Three new leaders face the challenge of food and fuel subsidies: Sisi, Modi, and Jokowi
Jeffrey Frankel 09 September 2014
Subsidies for food and energy are economically inefficient, but can often be politically popular. This column discusses the efforts by new leaders in Egypt, Indonesia, and India to cut unaffordable subsidies. Cutting subsidies now may even be the politically savvy choice if the alternative is shortages and an even more painful rise in the retail price in future. Ironically, it is India’s new Prime Minister Modi – elected with a large electoral mandate and much hype about market reforms – who is already shrinking from the challenge.
In few policy areas does good economics conflict so dramatically with good politics as in the practice of subsidies to food and energy. Economics textbooks explain that these subsidies are lose-lose policies. In the political world, that can sound like an ivory tower abstraction. But the issue of unaffordable subsidies happens to be front and centre politically this summer, in a number of places around the world. Three major new leaders in particular are facing this challenge: Sisi in Egypt, Jokowi in Indonesia, and Modi in India.
Development Energy Politics and economics Poverty and income inequality
subsidies, fuel subsidies, food subsidies, Agriculture, energy, Egypt, Indonesia, India, Poverty, environment, trade, WTO, Doha Round, Bali
Dirty little secrets: Inferring fossil-fuel subsidies from patterns in emission intensities
Radek Stefanski 30 May 2014
No comprehensive database of directly measured fossil-fuel subsidies exists at the international or the sub-national level, yet subsidies may be crucial drivers of global carbon emissions. This column describes a novel method for inferring carbon subsidies by examining country-specific patterns in carbon emission-to-output ratios, known as emission intensities. Calculations for 155 nations from 1980-2005 reveal that fossil-fuel price distortions are enormous, increasing, and often hidden. These subsidies contributed importantly to increasing emissions and lower growth.
An astonishing feature of international energy and climate policy is that fossil fuels – often seen as the primary contributor to climate change – receive enormous government support (IMF 2013, IEA 2012). Surprisingly, no comprehensive database of directly measured, comparable fossil-fuel subsidies exists at the international level. This is both because of political pressure from the direct beneficiaries of subsidies and because of the immense complexity of the task given the profusion and diversity of subsidy programmes across countries (Koplow 2009, OECD 2012).
energy, emissions, pollution, subsidies, fossil fuels, energy subsidy, carbon
Economic analysis of the US unconventional oil and gas revolution
Mathilde Mathieu, Thomas Spencer, Oliver Sartor 22 March 2014
The US unconventional energy boom has reversed the decline of domestic production, lowered oil and gas imports, reduced gas prices, and created political space for tougher regulations on coal-fired power plants. This column argues that it is not a panacea, however. Even if current estimates prove accurate, the long-run benefits to the US economy will be relatively small. Improving energy efficiency and promoting low-carbon technologies will be just as important as before – especially for the EU, given its more limited known reserves of unconventional oil and gas.
The recent rapid growth in the production of unconventional oil and gas (shale gas and tight oil) in the US has led to a significant decrease of natural gas prices as well as reduced oil imports. This has raised questions about the impacts of the unconventional oil and gas revolution on the US macroeconomy, industrial competitiveness, and energy sector. It has also raised questions about its implications for the EU (e.g. Beffa and Cromme 2013).
energy, US, environment, oil, gas, shale gas, fracking, tight oil, energy independence
Nuclear expansion or phase-out? Costs and opportunities
Enrica De Cian, Samuel Carrara, Massimo Tavoni 22 December 2013
After the Fukushima incident in 2011, many countries decided to shrink their nuclear power programmes. This article presents recent research on the optimal role of nuclear power in reducing carbon emissions. Phasing out nuclear power would be costly, since it is currently the cheapest low-carbon alternative to fossil fuels. However, these costs would be largely offset by the implicit subsidy to R&D in renewables, which suffers from innovation externalities. Still, carbon pricing and explicit R&D subsidies would be a more efficient way of determining the future of nuclear power.
"We learned from Fukushima that we have to deal differently with risks… We believe we as a country can be a trailblazer for a new age of renewable energy sources… We can be the first major industrialized country that achieves the transition to renewable energy with all the opportunities – for exports, development, technology, jobs – it carries with it.” Angela Merkel (distinct quotes).
R&D, energy, climate change, environment, climate policy, carbon pricing, energy mix, nuclear power
Green growth? Evidence from energy taxes in Europe
Richard S J Tol, Seán Lyons 12 November 2011
Politicians around the world like to argue that ‘green growth’ will create jobs and stimulate innovation. This column examines the impact of energy taxes on business, with a dataset of 11 million European firms between 1996 and 2007. The results are mixed – it seems that dirty, smoke-filled growth may well be better for the firm’s workers and their customers.
Politicians around the world like to argue that climate policy will create jobs and stimulate innovation. Such a message is largely unsupported but more palatable than the typical result of academic research that shows that climate policy would increase the costs of energy and slow down economic growth (Clarke et al 2009).
Energy Environment EU policies
energy, Green growth, energy taxes
Does daylight saving time save electricity?
Matthew J. Kotchen, Laura E. Grant 05 December 2008
Daylight saving time, designed for energy conservation purposes, is among the most widespread regulations on the planet. Surprisingly little evidence exists that it actually saves energy. This column, using a natural experiment, concludes that “saving” daylight has cost electricity.
Each year, 76 countries practice Daylight Saving Time (DST), referred to as Summer Time in the EU. By setting clocks forward one hour in the spring and turning them back one hour in the fall, DST effectively moves an hour of sunlight from morning to evening. The policy directly affects more than 1.6 billion people worldwide, making it among the most widespread regulations on the planet.
energy, daylight saving time, electricity