Download Fossil Fuel Subsidy Reform:

A Citizens’ Guide
to Energy Subsidies in Indonesia
Learning from international experience
Damon Vis-Dunbar, IISD
12 October 2012
Fossil-fuel subsidies: A global snapshot
• IEA estimates for consumption subsidies 37 countries:
2009:
$312 billion
2010:
$409 billion
• Without further reform, spending on fossil-fuel
consumption subsidies is set to reach $660 billion in
2020, or 0.7% of global GDP
• GSI estimates + $100 billion for subsidies to producers
Global Fossil-Fuel Subsidies
Source IEA World Energy Outlook 2011
Missing the right target: poor consumers
Share of fossil-fuel subsidies received by the lowest 20%
income group, 2010 Source: IEA, World Energy Outlook, 2011
Recent experience in other countries
• Iran, 2010
– Allocated subsidy savings:
• 50% households
• 30% business
• 20% government costs
– Cash transfers not
targeted, early payments
– Expansion of banking
system for cash transfers
& micro-credit
– Timing & measures to
control inflation
• Nigeria, 2012
– Raised prices of gasoline N65 to
N141/litre with no warning
– Serious corruption issues to
address
– Lack of trust in government
support measures
– Public demonstrations led to
backtracking of reform –
although prices still increased
(N97/litre)
– Civil society recognise need for
subsidy reform but want
corruption addressed first
5 key principles for reform
• Development focused – reform is an opportunity to invest
resources into more effective social welfare programs and
other development priorities
• Inclusive – policy-makers understand concerns of affected
groups and mitigate negative impacts as part of reform plan
• Transparency & public communication – public
understands rationale for reform including costs and benefits,
and decision-making process and plan for reform
• Short & long-term planning – managing short-term crises
with longer-term vision and strategy
• Well researched & prepared – evaluate a range of reform
options, learn from experience of other countries
Complementary policies to consider
Industry/business
Social
Energy
- Support to restructure sectors
e.g. retraining programmes
- Cash transfers: (un)conditional
- Investment in rural
electrification, renewable or
alternative energies
- Measures to improve energy
efficiency
- Investments in infrastructure
Macro-economic
- Policies to manage inflation
- Strengthen market forces and
encourage competition
- Social safety nets, pensions,
health insurance
- Increase (minimum) wages
- Pro-poor expenditure
Banking
- Can help roll out cash transfers
- Credit facilities, e.g. for SMEs
and micro-credit
- Energy conservation, energy
security, energy efficiency
policies
Transport
- Expanding public transport
systems
- Alternatives for freight (rail or
inland waterways)
- Transitional support for taxi
drivers
Alternative social assistance mechanisms
• Ghana, 2005
• Jordan, 2008
– Primary & junior
school fees eliminated
– Minimum wage & public services
wage increased
– Increased health care
funding for poorest
– One-time bonus for low-income
gov. employees & pensioners
– Increased investment in
mass urban transport
– Electricity subsidies continued
– Extra funds available
for rural electrification
– Food subsidies increased
– Reduction of certain import
duties
Building public support: Three elements
• Governance
• Public Consultation
• Communication
Discussions points
• Does the government have an effective reform
strategy?
• How can civil society participate more effectively in
the government’s reform process?
• What opportunities exist to raise public awareness
about fossil-fuel subsidies and their impacts?
• What sorts of social protection or other measures
are necessary to support reform?
Thank You
www.iisd.org/gsi