The World Bank, the International Monetary Fund, and the International Energy Agency are ramping up a campaign to abolish fossil fuel subsidies, just as low energy prices make it easier for countries to phase out long-established price relief for consumers.
Diesel subsidies have been eliminated in Morocco, Indonesia, Malaysia, and India in recent months, the Energy and Carbon Blog reports, and Egypt is testing the waters for a fuel subsidy cut next year. Even before the oil price crash, Iran “significantly increased prices for gasoline, diesel and compressed natural gas.” Russia is due to restart an annual increase in natural gas prices after postponing it last year.
“The problems with fossil fuel subsidies are well known,” Wynn writes. “They drive wasteful consumption (because they make energy prices artificially low) and black market smuggling (to countries with higher, unsubsidized prices). They deter private investment. They use up valuable fossil fuel resources and exports; disproportionally benefit the rich; they are a disincentive to invest in efficiency and clean energy; and they increase carbon emissions and local pollution (for example ozone and NOX from burning cheap gasoline). Finally, they are a big drain on government budgets.”