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Subsidy reform: Do as we say…

Subsidy Reform: Do as we say…

IMFA recently released report by the International Monetary Fund Energy Subsidy Reform: Lessons and Implications underscores points made in other international fora over the past 10 or more years: energy subsidies (and in particular, fossil fuel subsidies) are massive globally (especially amongst oil exporters) and, amongst other things, are encouraging excessive energy consumption and reducing incentives for investment in renewables.

None of this is especially new. The 2009 G-20 Leaders’ Forum resulted in a final statement in which participant nations agreed:

“To phase out and rationalize over the medium term inefficient fossil fuel subsidies while providing targeted support for the poorest. Inefficient fossil fuel subsidies encourage wasteful consumption, reduce our energy security, impede investment in clean energy sources and undermine efforts to deal with the threat of climate change.”

Last year’s UN ‘Rio+20′ Conference resulted in an agreement by the 193 Member States of the UN ‘The Future We Want’ which included a reaffirmed commitment:

“..to phase out harmful and inefficient fossil fuel subsidies that encourage wasteful consumption and undermine sustainable development. We invite others to consider rationalizing inefficient fossil fuel subsidies by removing market distortions, including restructuring taxation and phasing  out  harmful  subsidies,  where  they  exist,  to  reflect  their  environmental impacts,  with  such  policies  taking  fully  into  account  the  specific  needs  and conditions of developing countries, with the aim of minimizing the possible adverse impacts on their development and in a manner that protects the poor and the affected communities.”

Commitments such as those noted above appear to be readily signed up to by leaders of countries engaged at a very deep level in the very behaviour decried. Concrete action to address systemic, political and economic frameworks perpetuating subsidies is far harder to implement or even detect at the domestic policy level.

The 2013 IMF report identifies suggested strategies which include development of a comprehensive energy sector reform plan, and effective communications strategy, carefully managed phasing of price increases, improving efficiency of state-owned enterprises to reduce producer subsidies, targeted measures to protect the poor and institutional reforms ‘that depoliticise energy pricing, such as the introduction of automatic pricing mechanisms.’

By world standards, New Zealand engages in low levels of energy subsidies, although questions are regularly asked about consistency between its international position on fossil fuel subsidies and domestic practices.

This year I, together with other researchers at AUT University look forward to examining New Zealand’s role in the ongoing debate and negotiation on international energy subsidy reform in more detail.

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