Should Energy
be subsidized?
Presented By:
Singhzee’s Economics Group
Renewable Non-
Renewable
Objectives
 To learn about subsidy and its
various forms
 To evaluate whether energy should
be subsidized or not
 To as...
What is Subsidy?
 Government financial assistance
 In the form of
Grants
Tax breaks
Exemptions
Price Controls
Subsidy: the Whys?
 Lowering Price and Cost
 Ensuring Power Supply=Demand
 Providing Access to the Poor
 Preserving Do...
Types of Subsidies
Government Intervention Example
Direct Financial Transfer Grant to Producer/Grant to Consumer
Low Inter...
Case Overview
 January 2007, Subsidy Transfer
Proposal
 US$ 14 billion
 June 2007, still languishing in
senate
 Subsid...
Should Energy be Subsidized?
Class POLL
64%
24%
12%
Subsidy Statistics
Economic Zone US$
OECD 10 billion
20 of the largest
nations outside
OECD
48 billion
Annual Fossil-fuel...
Subsidy Statistics
Year US$
2009 110 billion
2010 412 billion
2011 523 billion
International Energy Agency(IEA)
Source :I...
Energy Subsidies: PROS
 Energy Access to the Poor
 Improvement of Living Standard
 Control on Inflation
 Reduction of ...
Energy Subsidies: PROS
Cross-Subsidies
Example: KEPCO
Customer Type Payment (%) of the
Total Cost
Commercial
Customers
1...
Increased Consumption of
Energy
Irresponsible Use of
Energy(Esp. Developed
countries)
Energy Subsidies: CONS
Energy Subsidies:
CONS
 Faster Depletion of Fossil Fuels
 Increased GHG Emissions
Energy Subsidies: CONS
 Distortion of Costs and Prices(Non-
Renewable Sources)
 Substantial Environmental
Damage(Electri...
Unbalanced benefits to HI and LI groups
Transfer of Subsidies: PROS
 Renewable Sources: More Competitive
Transfer of Subsidies: PROS
 Solution to GHG Emissions
 Help Save Environment
Transfer of Subsidies: PROS
 Initiatives taken by Some countries
Nation Period
Subsidies subject
to reduction
Amount of
R...
Transfer of Subsidies: PROS
 Energy Security
 Employment
 Foreign Exchange(E.g.
Denmark, Australia, Japan)
 Saving of ...
Transfer of Subsidies: CONS
Shift of
Subsidies
from NRES
TO RES
High
Energy
Prices
Inflation
Burden on
the Poor
Low
Energy...
Future Outlook
THANK YOU !!!
Should energy be subsidized? Case Study
Should energy be subsidized? Case Study
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Should energy be subsidized? Case Study

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Should energy be subsidized? Case Study

  1. 1. Should Energy be subsidized? Presented By: Singhzee’s Economics Group Renewable Non- Renewable
  2. 2. Objectives  To learn about subsidy and its various forms  To evaluate whether energy should be subsidized or not  To assess the pros and cons of shifting energy subsidies from non- renewable sources (NRES) to renewable(RES)
  3. 3. What is Subsidy?  Government financial assistance  In the form of Grants Tax breaks Exemptions Price Controls
  4. 4. Subsidy: the Whys?  Lowering Price and Cost  Ensuring Power Supply=Demand  Providing Access to the Poor  Preserving Domestic Competitiveness  Maintaining Employment
  5. 5. Types of Subsidies Government Intervention Example Direct Financial Transfer Grant to Producer/Grant to Consumer Low Interest or Preferential Loans to Producer Preferential tax treatment Rebates, exemptions, duties, levies, tariffs, etc Tax Credit Accelerated Depreciation Trade Restrictions Quotas, technical restrictions Direct Government Energy related services Direct investment in energy infrastructure Public R&D Regulation of the energy sector Price Control Market Research Restriction
  6. 6. Case Overview  January 2007, Subsidy Transfer Proposal  US$ 14 billion  June 2007, still languishing in senate  Subsidy came into focus  Increase in energy prices of 06/07  Arguments for and against subsidy
  7. 7. Should Energy be Subsidized? Class POLL 64% 24% 12%
  8. 8. Subsidy Statistics Economic Zone US$ OECD 10 billion 20 of the largest nations outside OECD 48 billion Annual Fossil-fuel Consumption Subsidies US$ 230 billion(1992) Regional Studies (1997)
  9. 9. Subsidy Statistics Year US$ 2009 110 billion 2010 412 billion 2011 523 billion International Energy Agency(IEA) Source :IEA(www.worldenergyoutlook.org)
  10. 10. Energy Subsidies: PROS  Energy Access to the Poor  Improvement of Living Standard  Control on Inflation  Reduction of Air Pollution and Deforestation (E.g. Senegal)
  11. 11. Energy Subsidies: PROS Cross-Subsidies Example: KEPCO Customer Type Payment (%) of the Total Cost Commercial Customers 134% Industrial Sector 96% Agricultural Sector 48%
  12. 12. Increased Consumption of Energy Irresponsible Use of Energy(Esp. Developed countries) Energy Subsidies: CONS
  13. 13. Energy Subsidies: CONS  Faster Depletion of Fossil Fuels  Increased GHG Emissions
  14. 14. Energy Subsidies: CONS  Distortion of Costs and Prices(Non- Renewable Sources)  Substantial Environmental Damage(Electricity Generation)  Heavy Burden of Government Finances  Increased Trade Deficit
  15. 15. Unbalanced benefits to HI and LI groups
  16. 16. Transfer of Subsidies: PROS  Renewable Sources: More Competitive
  17. 17. Transfer of Subsidies: PROS  Solution to GHG Emissions  Help Save Environment
  18. 18. Transfer of Subsidies: PROS  Initiatives taken by Some countries Nation Period Subsidies subject to reduction Amount of Reduction( US$) EFFECT China 1990- 1997 Annual Fossil Fuels Subsidies 24.5b to 10b •Coal Consumption ↓ by 14%(1996-2000) •CO2 Emissions ↓ by 17%(1997- 2000) 1993- 1995 Coal Subsidies 750m to 240m Tax on high-sulfur coals Chile 1995 •CO Emissions ↓ by 8%(1996)
  19. 19. Transfer of Subsidies: PROS  Energy Security  Employment  Foreign Exchange(E.g. Denmark, Australia, Japan)  Saving of billions of dollars(through redirection of subsidies budget)
  20. 20. Transfer of Subsidies: CONS Shift of Subsidies from NRES TO RES High Energy Prices Inflation Burden on the Poor Low Energy production Environm ental Hazards
  21. 21. Future Outlook
  22. 22. THANK YOU !!!

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