The Global Subsidies Initiative (GSI) of the IISD with Professor David Victor have recently published the report "The Politics of Fossil-Fuel Subsidies". The first in a series of reports to be published on fossil-fuel subsidies, called “Untold Billions: Fossil-fuel subsidies, their impacts and the path to reform.”
It is available at: http://www.globalsubsidies.org/en/research/political-economy
Summary: governments spend staggering sums of money subsidizing fossil fuels, with many harmful consequences for public budgets, energy markets, and pollution. While there is widespread agreement among analysts that most of these subsidies serve no legitimate purpose, cutting subsidies has proved extremely difficult. This paper explores the politics of subsidy creation and reform and suggests some strategies for improving the odds that reformers will be politically successful. Subsidies exist often because they are the only reliable mechanism available to governments that are under pressure to provide benefits to politically well-organized groups. Not understanding the political economy of subsidy policies can prevent successful reform, and the report argues that successful subsidy reforms often require broader reforms and improvement in public administration to create mechanisms that can compensate political losers.
For further information contact Ms. Kerryn Lang at: klang@iisd.org or +41.22.917.8920.
Reforming fossil-fuel subsidies is widely believed to be a “win-win” policy that would benefit energy security, economic growth and the environment, as evidenced by the G-20 commitment to phase out such subsidies. But subsidies are notoriously difficult to reform.
The political logic that keeps subsidies to fossil fuels in place differs according to circumstance. Whereas the main effect of producer subsidies is to boost local production, consumer subsidies are typically broad-based and popular, making them hard to reform without provoking protest.
Demand by politically well-organized groups can therefore perpetuate subsidies. But equally important is the appetite by governments to supply them. Subsidies often exist because they are claimed to be the only reliable mechanism available to governments that are under pressure to provide benefits to citizens, despite their inefficiency and distorting impacts. Many non-democratic countries are among the world’s biggest subsidizers, indicating that governments use subsidies to win favour with the public even when votes are not at stake.
In a study commissioned by the GSI, Director of the Laboratory on International Law and Regulation Dr. David Victor argues that the failures to reform subsidies are mainly due to failures to appreciate the political economy of subsidy policies. Reform is often not viable politically without a strategy to compensate powerful groups. Successful subsidy reforms often require broader reforms and improvement in public administration to create mechanisms that can compensate political losers.
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fossil fuels subsidies is insanity... biofuels are cleaner and some can be made using low-tech processes... in brazilian amazon rainforest there was a project to use locally-made dendê palm oil to replace diesel fuel for electric power generation, as diesel fuel becomes more expensive due to the transportation... too much better to use a locally-made biofuel to save money and avoid some emissions caused by the transportation... btw in brazil, despite government's advertisings about brazilian self-sufficiency in oil, the greatest amount of diesel fuel is imported...
ReplyDeletei know you're concerned about the food production, but in some brazilian regions, such as caatinga and cerrado, is easier to plant castorbean to extract the oil than corn or beans to eat...