On Thu, Jan 26, 2012 at 8:14 PM, Gar Lipow <[email protected]> wrote: > On Thu, Jan 26, 2012 at 3:15 PM, Robert Naiman > <[email protected]> wrote: >> Ironically, Iran has been reducing its fuel consumption subsidies, >> something it has long wanted to do on economic grounds, under the >> pressure of US-led sanctions. In fact, US sanctions gave them a >> nationalist excuse to do what they wanted to do anyway. An interesting >> case study in "Pareto improvement." >> >> Also interesting is that Iran had a careful plan for reducing the >> subsidies in a way that would not cause widespread social unrest. Part >> of it was replacing the subsidy by direct payments - just as classical >> economics would suggest - and part of it was starting the curtailment >> at the margin, so as to have maximum effect with minimum pain. (I >> gather that China introduced some price reforms in the same way, at >> the margin.) > I'm glad you noted this. Although the rich nations do have huge direct > subsidies to fossil fuels, they are dwarfed by the types of subsidies > Iran is phasing out - subsidies of the purchase of fuel for driving, > heating and cooking. Eliminating them without replacing them is a > very regressive way of reducing government debt. Replacing them with > cash subsidies makes a great deal of sense, but is still government > spending (which I'm not against) and will not reduce government debt .
Well, doesn't standard economic theory say that for a given amount of social benefit, cash payments are more efficient than commodity subsidies, because if you just gave the person the cash value of the subsidy, they would maximize their utility by spending the money any way they like, rather than on the subsidized commodity, and in general, unless their demand for the commodity were perfectly inelastic, their consumption pattern would change, making them better off for the same amount of money. So (putting implementation considerations to the side) if you give people the cash value of the subsidy, you make them better off for the same amount of money. That doesn't save the government any money, but it does make people better off. But, if that is true, then it is also true that there's a smaller amount of money that you could give people, which (on average) would make them indifferent between having the subsidy and having the cash. So in that case, in theory, the government could save some money while on average not making people worse off, although it certainly wouldn't be saving the full value of the subsidy. In practice it seems like it would be sensible to split the difference; if the government tries to capture all the value of reducing the subsidy, it's going to leave a lot of people worse off and they're going to be unhappy campers and resist the reform. If the government doesn't try to capture any of the value, then you take away much of the government incentive for implementing the reform. > Of course if you look at, and global warming and so on. the rich > nation "subsidies" to fossil fuels are much greater. The "and so on" > includes wars and war spending of course, but rich nation wars are > about more than oil; even at the resource level there are many > resources other than oil, plus there are markets, strategic locations, > ideological wars and so on.So hard to measure what portion of military > spending should be considered an oil subsidy. But no question that > some of it is. > >> >> Maybe Venezuela and Saudi Arabia should start enriching uranium so >> they can get rid of their fuel subsides. ;) >> >> On Thu, Jan 26, 2012 at 5:53 PM, Jim Devine <[email protected]> wrote: >>> from SLATE: >>> >>> Dirty Money >>> >>> The astonishing new data showing that simply eliminating inefficient >>> fossil fuel subsidies could achieve half the world’s carbon reduction >>> goals. >>> >>> By Matthew Yglesias | Posted Thursday, Jan. 26, 2012, at 1:20 PM ET >>> >>> What if I told you that we could obtain half the reduction in carbon >>> emissions needed to stave off climate disaster not with new government >>> interventions in the economy but simply by removing existing >>> interventions? >>> >>> Fatih Birol, chief economist of the International Energy Agency is >>> telling you exactly that. In data released this month as part of the >>> IEA’s latest World Energy Outlook report, he shows that in 2010 the >>> world spent $409 billion on subsidizing the production and consumption >>> of fossil fuels, dwarfing the word’s $66 billion or so of subsidies >>> for renewable energy. Phasing fossil fuel subsidies out would be >>> sufficient to accomplish about half the reduction in greenhouse gas >>> emissions needed to meet the goal of preventing average world >>> temperatures from rising more than 2 degrees Celsius. >>> >>> You don’t hear as much about this as you should largely because the >>> biggest offenders are far from our shores. Still, the scale and scope >>> of the issue is worth dwelling on if only because these subsidies are >>> so wrongheaded. >>> >>> Far and away the biggest problem seems to be that misguided sense that >>> countries that are large producers of certain kinds of fuels ought to >>> subsidize domestic consumption of the fuel in question. Thus Saudi >>> Arabia spends more than $30 billion a year on gas consumption >>> subsidies while Russia spends $17 billion on natural gas subsidies. >>> Iran, which produces both, subsidizes both, spending $66 billion in >>> total plus an additional $14.4 billion on electricity consumption >>> subsidies. Large-population developing countries such as China, India, >>> and Indonesia are also important players in the subsidy game. In no >>> case do these subsidies make sense. >>> >>> For starters, the mere fact that your country contains a lot of oil >>> offers no special reason to subsidize gasoline consumption. For one >>> thing, gasoline isn’t oil. Like other usable fuels, it needs to be >>> refined from crude. Iran is actually a net importer of refined >>> petroleum products, and the United States has recently become a net >>> exporter of them, even as the situation for crude oil is the reverse. >>> More broadly, the opportunity cost of using a domestically produced >>> barrel of oil is identical to the financial cost of buying a barrel on >>> international markets. In other words, if the Japanese government >>> wants to offer subsidized oil to its citizens, it needs to go buy the >>> oil first from Saudi Arabia. By the same token, if the Saudi >>> government wants to offer subsidized oil to its citizens, it needs to >>> sell less to Japan. The budgetary impact is identical in either case >>> and the merits of the policy have nothing to do with how much oil a >>> country has. >>> >>> And what are the merits? Not much. Consumption subsidies are typically >>> justified as beneficial to the poor. But while it’s certainly true >>> that in rich countries utility bills and transportation fuel costs >>> disproportionately burden the poor, it’s not clear that this is true >>> in the developing world. Here in the United States, only rich people >>> go to fancy restaurants, but everyone needs to run home appliances, >>> which is why higher energy costs hit the poor hardest. In India, >>> however, more than a third of the population doesn’t have electricity, >>> and most people don’t have cars. China’s not as poor as India, but the >>> same logic applies: The people who truly need help are the people who >>> can’t afford to take advantage of the subsidies. The IEA calculates >>> that less than 10 percent of global fossil fuel subsidies benefit the >>> poorest 20 percent. These subsidies would be much better spent on a >>> mix of cash grants to the poor, lower taxes to spur growth, and >>> investments in infrastructure and education. >>> >>> But even a direct fuel subsidy for the poor is a pretty bad way to >>> help people. America doesn’t go in for lavish spending on fuel >>> consumption subsidies, but we do have something called the Low-Income >>> Home Energy Assistance Program, which offers targeted subsidies to >>> help poor families in cold-weather states to keep their families warm >>> in the winter. This is hardly the worst idea in the world, but you’d >>> do more for the families and the environment if you just gave them >>> cash. Some of that cash might go to pay the heating bill, but some >>> might go to the purchase of sweaters or better insulation, >>> ecologically friendlier solutions that will probably help households >>> more over the long run. >>> >>> That these kinds of subsidies are misguided counts as conventional >>> wisdom in the economics world, but it’s not clear that even economists >>> have recognized the sheer scale of the impact. If roughly half of what >>> needs to be done can be achieved simply by eliminating economic >>> distortions—economic distortions that would be unwise even if there >>> were no concern about pollution—then the whole framework of a >>> trade-off between prosperity and sustainability is largely misguided. >>> The outlook for greener, freer markets gets even brighter when you >>> consider that consumption subsidies aren’t the only dirty >>> interventions out there. The U.S. government offers generous tax >>> subsidies for the production of oil and natural gas (each year, >>> President Obama proposes to scrap them, and each year Congress >>> declines), and the European Union does the same for coal. Local >>> governments nearly everywhere require the construction of more parking >>> spaces and lower-density buildings than a free market would provide, >>> encouraging excessive driving and energy-intensive large detached >>> homes. >>> >>> At the end of the day, pure laissez faire can never meet the world’s >>> environmental challenges. If you want to reduce greenhouse gas >>> emissions, you need to cap them and then you need to reduce the cap. >>> But a surprisingly large step toward that target can occur by simply >>> allowing the market to do its work by removing the subsidies that >>> encourage lavish and inefficient consumption of fossil fuels. >>> -- >>> Jim Devine / It's time to Occupy the New Year! >>> _______________________________________________ >>> pen-l mailing list >>> [email protected] >>> https://lists.csuchico.edu/mailman/listinfo/pen-l >> >> >> >> -- >> Robert Naiman >> Policy Director >> Just Foreign Policy >> www.justforeignpolicy.org >> [email protected] >> _______________________________________________ >> pen-l mailing list >> [email protected] >> https://lists.csuchico.edu/mailman/listinfo/pen-l > > > > -- > Facebook: Gar Lipow Twitter: GarLipow > Grist Blog: http://www.grist.org/member/1598 > Static page: http://www.nohairshirts.com > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l -- Robert Naiman Policy Director Just Foreign Policy www.justforeignpolicy.org [email protected] _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
