July 10, 2013
Hardly noticed in Europe, India, China and Indonesia, the three biggest Asian countries, have most recently raised their gasoline prices. This unpopular measure had become necessary in view of rising world market prices, excessive budget subsidies or current account deficits.
The persistent preaching by the IMF against fossil fuel subsidies might also have had some influence on policy makers.
In Asia, transport represents the fastest rising source of energy consumption and C02 emissions. It was therefore timely for governments to look at the economic and environmental costs and help reduce consumption through higher fuel prices.
The latest measures taken by India and China raise their fuel prices (around € 1.0/litre) beyond those in the USA (0.74 €/litre) and closer to those in Europe (€ 1.3-1.5/litre).
For the two biggest, though still very poor countries on earth this is also a modest contribution to their fight against climate change, alongside their big investments in solar and wind power.
The FMI and and the Asian Development Bank should persist in preaching the abolition of all fossil fuel subsidies and, subsequently, the imposition of high excise taxes to compensate for the external costs of burning fossil fuels.
Fuel taxation should be on the agenda of the forthcoming international climate conference in Warsaw. Effective gasoline/diesel taxation, accompanied by strict fuel efficiency standards are simple and effective instruments for reducing C02 emissions.
There are still poor countries like Egypt which subsidise the gasoline price at € 0.45/litre though they can ill afford to!
It is high time for the UN-sponsored climate conferences to address the principal causes of climate change: road transport, fossil-powered electricity, fossil heating, air transport, deforestation and agriculture.
Eberhard Rhein, Brussels
Author : Eberhard Rhein