• 22 hours PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 1 day Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 1 day Syrian Rebels Relinquish Control Of Major Gas Field
  • 1 day Schlumberger Warns Of Moderating Investment In North America
  • 1 day Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 1 day Energy Regulators Look To Guard Grid From Cyberattacks
  • 1 day Mexico Says OPEC Has Not Approached It For Deal Extension
  • 1 day New Video Game Targets Oil Infrastructure
  • 1 day Shell Restarts Bonny Light Exports
  • 1 day Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 2 days Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 2 days British Utility Companies Brace For Major Reforms
  • 2 days Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 2 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 2 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 2 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 2 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 2 days Rosneft Signs $400M Deal With Kurdistan
  • 2 days Kinder Morgan Warns About Trans Mountain Delays
  • 3 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 3 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 3 days Russia, Saudis Team Up To Boost Fracking Tech
  • 3 days Conflicting News Spurs Doubt On Aramco IPO
  • 3 days Exxon Starts Production At New Refinery In Texas
  • 3 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 4 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 4 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 4 days China To Take 5% Of Rosneft’s Output In New Deal
  • 4 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 4 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 4 days VW Fails To Secure Critical Commodity For EVs
  • 4 days Enbridge Pipeline Expansion Finally Approved
  • 4 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 4 days OPEC Oil Deal Compliance Falls To 86%
  • 5 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 5 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 5 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 5 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 5 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 5 days Aramco Says No Plans To Shelve IPO
Alt Text

The Next Big Digital Disruption In Energy

Blockchain technology is transforming the…

Alt Text

The Approaching U.S. Energy-Economic Crisis

The connection between energy and…

Alt Text

The New Challenger To Lithium Batteries

The lithium-ion battery is head…

Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

Low Oil Prices Enable India To Abolish Subsidies And Start Taxing Fuels

Low Oil Prices Enable India To Abolish Subsidies And Start Taxing Fuels

The difficulty for the international community in coming to an agreement on carbon emissions has largely been due to the great divide between developed and developing nations on who holds the most responsibility over climate change, and thus, who needs to take on more of the burden of cutting emissions.

In recent years, countries like the United States, which has finally started to make progress on reducing emissions, has balked at binding limits greenhouse gas emissions until fast-growing developing countries sign up as well. But the latter category, with China and India as the two largest countries, have resisted absolute caps on emissions, arguing that they deserve their own chance at growth development.

India, in particular, has been singled out as an intractable player, with China taking steps over the past year towards achieving a peak in its carbon pollution. Related: What Is In Store For the Halliburton-Baker Hughes Tie-Up?

But, since the collapse in oil prices, India has made more progress than some realize, at least according to the country’s Chief Economic Advisor, Arvind Subramanian. He argued in a May that many of the world’s top economies responded to the fall in oil prices by lowering taxes, rather than raising them. He points to the “regressive inaction” in advanced countries, where taxes on diesel and petroleum have dropped since June 2014 in places like Western Europe, Japan, and Canada (they remain unchanged in the U.S.).

Meanwhile, India has actually removed subsidies on fuel and transitioned into taxing them since 2014. Citing research from the World Bank, Mr. Subramanian says that India is essentially taxing carbon somewhere on the order of $60 per ton of CO2 for petrol and $42 per ton for diesel, “substantially above what is now considered a reasonable initial tax on CO2 emissions” of $25 to $35 per ton.

That provides India with a lot to brag about heading into the international climate negotiations later this year in Paris. Or as Mr. Subramanian puts it, “India – especially with a new PM – can credibly repudiate its past perceived image as a recalcitrant negotiator, focused on asking others to contribute without offering contributions of its own.” Related: Gazprom Putting The Squeeze On Turkmenistan

On subsidies of fossil fuels, he makes a good point. Fossil fuels enjoy $550 billion in subsidies each year, according to the IEA, more than four times the level received by renewables. The IMF says the figure is far higher, pegging the figure at $5.3 trillion annually, which includes the unpaid costs stemming from the environmental, social, and health damages of burning fossil fuels. To put that in context, that is equivalent to 6.5 percent of global GDP, and “more than what governments across the world spend on healthcare,” as The Economist recently noted.

The argument for subsidies is that removing them would hurt the poor. After all, countries like Iran, Venezuela, or Pakistan keep fuel prices low with the intention of helping the lower class. And removing them often invokes outrage from the people. But the IEA says that only 8 percent of fossil fuel subsidies actually go to helping the poor. The vast majority of financial support for fossil fuels actually accrues to the much better off, with policies that subsidize driving and flying and other consumptive lifestyles that the poor are unable to obtain.

Moreover, subsidies are wasteful, and not just from an environmental perspective. The billions blown on overconsumption could be rerouted to better causes, such as building schools, hospitals, or rebuilding infrastructure. Related: Ongoing Security Concerns In Kurdistan Have Oil Companies On Edge

There has been some headway made over the past year, however, as the dramatic fall in oil prices provided some breathing room for nervous governments. According to the International Institute for Sustainable Development, around 30 countries trimmed their fossil fuel subsidy programs over the past year. That is why, countries such as Indonesia, Egypt, China – and as Mr. Subramanian noted – India have been able to achieve subsidy reform. Without the fall in oil prices, there would be little appetite to implement such unpopular measures.

The big question is whether that modest progress on removing fossil fuel subsidies can be locked in. If oil prices rise, there will be a lot of pressure to reinstitute support.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News