Energy Subsidy Policy Research Articles

Assessing energy subsidy policies in a structural macroeconomic model

We assess the welfare consequences of energy price subsidies for an energy-importing country using a structural macroeconomic model that includes energy and durable goods consumption. To consume durable goods, energy consumption is required. In production, the use of energy and capital are complements. We calibrate the model to fit the economy of Taiwan. The results indicate that the optimal policy is achieved when subsidies are allocated to firms. This is primarily because in this economy energy is mostly consumed by industries rather than by households. The welfare gain is, however, very limited. Further sensitivity analysis suggests that having no subsidy would be the optimal policy in a less energy-dependent economy.

An inexact two-stage multi-objective waste management planning model under considerations of subsidies and uncertainties: A case study of Baotou, China

Government subsidy for waste incineration is an effective measure to promote the economic growth of the waste management system. It is of vital importance to formulate optimal management strategies for decision-makers by considering conflicting objectives among system cost and environmental risk under complex uncertainties. In this study, an inexact two-stage multi-objective planning (ITMOP) model is proposed for supporting municipal solid waste (MSW) management. This model advanced existing optimization methods through integrating interval linear programming and two-stage stochastic programming within the multi-objective programming framework, where various uncertainties expressed as interval value and probability distributions were effectively reflected. The environmental risks associated with exhaust gas and leachate emission from incineration and landfill are quantitively assessed. The economic performance of these two waste disposal facilities is evaluated through the introduction of different energy recovery and subsidy policy scenarios. The ITMOP-based municipal solid waste management model is applied to a case study of MSW management planning in the Baotou city of China. Ten scenarios integrated with different economic incentives are designed for analyzing the optimized solutions. The generated waste flow allocation pattern and facility expansion capacity results provide scientific waste management strategies for local authorities. Moreover, the obtained total system cost and environmental risks under different scenarios can help policymakers resolve eco-economic conflicts according to their preferences. Waste incineration will gradually replace landfilling as the mainstream of waste treatment in the future. Revenues from energy recovery and financial subsidies for incineration can compensate for its high economic cost and promote waste resource utilization. The results indicate that the local government can use the subsidy policy to encourage waste disposal to proper facilities and simultaneously reduce environmental emissions.

Effectiveness of energy efficiency improvements in the context of energy subsidy policies

Malaysia, as one of the top energy subsidizing countries, has announced to remove energy subsidies necessarily, not only to reduce energy consumption and the government budget deficit but also to improve overall efficiency and air quality. Therefore, this study evaluates the impacts of rationalizing energy subsidy and its energy efficiency improvement during 2010–2030 using a dynamic recursive computable general equilibrium model. Results revealed that reducing energy subsidies decreases energy consumption and emissions of all air pollutants. While the economic performance of the country improves in the long run due to stimulation in capital demand and investment, it reduces in the short run. Energy efficiency also improves by 1.1% and 2.3%, in the short run, in response to a reduction of 10% and 100% in energy subsidies, respectively. Energy efficiency improvements decrease the negative effects of pure subsidy policies on real GDP, trade, investment, and household consumption. The efficiency improvement policies also are effective in reducing more level of the rebound effect and lead to more energy saving in the economy, particularly in the petroleum products sector. The impacts on the rebound effect also differ across economic sectors. The results of this study provide new insights for energy subsidy policy and energy efficiency and suggest that additional tools and policies are required for improving the energy efficiency caused by phasing out energy subsidies. Malaysia, as one of the top energy subsidized countries, attempts to reduce the level of energy subsidies over time and, consequently, decline the use of fossil fuels in the economy. Therefore, this study analyzes the impacts of different subsidy reform policy on energy efficiency and, consequently, on economic and environmental performance and rebound effect of Malaysia by a recursive dynamic computable general equilibrium model.

Stakeholders’ Perception About the Effectiveness of Renewable Energy Subsidy in Nepal: A Review of Biogas Subsidy

Due to sustainability and climate change concerns associated with fossil fuels, renewable energy (RE) is increasingly being recognized as crucial link between energy access and sustainable development. Growing interest in RE has led many countries to adopt different strategies to promote its growth. Subsidy in various forms is one of the common measures governments around the world have used to support the production and to encourage the use of RE technologies. Renewable energy sector in Nepal is also largely driven by RE subsidies, primarily targeted at potential users. While many argue that subsidy played a major role in the promotion and uptake of RETs, there is little knowledge on the differential impact RE subsidies have had on different stakeholders and actors in the RE sector. Knowledge about broader impact of RE subsidy, its relevance to different RETs and its effectiveness in achieving sustainability of the sector also remains largely fragmented. In order to devise strategies to overcome barriers in the development of RE sector in Nepal, it is important to fill these knowledge gaps. It is also important to better understand challenges and opportunities. To this end, this study uses qualitative research method to draw knowledge from different stakeholders about the effectiveness of renewable energy subsidy policy in Nepal. The primary focus of this study is biogas subsidy that has been in place since the 1990s. The study reveals that the effectiveness of RE subsidy is a function of various factors such as users’ awareness about RET benefits, government policy and provisions, cost-effectiveness of the technology, after-sales-services, long-term access to RE technologies and services etc. The general consensus is that RE subsidy so far has primarily benefited better-off households than the low-income populations. It was also revealed that, without subsidy or some kind of financial intermediation, access of poor farmers to biogas technology is likely to remain a challenge. The high upfront cost of the technology was frequently cited as one of the biggest barriers in the market-led dissemination of biogas technology (particularly the one being promoted by the Government of Nepal). This highlights the need for improvement in resource (land, raw material for its construction and operation) and cost efficiency of the technology for it to remain economically viable for farming communities, to whom the technology might have the greatest utility. Better measures and communication strategy are needed to make targeted subsidies and relevant information about policy mandates and provision accessible to the grass roots.

ENERGY INSECURITY IN THE ASEAN REGION: THE IMPLICATIONS OF ENERGY POLICY REFORM

Energy insecurity has become an alarming issue among ASEAN countries. One proposal to overcome this energy insecurity is to integrate energy markets among ASEAN countries. In order to do this integration, a major energy policy reform, particularly the elimination of energy subsidy policies, is needed. The main goal of this paper, hence, is to analyze the impact of an energy subsidy reduction policy in ASEAN, particularly in terms of economic growth, environmental improvement and welfare distribution. To achieve this goal, this paper uses a multi-country computable general equilibrium (CGE) for Inter-Regional System Analysis for ASEAN (IRSA-ASEAN) to conduct the analysis. This paper finds that countries in which energy subsidies significantly exist, i.e., Indonesia and Malaysia, stand to gain much from eliminating these subsidies. Gross domestic product (GDP) is likely to increase, with the added benefit of reduced CO2 emissions. In terms of welfare distribution, this policy appears to be progressive in nature.

From NEDC to WLTP: Effect on the Energy Consumption, NEV Credits, and Subsidies Policies of PHEV in the Chinese Market

The switching from new European driving cycle (NEDC) to worldwide harmonized light vehicles test procedure (WLTP) will affect the energy consumption of plug-in hybrid electric vehicle (PHEV), and then affect the new energy vehicle (NEV) credit regulation and subsidy policy for PHEVs. This paper reveals the impact on energy consumption, NEV credit regulation, and subsidy policy for PHEV in the Chinese market of the switching from NEDC to WLTP based on qualitative analysis and quantitative calculation. The results show that the WLTP procedure is stricter than NEDC in the determination of road load, test mass, driving resistance forces, and tire selection. Firstly, the electricity consumption (EC) of PHEV in charge-depleting mode (CD) under the WLTP procedure is 26% higher than NEDC on average, which makes the all-electric range (AER) significantly lower under WLTP. The weight EC tested in the WLTP procedure is higher than NEDC. Secondly, the fuel consumption (FC) of PHEV in CD mode is related to the adjustment of the engine management system (EMS) and the size of battery energy under the WLTP procedure. For the FC in the charge-sustaining (CS) mode of PHEV under the WLTP procedure is 20% higher than NEDC on average. However, the weight fuel consumption of PHEVs under WLTP with a long AER may be lower than that of NEDC due to the characteristics of utility factor in the WLTP procedure. Thirdly, most PHEVs fail to meet the requirements of 50 km AER due to the switching of the test procedures. However, the Chinese government reduced the technical specification of PHEV’s AER under the WLTP procedure to 43 km to support the development of PHEV technology. It ensures that the switching of test procedures does not change the treatment that they could obtain, the NEV credits, and subsidy as a NEV in China. However, the increasing of the EC in CD mode and the FC in CS mode under the WLTP procedure makes the PHEV obtain lower credit and subsidy multiple compared with NEDC procedure.

Energy policy and conservation planning in Sweden: a longitudinal evaluation

PurposeSweden, like other countries, has set ambitious national targets for both energy efficiency and conservation of heritage values in the built environment. However, how these policies are implemented on a local level and how they affect each other is not known. This study aims to argue that extensive energy-saving policies can have unintentional impacts not just on the built environment but also on conservation practice.Design/methodology/approachBy using a longitudinal approach, the aim is to investigate the possibilities of conserving the built environment when policies for increased energy efficiency are implemented in existing urban areas. The methodology used is qualitative, applying a combination of study of public records, policy documents, interviews with public officials and ocular investigation of buildings in three areas located in two different municipalities.FindingsThe study suggests that extensive refurbishments not only have effects on the character of an area, but in extension, affect how urban planners and local authorities approach the development in the same area. Urban areas affected by extensive retrofits in the past seem to be managed in less detail, leaving existing policy measures on both energy and heritage untapped.Research limitations/implicationsThis is a study concerning two Swedish municipalities. Furthermore, it is limited to one specific policy measure, energy-saving subsidies provided in the 1970s and 1980s. The generalisability of the findings may, therefore, be limited. Despite this, the findings provide an important indication of the relationship between energy-saving policies in the past and urban planning practice of existing urban areas today, as well as the importance of alignment between policy-making and implementation.Practical implicationsPolicy instruments for the building stock and the practice of conservation planning have not worked well together. Due to local practice, energy subsidies provided in the 1970s and 1980s still today have a negative effect on both heritage conservation and energy efficiency in existing areas.Social implicationsThere is a discrepancy between expectations and outcome of policy measures. National decision-makers overestimate the possibilities to control the development on a local level, for both energy efficiency and heritage values. By examining an innovative set of sources, acknowledging long-term effects and entanglements of policies and practice, this study contributes to a better understanding of the complexity of different values in the built environment.Originality/valueBy comparing the share of approved applications, as well as completed energy retrofits, this study demonstrates that the effects of the national energy subsidy policy differed significantly between urban areas. Areas with a high degree of approved subsidies also had a high degree of retrofits, suggesting that the policy had intended effects. In these areas, the number of retrofits were also significantly higher than the number of subsidies. This was not the case where energy subsidies were fewer, which indicates that energy retrofits are performative, meaning that they accelerate further retrofits in the same area.

Mapping renewable energy subsidy policy research published from 1997 to 2018: A scientometric review

Renewable energy is considered as one of the most promising ways to support sustainable development, which leads to renewable energy subsidies becoming an increasingly important study area in the field of energy policy research. This article reviews the key literature, historical research pathways, and research clusters from 1997 to 2018 focusing on renewable energy subsidy policy. We qualitatively reviewed renewable energy subsidy policies on the basis of three quantitative analysis methods including co-citation network analysis, historical path analysis, and bibliographic coupling analysis. A co-citation network analysis allowed the identification of influential studies on the subject of renewable energy subsidy policies. Our analysis of the research literature published within our time range identifies “key nodes” (documentation), “historical pathways” (evolutionary history), and “intellectual clusters”. This study can provide an in-depth understanding and guidance for researchers and policymakers in the area of renewable energy subsidy policies.

Renewable energy policy scenarios as implementation moderation of fuel subsidy policy in Indonesia

PurposeThis paper aims to examine the effect of communication, resources, disposition and bureaucratic structure to the success of energy subsidy policy, to examine the effect of moderation of variable scenario of renewable energy policy on the influence of communication, resources, disposition and bureaucracy structure on the success of energy subsidy policy.Design/methodology/approachThis study was purposively (based on specific objectives) conducted in Jakarta, which is associated with the implementation and subsidy policy scenario, the study focused on the center of government, namely, the capital city, Jakarta. Collection of data in this research survey was conducted in June-August 2017. The sampling technique was proportional stratified random sampling that took up most of the 770 members of Masyarakat Peduli Energi dan Lingkungan and Masyarakat Energi Terbarukan Indonesia using a representative sample of results that have the ability to be generalized. Based on the formula Slovin (Solimun and Fernandes, 2017), a sample of 145 respondents was obtained. The research approach used was a quantitative with the analysis tool called the generalized structure component analysis.FindingsThis paper exhibited that all relationships between variables have a p-value of 0.05 except the third moderation and fourth moderation relationship. So it can be said that all relationships between variables are significant except the relationship between the variables of moderation to the relationship between the disposition variable (X3) on the successful implementation of subsidy policy (Y) and the relationship between the moderation variable to the relationship between bureaucracy structure variable (X4) to the successful implementation of subsidy policy.Originality/valueThe originality of the research refers to the following: The Policy Theory described by Edwards III (1980), and reinforced by the findings of Ratminto and Winarsih (2005), and Bloom et al. (2009), that communication, resources, dispositions and bureaucratic structures affect the success of the energy subsidy policy. This becomes the formulation of a hypothesized research problem whether communication, resources, disposition and bureaucratic structure affect the success of the energy subsidy policy. In fact, the conditions in Indonesia are quite different from the Western world, and the system in Indonesia has embraced subsidies. Therefore, this study also examines the moderating effects of renewable energy policy scenarios in the relationship between communication, resources, dispositions and bureaucratic structures on the success of the subsidy policy energy. Given that there is no strong theory that examines the effects of moderation of these four factors on the success of the energy subsidy policy. Therefore, as the development of Edward III Theory, this study examines the proposition of whether renewable energy policy scenarios reinforce or weaken (moderation effects) on the effects of communication, resources, dispositions and bureaucratic structures on the success of energy subsidy policies.

Impacts of the Clean Energy Subsidy Reform on Industry Development and Environment Pollution: An Analysis Based on a Dynamic CGE Model

Clean energy subsidies are important policy tools to promote the development of related industries and achieve resource and environmental goals in China. In view of a series of serious environmental pollution problems caused by fossil energy consumption, the call for increasing the clean energy use and improving the utilization of clean energy to improve and optimize the energy consumption structure has become more and more intense in recent years. However, previous studies have focused on the energy price reform and the impact of the subsidy scale on the social economy, focusing on the analysis of the process and effect of energy subsidy policies on macroeconomic operations while lacking quantitative research on the impact of relevant industries and environmental systems. In the clean energy subsidy program, different subsidy policy schemes are quite different. How much influence does the clean energy subsidy reform design have on different industry development and environmental pollution control? It is worth further research. The paper constructs a dynamic computable general equilibrium model （DCGE） to appraise the impact of clean energy subsidies on industry development and environmental governance based on a national + local” scenario from a long-term latitude. The results show that, overall speaking, clean energy subsidies are helpful to promote the energy price reform. Due to the price advantage brought by clean energy subsidy policies, elasticity of substitution between fossil energy and clean energy can be changed greatly, which will increase the total output of related industries, improve the energy consumption structure, and reduce the emission intensity of major pollutants. However, the impacts of different subsidy programs greatly differ from each other. National basic subsidy policies can improve the competitiveness of clean energy to some extent, and strong local subsidy policies can be more effective to promote the development of clean energy industries, improve energy consumption per unit GDP and per capita energy surplus, reduce the environmental damage, and optimize the energy consumption structure. Therefore, the use of the national + strong local” design is more conducive to clean energy industry development and environmental governance. The main contributions of this paper are to introduce factors such as clean energy industry and resource environment into the subsidy reform research, effectively assess the differences between different programs on industrial development and environmental systems, and study the subsidy intensity of different topics such as national and local governments in subsidy policies. The impact of alternative elasticity, industrial development and environmental pollution control makes clean energy subsidy policies more in line with the reality of social development. The results of this paper can improve the feasibility of the clean energy subsidy program, and provide reference for the formulation and sustainable development of clean energy subsidy policies related to the national economy and the people’s livelihood.

Industrial eco-efficiency, regional disparity, and spatial convergence of China's regions

In this study, the industrial eco-efficiency measures of 30 Chinese provinces (municipalities and autonomous regions) from 2001 to 2015 were estimated based on a proposed data envelopment analysis (DEA) model and the non-convex metafrontier-undesirable outputs-super efficiency-slacks-based measure (NCMeta-US-SBM) which simultaneously incorporates non-convex metafrontier technology, undesirable outputs, and super efficiency into slacks-based measure. Subsequently, dynamic spatial econometric models were employed to test the spatial convergence of industrial eco-efficiency. The empirical results show that: 1) the average value of industrial eco-efficiency was the highest in the eastern region (0.67), followed by the western region (0.30) and central region (0.27), indicating the existence of a significant regional disparity. 2) Strong evidence for global and club spatial convergence of industrial eco-efficiency was found. With regard to regional heterogeneity, provinces in the eastern region converged faster than those in the central and western regions; while the convergence speed of industrial eco-efficiency increased after 2008 with respect to temporal heterogeneity. 3) The ownership structure appeared to have a higher impact on industrial eco-efficiency than other controls in the presence of spatial conditional β-convergence. These findings are robust with regard to both spatial econometric model and spatial weighting matrix specifications. Based on the empirical analysis, the following policies promote industrial eco-efficiency in China have been recommended. First, relevant authorities must take effective measures to encourage the central/western regions to adopt clean energy technologies. The energy subsidy policies should strive to break through the technological lock-in and turn to regional green development. Second, full advantage of the spatial effects must be taken and technological exchanges and cooperation among neighboring areas must be strengthened to ensure that the industrial eco-efficiency of the central and western regions converge with those of the eastern coastal areas. Policy implications of multidimensional heterogeneity and adjustment of industrial structure should be highlighted while promoting industrial eco-efficiency. Finally, it is crucial to emphasize factors, such as foreign direct investment (FDI), ownership and industrial structures to attract FDI and optimize the current industrial structure.

Energy Goods Demand in Tabalong Regency: Almost-Ideal Demand System Approach

The declining trend of Tabalong Regency’s economic growth in recent years adversely affected the poverty rate. Further, the recent energy subsidy policy applied by the Indonesian Government has pushed the subsidy’s budget down for some energy goods. Therefore, there should be an awareness regarding the current energy policy and the impact on the poverty particularly in Tabalong Regency. This paper investigates the demand system for the three main energy goods; premium fuel, electricity, and Liquid Petroleum Gas (LPG) in Tabalong Regency of the South Kalimantan Province. Although the same method was previously used on the different topics, this paper uniquely utilizes the combined Linear Approximation and Quadratic Almost-Ideal Demand System on the particular energy policy topic. This paper utilizes the National Social Economics Survey conducted by BPS-Statistics of Tabalong Regency in 2016. The results show that the income elasticity of demand for the top 60% and the bottom 40% of the income groups were positive; however, slight differences could be seen. For the top 60% of the income group, the income elasticities of demand were 0.97, 1.02, and 1.08 for premium fuel, electricity, and LPG respectively. On the other hand, the bottom 40% of the income group had 0.99, 1.07, and 0.91 of income elasticity of demand for premium, electricity, and LPG. The price elasticity of demand for both income groups had negative signs, which is agreeing with the theoretical demand function. These results indicate that the current energy policy should continue with securing the poor households from the possible effect.

Global Energy Subsidies Reform: Inclusive Approaches to Welfare Assessment

For several decades energy subsidies remain on the top of international policy agenda, serving as one of the most widely used policy tools. Several major international organizations have attempted to quantify global energy subsidies and provide assessment of their potential reform. This includes studies by Organization for Economic Co-operation and Development (OECD), International Energy Agency (IEA) and International Monetary Fund (IMF). While most of these contributions provide estimates of wide economic effects they lack consistent assessment of environmental co-benefits of subsidies elimination, which can potentially have a significant influence on aggregate results and their regional distribution. In this paper, we apply a multistep framework to analyze two global energy subsidies scenarios, which include elimination of pre-tax consumer and post-tax local pollution subsidies. Computable general equilibrium GTAP-E-Power model is used to implement energy subsidy policies, quantify economic impacts, estimate energy use changes and CO2 emissions. Energy use changes are linked to emissions of air pollutants (SO2, NOx and PM2.5) and pollution-mortality impacts are estimated based on the population exposed by pollution and corresponding mortality risks for chronic obstructive pulmonary disease, lung cancer, ischemic heart disease and stroke. Finally, welfare benefits related to reduced mortality rates using country-adjusted willingness-to-pay measure from direct valuation studies.

Model of sustainable development of energy system, case of Hamedan

Sustainable economic growth and improvement of the social welfare depend upon the sufficient supply of energy resources, while the utilization of energy resources is one of the main factors of environmental degradation. This research is involved with development of a sustainable energy system model and a new method for sustainability assessment. This model represents the flow of energy from primary resources through processing, conversion, and end-use technologies in an optimization framework where the useful energy demand in various social and economic sectors is met. The impact of energy supply and consumption chain on the environment at each level of energy system is also embedded in the model structure. A multi-criteria analysis of changes is then applied and sustainable development indices of the whole system are concluded. Finally, effects of the energy subsidy policy and high economic growth rate on sustainability of the energy system in three scenarios are analyzed. Results demonstrate that energy subsidy decelerates the improvement rate of the total sustainability index. Also, when a high economic growth is accompanied with the energy subsidy this index reduces considerably. Results show that how penetration of renewable energy potentials changes the sustainability situation of energy systems.

Comprehensive optimisation of China’s energy prices, taxes and subsidy policies based on the dynamic computable general equilibrium model

Under the condition of increasingly serious environmental pollution, rational energy policy plays an important role in the practical significance of energy conservation and emission reduction. This paper defines energy policies as the compilation of energy prices, taxes and subsidy policies. Moreover, it establishes the optimisation model of China’s energy policy based on the dynamic computable general equilibrium model, which maximises the total social benefit, in order to explore the comprehensive influences of a carbon tax, the sales pricing mechanism and the renewable energy fund policy. The results show that when the change rates of gross domestic product and consumer price index are ±2%, ±5% and the renewable energy supply structure ratio is 7%, the more reasonable carbon tax ranges from 10 to 20Yuan/ton, and the optimal coefficient pricing mechanism is more conducive to the objective of maximising the total social benefit. From the perspective of optimising the overall energy policies, if the upper limit of change rate in consumer price index is 2.2%, the existing renewable energy fund should be improved.

Prospective thermal power generation in the Western Balkan countries

The aim of this paper is to analyze the expansion of the thermal generation in the long-term for the Western Balkan region. This paper concentrates on the estimation of long-term energy data for the (Western) Balkan countries. The process was implemented by the use of the PRIMES model in order to perform simulations for the future growth of electricity supply and demand in the region. Two scenarios were applied. The first (Baseline) scenario was based on the current energy path of each country and on the absence of any specific energy policy like tax emissions or renewable subsidies. The second (Reference) scenario was practically a series of “environmental” sub-scenarios, based on specific energy subsidy policy applied to the electricity generated by renewable sources. Results were given for the period between 2015 and 2050 in 5-year steps and conclusions were made for the whole region. As such, the results can feed up trials of energy planning referring to the future energy condition.

Interaction of Renewable Energy Policy and CO2 Emission Control Policy: Case Study

Cost-effective policy on renewable energy could be made based on information of renewable energy industry development and carbon dioxide control strategy. To analyze the interaction of renewable energy policy with CO2 control strategy, we developed a recursive linear planning model. The year 2004 is set as the base year. The target years are 2015, 2025, 2035, and 2045. Fujian province in China is selected as a case for the study. Calculation results show that in some instances, renewable energy subsidy policy and clean development mechanism incentive could not drive the market as policy makers expected. Careful design is required for renewable energy policy and carbon dioxide control policy, especially for developing countries. This study shows that a recursive linear program could be applied to an integrated study of renewable energy policy and carbon dioxide control policy.