Reducing Energy Subsidies Research Articles

FOREIGN DIRECT INVESTMENT: GLOBAL AND LOCAL FLOWS (THE CASE OF THE REPUBLIC OF NORTH MACEDONIA)

Foreign direct investment (FDI) is the notion that can be summarized in the form in which it represents the process in which an enterprise from one country invests capital in an existing enterprise or in a new enterprise established in another country. The standard definition of foreign direct investment is given by the Organization for Economic Cooperation and Development (OECD), according to which FDI is defined as the establishment of a lasting interest in and significant degree of influence over the operations of an enterprise in one economy by an investor in another economy. FDI has proven to have an expressed importance mainly in allowing the transfer of technology – especially in the form of new types of capital inputs – that cannot be achieved or at least in the form and volume required through financial investment or trade in goods and services. FDI has already proven that it can boost competition in the domestic input market, but also motivates the employment of domestic labor. In recent decades, the global map of inflow and outflow FDI has changed considerably. Traditionally, FDI originated from developed economies, which have recently gained significant ground in the share of FDI flows between geopolitically aligned economies. In particular during financial crises there is substantial evidence that FDI can lead many developing countries to consider it as an inflow of selected private capital and in certain cases even as a single capital inflow. Such a thing finds support in the tendency of economists who insist on the free flow of capital across national borders because it enables capital to have more favorable preconditions for return at the highest rate. However, the tradition has recently been changing, making the largest sector for FDI projects to be closely related to software and IT services. Investors see rising commodity prices, increased geopolitical unrest and political instability, as well as high inflation in an emerging market as the most likely risks at this time. The official data provided by World Bank (WB), International Monetary Fund (IMF), OECD, as well as the local National Bank and State Statistical Office are unanimous that in the last 20 years, North Macedonia has maintained a continuous increase in FDI, but unfortunately, at a comparative level with the countries of the region, it continues to lags behind. The North Macedonian authorities are progressing towards the Precautionary and Liquidity Line (PLL) objectives, including preserving public finances, reducing energy subsidies, tackling high inflation and ensuring financial stability, which will also increase the possibility real for FDI inflows.

Modeling the Environmental Macrostructural and Social Impacts of Reducing Energy Subsidies (by the Example of Uzbekistan)

Modeling the Environmental Macrostructural and Social Impacts of Reducing Energy Subsidies (by the Example of Uzbekistan)

The Effects of Electricity Consumption on CO2 Emissions in Iran

This study examined the empirical effects of electricity consumption on carbon dioxide (CO2) emissions in Iran. To achieve this goal, we applied the autoregressive distributed lag (ARDL) approach. The results indicate that cointegration exists among electricity consumption, economic growth, foreign direct investment (FDI), financial development and carbon dioxide (CO2) emissions. Also findings indicate that increase in electricity consumption has had a direct impact on carbon dioxide (CO2) emissions in both the short and long run. However, financial development and foreign direct investment (FDI) have a negative and significant effect on carbon dioxide (CO2) emissions. Therefore, it is proposed to reduce energy subsidies in the polluting industry. In addition, more investment in the use of renewable energy is required.

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.

Micro, small, and medium enterprises in emerging economies and economic transition: a comparative study between Indonesia and Hungary

It is necessary to foster and strengthen micro, small, and medium enterprises (MSMEs) to enhance their growth and develop them as strong, resilient, efficient, and independent contributors to the national economy. The purpose of this study is to analyse and compare the influence of MSME growth on the economic growth of an emerging economy (Indonesia) and an economy in transition (Hungary). This study uses secondary data, which are transformed into logarithms. Based on panel data regression analysis, this research finds that there is a significant influence of MSMEs and employment on economic growth in both countries. In the Hungary regression model, the MSME variable has a partial negative influence on economic growth due to political and economic influences. This study has two recommendations. First, Hungarian and Indonesian Government interventions are needed to develop MSMEs. Second, the Indonesian Government should reduce energy subsidies.

Oil price shocks and energy consumption in GCC countries: a system-GMM approach

A close association prevails among energy consumption, energy prices, and income levels. This association has implications for the growth of an economy. Hence, incorporating energy consumption properties in an economy is crucial for policy design purposes especially in the case of energy-exporting countries of the Gulf Cooperation Council (GCC). This paper studies the correlates of energy consumption with an emphasis on shocks in crude oil prices, changes in GDP per capita, carbon dioxide emissions, trade, population growth, and other key indicators using a panel of GCC countries over 30 years of data period (1985–2014). The study provides direct evidence of the oil price shocks and energy consumption using a static panel (POLS and FE) and dynamic panel (system-GMM) estimation technique. The finding shows that oil price shocks affect energy consumption negatively. The greatest positive effect on energy consumption is observed with an increase in GDP per capita, as a percent increase in it increases energy consumption by 0.65 percent. It is followed by trade openness which increases energy consumption by 0.14 percent. While the greatest negative effect on energy consumption is observed by a rise in oil prices, as a percent increase in oil prices reduces energy consumption by approximately 0.22 percent. The study also finds that higher energy consumption increases carbon dioxide emissions as energy consumption is growing with population growth. Thus, it is important to upscale the adoption of renewable energy sources, adopt energy-efficient technologies, reduce energy subsidies, and practice demand-side management.

The implementation of energy subsidy reduction policy on the Indonesian economy performance

Purpose: This study aims to evaluate the impact of the implementation of the energy subsidy reduction policy conducted by the Government of Indonesia for the period 2015-2017. The author examines the application of the subsidy reduction policy and its impact on economic performance, specifically on economic growth; inflation rates, sectoral employment absorption, income levels and households group income distribution using the computable general equilibrium approach (CGE Model). Research Methodology: The study used data from the 2008 Social Economic Balance System (SNSE) published by the Indonesian Central Statistics Agency (BPS). Furthermore, it also built a balance of data base with the static version 1.1 PEP model, version 2.0 making the energy subsidy reduction policy a shock in the simulation model developed. Results: The author found that the application of policy to reduce energy subsidies has an impact on increasing economic growth, reducing inflation, increasing employment in the livestock, hospitality, land transportation and other service sectors. Limitation: The limitation of this study is the use of funding 2008. Contribution: The government as a stakeholder should provide the inclusive potential opportunity and considerable funds for research and development of new energy sources which will benefit of the future of nations life.

An evaluation of technical progress and energy rebound effects in China's iron & steel industry

As a pillar industry in China, the iron & steel sector have under through rapid growth and technical progress for decades. However, energy polices aiming at energy savings may not be as good as expected due to the existence of rebound effects. The motivation of the paper is to analysis the nexus between technical progress and energy rebound effects. Based on a three-input trans-log cost function model, we first estimate the share equation and the corresponding price elasticity for each input factor. Then, the rebound effect in China's iron & steel industry over 1985–2015 is evaluated through decomposing the energy prices. Empirical results show that: (1) The price elasticities of input factors are negative; (2) Energy/capital and energy/labor show substitute relationships; (3) The average energy rebound effect in the ISI is as high as 73.88%; (4) The energy rebound effect shows a downward trend before the 11th Five-year period and then an upward trend after that. Therefore, policies proposals of lowering the rebound effect should be placed not only on technical progress, but also on energy price reform by reducing energy subsidies and thus accelerating energy price marketization, so as to promote energy substitution, reduce energy rebound effect and produce further economic and environmental benefits.

Conceptual Model of Supply Chain Structure Mapping - A Case of Subsidized LPG Commodity in Yogyakarta

— In 2007, the government launched a conversion program of kerosene to LPG by issuing a Presidential Regulation No. 104/2007 on Supply, Distribution and Pricing LPG 3 Kg. Article 2 on the regulation says that setting the supply, distribution, and pricing of LPG 3 Kg include planning an annual sales volume of enterprises, the reference price and the retail price and conditions of export and import of LPG 3 Kg in order to reduce subsidies Kerosene especially to divert the use of kerosene according to government policy. In principle, the purpose of this policy is to reduce energy subsidies on commodities, especially Kerosene. Although the government claimed the conversion program is success, there are few problems arising from conversion program. In 2014, many scarcity and high price of LPG 3 Kg were reported. In this case, Pertamina was given full authority to manage all supply chain and distribution. Because the root of the problem of scarcity that occurred in the supply chain system has not been explained, the proposed solutions will also be partial and not comprehensive. Thus, this research will build a structural map of the causes of supply chain system LPG 3 Kg, as well as providing a comprehensive picture of system dynamics of LPG 3 Kg supply chain system which applied in Indonesia. And the result is expected as in form of Causal Loop Diagram of supply chain system.

PHASING OUT KEROSENE SUBSIDY IN DEVELOPING COUNTRIES CASE STUDY OF INDIA AND INDONESIA

Subsidy is one of the main problems that burden the budget in some developing countries. Indonesia and India have similarities in dealing with efforts to reduce energy subsidies, especially kerosene. This study aims to explain the impact of the kerosene subsidy to the state budget of India and Indonesia, to explore and propose the alternative solutions to solve the problems occurred in relation with the implementation of the kerosene subsidy in both countries and to elaborate the strategy made by the government of both countries in reducing kerosene subsidy. This study used qualitative methods to explore ways of collecting information through data analysis in various types of both primary and secondary. The analysis used in this research is descriptive analysis in which researchers performed interpretation of data. From the analysis conducted, both countries succeeded in reducing the burden of subsidies for kerosene with a variety of strategies fit with the characteristics of each country.

Structural breaks and Fiscal Sustainability of the Indonesian Government Budget

The purpose of this study is to identify government policy regimes or structural breaks as indicated by significant changes in debt to GDP ratio and to identify fiscal sustainability in Indonesia from 2000 to 2013. Using Fiscal Reaction Functions framework and Smooth Transition Regression, the study found two structural breaks following the three regimes. Foreign debt repayment dominates the government policy during Regime I. Fiscal consolidations and discipline such as reducing energy subsidies in 2002 and 2005, managing debt portfolio and increasing government revenues were dominant during Regime II. In Regime III, the government increases domestic debt, particularly to finance stimulus package. This study also found that the Indonesian fiscal is unsustainable during the period of study. Overall, the findings seem to suggest that managing government debt through fiscal consolidations, foreign debt repayment and debt portfolio management is not sufficient to achieve long-term fiscal sustainability.

Reducing Energy Subsidies in China, India and Russia: Dilemmas for Decision Makers

This article examines and compares efforts to reduce energy subsidies in China, India and Russia. Despite dissimilarities in forms of governance, these three states have followed surprisingly similar patterns in reducing energy subsidies, characterised by two steps forward, one step back. Non-democratic governments and energy importers might be expected to be more likely to halt subsidies. In fact, the degree of democracy and status as net energy exporters or importers does not seem to significantly affect these countries’ capacity to reduce subsidies, as far as can be judged from the data in this article. Politicians in all three fear that taking unpopular decisions may provoke social unrest.

An evaluation of the impact of reducing energy subsidies on living expenses of households

A policy of subsidizing energy has been pursued in the Islamic Republic of Iran to help the poor and to utilize the relative advantages of the country. But it has been realized that energy subsidy has led to market distortion and welfare loss. Hence, elimination of energy subsidy is considered as a crucial matter. Changes in energy policy are hindered by the uncertainty on the impact of reducing energy subsidy on the living expenses of population. In the present article the distribution of resources through energy subsidy is evaluated; and, the direct and indirect effect of eliminating energy subsidies on the living expenses is estimated with the help of an analytical tool that has been developed. It is then concluded that additional financial resources obtained from reduction of energy subsidies could be allocated for compensating the decrease in purchasing power of households. The results of analysis reveal that more egalitarian distribution of resources and helping the poor could be achieved through implementation of a progressive policy of social security that is supported by financial resources available from elimination of energy subsidies.