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Pull the plug of over-consumption

By Li Jing (China Daily)
Updated: 2008-09-15 14:55

Some analysts have proposed this might be a good time for China to adjust its pricing mechanism for refined oil, since the domestic price is roughly the same as it is on the international market, and it would have a limited impact on domestic producers.

Spence holds that lifting the energy subsidies should not be done quickly. It must be done in a "pretty careful" manner to avoid conflicts among people, especially "poor people in the rural areas", he says, adding that some kind of "compensation" can be given to them when lifting the subsidies.

Zhou also recommends a step-by-step adjustment of the energy prices. He emphasizes it is important to send the signals to consumers that the old ways of energy use, such as driving gas guzzlers, no long work.

The final result of an energy price hike would be to mobilize the improvement of energy saving technology and to change consumers' old habits, says Zhou.

A new United Nations Environment Program (UNEP) report also urges countries to phase out energy subsidies.

Governments spend as much as $300 billion a year total in subsidies that encourage consumption and discourage efficiency, the report says. The subsidies also delay the transition from dirty energy to more climate-friendly sources of power, according to the report.

Subsidies "don't always help the poor who need it most" and often benefit the wealthy, says Kaveh Zahedi, UNEP's climate change coordinator.

The UNEP report says money could be redirected into programs that support low-income families more directly and should also be targeted to promote green energy, such as wind or solar.

Cutting off the subsidies would be good for the environment as it would reduce carbon emissions by as much as 6 percent, says Zahedi.

"Some countries spend more on subsidies than on health and education combined ... they stand in the way of more environmentally friendly technologies," Zahedi says.

Smarter subsidies such as tax breaks, financial incentives or other market mechanisms could generate benefits for the economy and environment if properly targeted, the UN report says. It pointed to subsidies to promote wind energy in Germany and Spain aimed at helping to shift from fossil fuels.

Well-devised subsidies in Chile had spread rural electrification to 90 percent of the population from 50 percent in 12 years, it says.

Governments in Accra are working on the building blocks of a new climate treaty meant to be agreed at the end of 2009 to help slow warming temperatures that may bring more heatwaves, more powerful storms and disruptions to water and food supplies.

UNEP also says Africa was starting to benefit from a UN project to help investments in clean technologies such as wind or geothermal power. Nations such as China, India and Brazil have so far won almost all of the 3,500 projects.

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