Removing energy subsidies in China
Posted by Daniel Hall on November 6, 2008
There is a new discussion paper out from William Pizer, Takahiro Ueno, Michael Levi, and (ahem) Daniel Hall. We talk about options for engaging countries in the developing world in a post-Kyoto climate agreement.
Here is an interesting sentence:
the elimination of subsidies for transport fuels in China would be equivalent to an $11 per ton CO2 tax on gasoline – or a $25 per ton CO2 tax on diesel – relative to current prices.
The upshot is that the removal of subsidies for fossil fuels in non-OECD countries — where subsidies remain widespread and encourage fuel and emissions growth — could be a near-term bridge for international climate negotiations. Developed countries could raise fossil energy prices — through taxes or cap-and-trade systems — while simultaneously developing countries reduced or eliminated fossil fuel subsidies. Eventually one would like to harmonize prices on emissions/fuels globally, as this would be most efficient. In the near-to-medium term, however, moving closer to market prices in the developing world while taxing externalities in the developed world would be a big step forward.
I suspect I may have other sentences of interest from this paper in coming days.
Here is the website for the Harvard Project on International Climate Agreements. Our discussion paper is one among a great number of very interesting papers for the project.