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Consider in more detail the experiences of Mexico and Indonesia.

Mexico uses monthly price ceilings to subsidize consumers of gasoline and diesel fuel. This results in a subsidy to gasoline and diesel consumption. The subsidies since 2006 have averaged about 40 cents a gallon (U.S.$) for gasoline and about 59 cents a gallon for diesel.

The Mexican government has maintained that the subsidy is necessary to protect the poor from higher fuel prices. “Getting Prices Right: Mexico’s Fuel Subsidies”, Federal Reserve Bank of Dallas, Southwest Economist , October 2013. The subsidy does not begin to satisfy its objective. According to 2010 Mexican data the poorest 2 deciles in the income distribution had only 3% of gasoline and diesel consumption.

On the other hand. The top two, richest deciles consumed 58.5% of gasoline and diesel. So, nearly 60% of 96% subsidy goes to wealthy households. The subsidy clearly has no earmarks of a pro-poor program.

In Indonesia, in many years over the past 3 decades the subsidy to domestic consumption of fossil fuels has been very high, in other years somewhat lower. The low years were always the years right after Indonesia increased prices of gas and diesel, indicating significantly high price elasticity of demand.

In some recent years, the Indonesian subsidy has amounted to as little as 13% and as much as 20% of government spending: one-fifth of a budget that cannot be spent on human capital formation, infrastructure or poverty reduction. In recognition of the problem, the Indonesian Government in 2014 twice increased fossil fuel prices 44% to cut the annual subsidy bill to $20 billion. Then in November, prices were again increased, by another 30%.

In Venezuela fuel prices are capped at less than U.S. 10 cents per gallon, and the energy subsidy costs 7% of GDP (see Table 15-2).

Worldwide, the International Energy Agency (IEA) estimates that in 2010 government spending on subsidies for consumption of fossil fuels amounted to about $408 billion. Of this amount, only $35 billion of worldwide energy subsidies benefitted the bottom 20% of the income distribution. Thus the poorest two deciles received only 9% of the total subsidy. “Getting Prices Right,” Mexico’s Fuels Subsidies, Dallas Fed, Southwest Economist , October 2013. Other research confirms this pattern. According to the International Monetary Fund (IMF) only 7% of total fuel subsidies go to the poorest 20% of households; while 43% goes to the richest 20%. “Fueling Controvery,” The Economist , January 11, 2014. The reader should ask:

Is this good income distribution policy?

Is this good resource allocation policy?

Is this good policy for reducing greenhouse gasses?

Is this good environmental policy – does it help reduce air pollution?

The answer to each of these questions is clearly no. If governments are concerned with the effects of fossil fuel purchases on poorer families, the fuel subsidies are decidedly inferior to cash transfers to the poor, to enable them to better shoulder the costs of higher fuel prices, cash subsidies for this purpose have been utilized since 2011 in Uganda and Iran.

Questions & Answers

I only see partial conversation and what's the question here!
Crow Reply
what about nanotechnology for water purification
RAW Reply
please someone correct me if I'm wrong but I think one can use nanoparticles, specially silver nanoparticles for water treatment.
what is the stm
Brian Reply
is there industrial application of fullrenes. What is the method to prepare fullrene on large scale.?
industrial application...? mmm I think on the medical side as drug carrier, but you should go deeper on your research, I may be wrong
How we are making nano material?
what is a peer
What is meant by 'nano scale'?
What is STMs full form?
scanning tunneling microscope
how nano science is used for hydrophobicity
Do u think that Graphene and Fullrene fiber can be used to make Air Plane body structure the lightest and strongest. Rafiq
what is differents between GO and RGO?
what is simplest way to understand the applications of nano robots used to detect the cancer affected cell of human body.? How this robot is carried to required site of body cell.? what will be the carrier material and how can be detected that correct delivery of drug is done Rafiq
what is Nano technology ?
Bob Reply
write examples of Nano molecule?
The nanotechnology is as new science, to scale nanometric
nanotechnology is the study, desing, synthesis, manipulation and application of materials and functional systems through control of matter at nanoscale
Is there any normative that regulates the use of silver nanoparticles?
Damian Reply
what king of growth are you checking .?
What fields keep nano created devices from performing or assimulating ? Magnetic fields ? Are do they assimilate ?
Stoney Reply
why we need to study biomolecules, molecular biology in nanotechnology?
Adin Reply
yes I'm doing my masters in nanotechnology, we are being studying all these domains as well..
what school?
biomolecules are e building blocks of every organics and inorganic materials.
anyone know any internet site where one can find nanotechnology papers?
Damian Reply
sciencedirect big data base
Introduction about quantum dots in nanotechnology
Praveena Reply
what does nano mean?
Anassong Reply
nano basically means 10^(-9). nanometer is a unit to measure length.
do you think it's worthwhile in the long term to study the effects and possibilities of nanotechnology on viral treatment?
Damian Reply
absolutely yes
how to know photocatalytic properties of tio2 nanoparticles...what to do now
Akash Reply
it is a goid question and i want to know the answer as well
characteristics of micro business
for teaching engĺish at school how nano technology help us
How can I make nanorobot?
how did you get the value of 2000N.What calculations are needed to arrive at it
Smarajit Reply
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Source:  OpenStax, Economic development for the 21st century. OpenStax CNX. Jun 05, 2015 Download for free at http://legacy.cnx.org/content/col11747/1.12
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