Presentation on theme: "EFFECTS OF SUBSIDY ON SUSTAINABLE DEVELOPMENT Oleh : 1. Agustinus Yanuar Mahendratama (NPM: 1006787685) 2. Danny Cahyono (NPM :1006787703) 3. Intan Yulia."— Presentation transcript:
EFFECTS OF SUBSIDY ON SUSTAINABLE DEVELOPMENT Oleh : 1. Agustinus Yanuar Mahendratama (NPM: 1006787685) 2. Danny Cahyono (NPM :1006787703) 3. Intan Yulia Sari (NPM :1006735486) 1 ST ASSIGNMENT OF SUSTAINABLE ENERGY
SUBSIDY DEFINITION : Financial assistance granted by the government to firms and individual. Subsidies act as a drain on government finances and reduce the incentive to use energy efficiently.
SUSTAINABLE DEVELOPMENT DEFINITION : Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
SUSTAINABLE DEVELOPMENT Energy’s role : A lack of access to reliable and affordable energy undermines economic and social development in many parts of the world today. Consequences of energy production and use : Threatening the stability of ecosystems and the health. Burning fossil fuels causes urban smog and acid rain. while producing polluting water supplies.
SUSTAINABLE DEVELOPMENT Principle to achieving Sustainability Energy : Increasing the energy efficiency of output so amount of goods and services with less energy. Conserving energy. The cleanest way to use Switching from fossil fuels to others that emitgreenhouse gases, such as renewable energy. Increasing the capacity of the Earth’s forests Capturing carbon and other substances at the they are emitted into the atmosphere.
Energy in the context of sustainable development Energy is critical to economic development and poverty reduction Nearly 2.5 billion people continue to use traditional biomass fuels for cooking and heating (IEA, 2009). Governments support the production or consumption of energy in many ways The sets of policies that countries have used to influence their energy markets vary according to their level of development Given the critical role that energy plays in economic and social development, the reform of inefficient energy subsidies should be analyzed in context, including their links to each of the economic, social and environmental dimensions of sustainable development
What makes for inefficient subsidies leading to wasteful consumption? Policy makers usually justify energy subsidies with the argument that they contribute to economic growth, poverty reduction and enhance security of energy supply Energy subsidies could create distortive price signals and result in higher energy consumption or production, or barriers to entry for cleaner energy services Energy subsidies can put societies onto inefficient consumption and production paths Identifying which specific fossil-fuel subsidies are “inefficient” and “encourage wasteful consumption” requires understanding the circumstances of each country, and the impact of the different subsidies in use
Social, Economic, and Environmental Impacts of Energy Subsidies (UNEP)
Reforming and phasing-out inefficient energy subsidies Phasing out inefficient energy subsidies could have direct positive effects on the economy, particularly in the longer-term, if it reduces economic distortions Energy subsidies lead to a worsened fiscal balance due to increased government expenditures or net current transfers and can affect the balance of payments Phase out of fossil fuel subsidies may lead to reduced demand for fossil fuels, either through improvements in energy efficiency and more efficient fuel use, or through substitution with other fuels or other inputs Reduced demand growth for fossil fuels will also lead to lower emissions of sulphur dioxide (SO2), nitrogen oxides (NOX)
Environmental effects of subsidies The graph on the left demonstrates how production and consumption subsidies on fuel production can be bad for the environment, assuming that the supply and/or use of the fuel results in some form of air pollution or climate destabilizing emissions.
Impact of the removal of energy consumption subsidies
Impact of subsidy phase-out on global energy demand
Impact of subsidy phase-out on energy-related carbon dioxide emissions
Long-term impact of a multilateral phasing-out of fossil fuel subsidies on GHG emissions
Subsidy programmes should be: well-targeted—subsidies should go only to those who are meant and deserve to receive them; efficient—subsidies should not undermine incentives for suppliers or consumers to provide or use a service efficiently; soundly based—subsidy programmes should be justified by a thorough analysis of the associated costs and benefits; practical—the overall amount of the subsidy should be affordable and the administration of the subsidy programme should be at a reasonable cost; transparent—information on the amount of government money spent on the subsidy and on subsidy recipients should be disclosed; and limited in time—sunset clauses should be included in the design of subsidy programmes to avoid consumers and producers becoming overly dependent on this support and costs spiralling out of control.
Dealing with barriers to reform : Reforming energy subsidies in practice requires strong political will to take tough decisions that benefit society as a whole.
REFERENCE International Energy Agency-United Nations Environment Programme, Reforming Energy Subsidies, 2002. Indonesian Energy Outlook, Pengkajian Energi UI, 2006. Anaysis of The Scope of Energy Subsidies and suggestions for the G-20 Initiative, IEA, OPEC, OECD, World Bank Joint Report, 2010.
Subsidy Impact : ● Subsidies often lead to higher consumption and waste, exacerbating the harmful effects of energy use on the environment. ● They can place a heavy burden on government finances and weaken the potential for economies to grow. ● They can undermine private and public investment in the energy sector, which can impede the expansion of distribution networks and the development of more environmentally benign energy technologies. ● They do not always end up helping the people that need them most.