Manila—20th June—This year, the Asian Development Bank's Asia Clean Energy Forum (ACEF) included a special session on fossil-fuel subsidies hosted by the Global Subsidies Initiative. The session provided an important perspective on the pursuit of clean energy in Asia, emphasizing that alongside the Forum's general focus—policies to promote renewable energy technologies, energy conservation and efficiency—it is equally important to identify and remove the policies that undermine and obstruct these objectives.

The session was chaired by Dr. Wijayatunga, Principal Energy Specialist at the Asian Development Bank. It included presentations from representatives of the GSI and the ADB; and discussion by experts from Indonesia, Vietnam and the Philippines.

In her opening address, the GSI's Tara Laan noted that fossil-fuel subsidies are widespread in Asia, with consumer subsidies averaging around 2 per cent of GDP. While there have been many commitments and efforts to reduce subsidies for fossil fuels across the region, progress has been slow because leaders are concerned about the impacts of reform. These impacts can be economic, social and political. A reform strategy can help to mitigate the various impacts and improve the political viability of reform.

Dr Shikha Jha, Principle Economist at the ADB, outlined the key findings of an upcoming ADB-GSI study that quantifies fossil-fuel subsidies in India, Indonesia and Thailand and projects the impacts of reform using economic modelling. Consumer fossil-fuel subsidies were found to be widespread in each country, accounting for between 2 and 4 per cent of GDP. The projected impacts varied depending on the model choice and assumptions but generally it was found that the elimination of fossil-fuel subsidies would have detrimental impacts that could be completely ameliorated by redistributing subsidy savings to households.

The discussants each provided a presentation of reforms in their country. Mr Perdana, Head of Income and Employment Generation Working Group at the National Team for Accelerating Poverty Reduction (TNP2K) in Indonesia, spoke on the challenges and opportunities of using social safety nets to reduce the impact of reform Indonesia's poor. Dr Nguyen Manh Hai, Director of the Department for Public Service Policies with the Central Institute for Economic Management (CIEM) of Vietnam, discussed setting prices for electricity and coal in Vietnam with a particular focus on the pace of price increases and impacts on inflation. Undersecretary of the Department of Energy in the Philippines, Ms. Zenaida Monsada, spoke about the Philippines’ experience reforming subsidies to petroleum and electricity, including measures to assist the poor and transition towards deregulated markets.

A summary of the sessions agenda, and available presentations, is below.

Chair

Dr. Priyantha D. C. Wijayatunga, Principal Energy Specialist at the Asian Development Bank

Speakers

Ms. Tara Laan, Associate, GSI. Barriers to Reforming Fossil-Fuel Subsidies: Lessons Learned from Asia (PDF - 1.76 MB)
Dr Shikha Jha, Principle Economist, ADB. TA: Preparing for Fossil-Fuel Subsidy Reforms. India, Indonesia and Thailand (PDF - 3.16 MB)

Panelists

Mr Ari Perdana, Head of Income and Employment Generation Working Group, National Team for Accelerating Poverty Reduction, Republic of Indonesia
Dr Nguyen Manh Hai, Research Department for Public Service Policies, Central Institute for Economic Management of Vietnam, Vietnam
Ms Zenaida Y. Monsada, Undersecretary, Department of Energy, The Philippines

* All photographs used in this article are courtesy of the Asian Development Bank.