http://blog.prospectblogs.com/2008/07/02/prospect-online-this-week-25/ Tue, 02 Dec 2008 20:38:06 +0000 http://wordpress.org/?v=2.6.5 http://blog.prospectblogs.com/2008/07/02/prospect-online-this-week-25/#comment-4891 chrisg Tue, 15 Jul 2008 16:01:53 +0000 http://blog.prospectblogs.com/?p=752#comment-4891 A viscous circle It is really quite simple for countries like China to get rid of subsidies on fuel or food. They should simply replace them with direct cash subsidies to the poor. The poor will spend as little of the cash on petrol as they can, so replacing low priced fuel with cash subsidies will cut demand for petrol. Having said that, while Western countries can do this, it isn't easy for 3W countries (China is as bad or worst than most)because they lack the ability to target cash handouts at the poor effectively. Or they get stolen en route. And especially in China there's a very long tradition of central (imperial) control. So if you can't easily get rid of fuel subsidies, what's the next best thing? Complement them with even bigger subsidies for things that reduce fuel consumption, ie subsidise fuel-efficient cars, energy saving devices, low energy light bulbs, etc; and tax high-polluting vehicles and activities, etc. Economists will whinge that adding more subsidies isn't efficient and they are right but it is better than doing nothing, and can affect behaviour quite quickly- note how fast Germany has shifted to renewable energy production thanks to big consumer subsidies. A viscous circle
It is really quite simple for countries like China to get rid of subsidies on fuel or food. They should simply replace them with direct cash subsidies to the poor. The poor will spend as little of the cash on petrol as they can, so replacing low priced fuel with cash subsidies will cut demand for petrol. Having said that, while Western countries can do this, it isn’t easy for 3W countries (China is as bad or worst than most)because they lack the ability to target cash handouts at the poor effectively. Or they get stolen en route. And especially in China there’s a very long tradition of central (imperial) control. So if you can’t easily get rid of fuel subsidies, what’s the next best thing? Complement them with even bigger subsidies for things that reduce fuel consumption, ie subsidise fuel-efficient cars, energy saving devices, low energy light bulbs, etc; and tax high-polluting vehicles and activities, etc. Economists will whinge that adding more subsidies isn’t efficient and they are right but it is better than doing nothing, and can affect behaviour quite quickly- note how fast Germany has shifted to renewable energy production thanks to big consumer subsidies.

]]> http://blog.prospectblogs.com/2008/07/02/prospect-online-this-week-25/#comment-4823 N.A.YARDLEY Thu, 03 Jul 2008 17:45:17 +0000 http://blog.prospectblogs.com/?p=752#comment-4823 I BET TOM DE CASTELLA IS A WHITE MAN. IF SO, THIS PROVES IT ALL. I BET TOM DE CASTELLA IS A WHITE MAN. IF SO, THIS PROVES IT ALL.

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