Thu. Jan 20th, 2022

The government announces a new policy that will increase fuel prices. Street protests break out. An unprepared administration strikes with excessive force. It intensifies public anger, which is overcome in calls for greater democratic rights.

It’s the story of Kazakhstan, where the end of price controls for liquefied petroleum gas (LPG) – a popular, affordable fuel – in early January led to the country’s biggest protests since the collapse of the Soviet Union three decades ago. But the Central Asian Republic’s current political crisis now reflects a growing series of similar mass protests around the world, all linked to increased taxes or reduced subsidies on fossil fuels in recent years.

From France to Ecuador, Pakistan to Iran, and Zimbabwe to Lebanon, mass agitations over the past three years have revealed the difficult terrain that governments are entering as they try to get the market to set energy prices without causing mass uprisings.

Subsidies squeeze the budgets of countries and keep the planet addicted to fossil fuels. Yet the protests in Kazakhstan and other countries also expose uncomfortable truths about democracies and autocratic regimes, analysts say. Often, governments are more willing to cut subsidies for vulnerable sections of society than to direct benefits to fossil fuel companies. And in country after country, citizens come to the conclusion that they can influence energy policy just by taking to the streets.

Democracy shortage and climate change

“There’s a clear democratic deficit here,” said Naomi Hossain, a senior professional lecturer at the American University in Washington who has conducted extensive research on the link between fuel prices and mass protests worldwide. “Citizens often just do not trust their governments when it comes to energy policy.”

That lack of confidence exacerbates the world’s struggle to address climate change. “Fossil fuel subsidies include dependence on coal, oil and gas, while at the same time hampering the competitiveness of renewable energy,” Harro van Asselt, a professor of climate law and policy at the University of Eastern Finland, told Al Jazeera.

There is a clear shortage of democracy here.

Naomi Hossain, Senior Lecturer, Washington University

According to the International Energy Agency and the Organization for Economic Co-operation and Development (OECD), 81 major economies expanded $ 468 billion in 2019 – an amount greater than Nigeria’s gross domestic product – in financial support to the fossil fuel sector. The COVID-19 pandemic has hurt global energy demand, but as economic growth has recovered, so has the hunger for fossil fuels. Many countries have chosen to double down on coal, oil and gas.

“Instead of using it as an opportunity to recover, many countries have gone back to the traditional way and supported fossil fuel-based energy choices,” said Vibhuti Garg, an energy economist at the Institute of Energy Economics and Financial Analysis, told Al Jazeera. .

Billions in benefits for fossil fuel companies

Yet experts point out that not all fuel discounts are the same. Price controls and lower taxes for consumers often get undue attention, they say. But governments are also handing out billions of dollars in annual benefits to fossil fuel companies. In 2019, for example, 50 of the world’s largest and richest economies increased their financial support for fossil fuel production by 30 percent compared to the previous year. In total, these countries distributed $ 178 billion in benefits that year.

Some governments refuse to even count benefits for energy companies as subsidies. “The UK maintains the ridiculous position of not having fuel subsidies,” Neil McCulloch, a British development economist, said in an interview with Al Jazeera. In fact, by 2020, the UK has given more than $ 13 billion in tax cuts and other rebates to the industry, according to OECD data. Australia, the world’s largest coal exporter, spent $ 7.4 billion on subsidies in 2020-’21.

These subsidies to fuel producers help governments attract investors and in turn earn royalties and dividends, while also creating jobs, Garg said.

Protect the most vulnerable

While all subsidies must disappear if the planet is to be saved, it is essential to prevent “the cost of transition from falling mostly on the most vulnerable”, says Bronwen Tucker, global public finance co-manager at Oil Change International, a nonprofit which follows fossil fuel subsidies. “The richest companies, countries and individuals have to pay.”

The richest companies, countries and individuals have to pay.

Bronwen Tucker, Co-Manager of Global Public Finance at Oil Change International

Yet protesters in the streets of Almaty and previously in Paris, Beirut, Tehran and Quito have made it clear that they believe ordinary people currently face the bulk of fuel subsidy cuts. A proposed new fuel tax has sparked protests in France in 2018. In Iran, Zimbabwe, Pakistan and Lebanon, governments have faced unrest following sharply rising fuel prices, which have been curtailed by subsidies. And in Ecuador in 2019, the government of then-President Lenin Moreno announced the end of all fuel subsidies while trying to balance his books.

In several nations – especially energy-exporting countries – governments are using fuel price controls as a lazy substitute for building and maintaining robust social security systems, analysts say.

“Retaining fuel subsidies is easier than implementing the many other policies that will create a better life for the public,” Tucker told Al Jazeera.

If that’s the only major benefit the state gives people to protect them from price fluctuations, it’s no surprise that protests erupt when fuel subsidies are eliminated, Hossain said.

U-turns and successful transitions

Kazakhstan’s government has reversed its decision to end price controls. France has abandoned its plans for a new tax. And Ecuador has killed its efforts to end fuel subsidies. But the lesson from these protests is not that countries should keep fuel subsidies intact, experts say.

Research by McCulloch and his colleagues suggests that countries with rigid restrictions on fossil fuel prices are more likely to see major protests when fiscally-battered governments are forced to sharply increase the cost of energy.

“Countries need to gradually move towards a flexible pricing system while introducing targeted cash transfers and other benefits so that the burden does not fall too heavily on ordinary people,” he said. “To be honest, if governments do not want their rule threatened by protesters, that shift is in their interest.”

A few countries have made that transition successful. In 2015, Indonesia introduced reforms that significantly reduced subsidies on diesel and gasoline. More recently, India has used direct transfers to reduce diesel price controls and end subsidies on VPG.

Meanwhile, fuel is more central to people’s lives than it has ever been, Hossain said. “Energy today is like food 200 years ago,” she told Al Jazeera. “No one can do without it.”

The problem? Unlike other sectors, including food, where civic groups are sitting at the policy table in most countries, energy policy is treated “like a top-secret national security issue,” Hossain said. That needs to change in order to bring about meaningful reforms in fossil fuel prices, she said.

Without it, experts warn that other countries and regions where fuel subsidies are part of the social contract between the state and people – such as the Middle East and Nigeria – may witness subsequent protests of the kind that have plagued Kazakhstan.

“Until energy policy is democratized,” Hossain said, “I see many more protests in the future.”

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