Title: The Role of Pricing, Taxation and Incentives for Introducing Cleaner Fuels in Asia
1 The Role of Pricing, Taxation and Incentives for
Introducing Cleaner Fuels in Asia
Grant Boyle, ADB Consultant May 22, 2006,
Manila, Philippines Developing Fuel Quality
Roadmaps for Conventional Fuels in Asia
2Pricing, taxation and incentives and cleaner
fuels governance/policy
3What are the sources of cleaner fuel supply in
Asia?
- Domestic Refinery Upgrades?
- Regional Imports?
- (Singapore, South Korea, Chinese Taipei, Japan,
Australia, India) - Global Imports?
- ( Middle East)
Source BP Statistical Review 2005 APERC, 2005
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5Regulatory Framework Industry Structure
Source US DOE, 2005 APERC, 2005 Petroleum
Intelligence Weekly, 2005
6Regulatory Framework Pricing Tax
Source Metschies, 2005 APERC, 2005
7Impact of Rising Oil Prices
- In October 2005, Indonesia increased diesel
prices 105 Rp 2100 (US 0.22) to Rp 4300 (US
0.46) and gasoline prices from 88 Rp 2400 (US
0.26) to Rp 4500 (US 0.48). - In 2005 Malaysia forewent a fuel sales tax, which
amounted to RM7.9 billion (US2.2 billion). As of
March 2006, pump prices had risen 40 for
gasoline and 100 for diesel since October 2004.
- China PetroChina lost 19.8 billion Yuan (US2.4
billion) on refining and fuel sales in 2005. -
- In 2005, the government gave Sinopec a payment
of Rmb9.42 billion (US 1.18 billion) to
compensate for its refining losses. -
- 2006 introduced a special revenue charge on
crude oil producers varies according to
international crude prices between 20 and 40 on
prices exceeding US40 per barrel.
8Implications of Regulatory Framework for Cleaner
Fuel
- Controlled pricing regimes can preclude
opportunity to pass costs of cleaner fuels on in
consumer prices. - Does preferential tax treatment for diesel have
cleaner fuel implication? (Also, subsidies to
kerosene may encourage fuel adulteration). - Less competitive, protected markets will not move
to cleaner fuels unless mandated by government or
may not be prepared to do so. - Industry structure and ownership influences
financing arrangements.
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10Cleaner Fuel Incentives
3 pence per liter
2 pence per liter
1 pence per liter
Source HM Customs and Excise,2000- in
Environment Canada, 2000
11Cleaner Fuel Incentives in Asia
Euro Spec/ ULSD
Unleaded
12Cleaner Vehicle Incentives
Source Land and Transport Authority
OMV (Open Market Value) is the basic price of the
vehicle determined by customs
ARF (Additional Registration Fee) is typically
110 of OMV
13Cleaner Vehicle Incentives in Asia
14Conclusions
- The global experience shows that regulations are
instrumental in establishing the market for
cleaner fuels. Tax advantages and incentives have
helped accelerate and support cleaner fuels
globally and in Asia, but have not acted as
substitutes for regs. -
- Asian countries have managed to introduce cleaner
fuels quickly without incentives, especially
importing countries.
15Conclusions
- Market pricing that allows refiners to pass
higher costs of cleaner fuels on to consumers may
be the most important fuel pricing policy issue
concerning cleaner fuel investments. High
international prices in recent years have
illustrated the non-sustainable nature of
subsidized fuel prices in general, as well as the
feasibility of letting retail prices rise, but
also the challenges of fuel poverty. - Over the short term, advantageous pricing and
taxation for cleaner fuels can be adopted, based
on existing industry structures and pricing
regimes.
16Thank you