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The Role of Pricing, Taxation and Incentives for Introducing Cleaner Fuels in Asia

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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
2
Pricing, taxation and incentives and cleaner
fuels governance/policy
3
What 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
4
(No Transcript)
5
Regulatory Framework Industry Structure
Source US DOE, 2005 APERC, 2005 Petroleum
Intelligence Weekly, 2005
6
Regulatory Framework Pricing Tax
Source Metschies, 2005 APERC, 2005
7
Impact 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.

8
Implications 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.

9
(No Transcript)
10
Cleaner Fuel Incentives
3 pence per liter
2 pence per liter
1 pence per liter
Source HM Customs and Excise,2000- in
Environment Canada, 2000
11
Cleaner Fuel Incentives in Asia
Euro Spec/ ULSD
Unleaded
12
Cleaner 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
13
Cleaner Vehicle Incentives in Asia
14
Conclusions
  • 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.

15
Conclusions
  • 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.

16
Thank you
  • boyle_at_hq.unu.edu
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