BRICS nations must adapt clean energy transition
New Delhi, Nov 13 (IANS) As the BRICS leaders’ summit starts in Brazil, a first-of-its-kind report on Wednesday brought together data on both revenues and subsidies related to fossil fuels.In India, revenues from fossil fuels stand at 17.8 per cent, compared to 4.2 per cent in China.
The report — ‘Beyond fossil fuels: Fiscal transition in BRICS’ — from the Global Subsidies Initiative (GSI) of the International Institute for Sustainable Development (IISD) and the Leave it in the Ground (LINGO) estimates that in 2017 taxes and other revenues from fossil fuel production and consumption amounted to 23.6 per cent of general government revenue in Russia and 6.8 per cent in both Brazil and South Africa.
In India, the research looks at government revenue at both the central and state levels.In particular, in fiscal 2017-18, India is estimated to have received Rs 623,700 crore from taxes and other revenue streams related to fossil fuels.A total of Rs 394,100 crore, or 11.3 per cent of general government revenue, came from fossil fuel production, most importantly through the excise duty on oil, gas and petroleum products processed by Indian companies.
A sum of Rs 229,600 crore, or 6.5 per cent of general government revenue, came from taxes on fossil fuel consumption, including a value-added tax (VAT), which was replaced with Goods and Services Tax (GST) in 2017-18.Experts warn that governments receiving a lot of revenue from fossil fuels, whether through their consumption or production, will see a sudden gap in their budgets if they don’t start adapting their fiscal policy to the clean energy transition.
“The clean energy transition will replace fossil fuels and thus can lead to a decrease in fossil fuel revenues for India and the other BRICS governments in two ways: through a drop in prices and, over the longer term, through the shrinkage of absolute amounts of production and consumption,” Vibhuti Garg, co-author of the report and IISD Senior Energy Specialist in India, told IANS in a statement.”We can see these trends already unfolding in India: many of the country’s coal and gas power assets are stressed in light of the plummeting costs of solar and wind.
The demand shrinkage risks will also affect fossil fuel export-oriented businesses such as some of India’s oil refineries. As a result, government revenues from these operations are also in peril.””The Indian central and state budgets are already being eroded by subsidies to both fossil fuel production and consumption,” added Garg.A year ago, IISD’s report ‘India’s energy transition: Subsidies for fossil fuels and renewable energy, 2018 Update’ estimated Indian subsidies to oil and gas at Rs 46,933 crore in 2017-18 and subsidies to coal and coal-fired power at Rs 13,849 crore in the same fiscal.
Researchers focus on BRICS as a group of countries that increasingly influence the future of the global clean energy transition due to their growing role in the world’s economy and energy markets.In turn, the clean energy transition also affects BRICS through international climate commitments, the plummeting costs of renewables and domestic efforts to improve energy efficiency, energy security and local air quality.This report calls on the governments of Brazil, Russia, India, China, and South Africa (BRICS) to foster economic and fiscal diversification and strategic use of the current revenues from fossil fuels.
To improve their fiscal stability, governments should phase out fossil fuel subsidies.In the short-to-medium term, they can also increase taxes on fossil fuels and carbon.Such revenues should be used as a temporary bridge to help fund the costs of transition.India has increased its charge on coal production several times, although attempts to use part of these revenues to support renewable energy have not yet been fully successful.