Page 5 - AfrElec Week 11 2023

AfrElec COMMENTARY AfrElec

or capping price increases. scheme, which supports access to liquefied
The Peruvian government decided in April petroleum gas (LPG) for the poorest segments
2022 to temporarily include a number of trans- of the population, saw its cost reach $820mn
port fuels in the State Fuel Price Stabilisation In Germany, the government implemented
Fund to reduce the rise in prices. Thailand intro- several additional payments to help vulnerable
duced a diesel price cap of THB30 ($0.85) per communities pay their heating bills (households
litre. on housing benefits, apprentices and students
El Salvador introduced price caps for gasoline with student loans). In South Korea, vouchers for
and diesel products. Egypt extended the period energy expenses – including electricity, gas, LPG
for subsidising electricity, while it had previously and heating – were provided to around 1.2mn
been planning to stop doing so by the end of the vulnerable households in 2022, and the voucher
fiscal year 2021-2022. amounts were raised twice during the year.
France enacted a ‘tariff shield’ that ini- Phasing out fossil fuel subsidies is crucial for
tially froze electricity and gas retail tariffs for a successful clean energy transition, as empha-
households and then limited the possibility for sised in the Glasgow Climate Pact, stressed the Governments
increases in price. IEA. However, the current global energy crisis
Exemptions from various taxes and levies highlights the political challenges involved in should focus
were common. The South African govern- doing so. on structural
ment froze the general fuel levy on petrol and Although high and volatile fossil fuel prices
diesel from February 2022, and reduced it by emphasise the unsustainability of the current changes that
ZAR1.50 ($0.9) per litre from April to June energy system and underscore the benefits of
2022. energy transitions, the volatility comes with sig- reduce fossil fuel
Guyana removed the excise tax on gasoline nificant economic and social costs. High fossil
and diesel in March. The United Kingdom cut fuel prices hit the poor the hardest, but subsidies demand, rather
fuel duty, and Belgium reduced the VAT on elec- tend to benefit the better-off, making effective than emergency
tricity bills from 21% to 6%. targeting essential.
Well-designed policies should prevent fuel relief when fuel
Policy solutions supply from getting too far out of step with
Easing payment terms or banning disconnec- demand, with resources deployed to provide prices rise.
tions were also in evidence. Japan eased gas and lasting protection against volatile fuel prices.
electricity payment terms for those struggling This means anchoring market-based prices in a
to pay. In Spain, a “vital minimum supply” obli- broader suite of policies and measures that ena-
gation for utilities was enacted from September ble households and industries to make cleaner
2021, ensuring vulnerable households unable to energy choices. High-efficiency and low-emis-
pay their electricity bills would still get supplied sions equipment and services must be readily
for a period of 10 months. available, and poorer consumers need support
In some countries, compensation mecha- to manage their upfront costs.
nisms have been adopted for different affected Governments should focus on structural
groups of consumers, including households, changes that reduce fossil fuel demand, rather
businesses and industrial consumers. In India, than emergency relief when fuel prices rise, con-
the Pradhan Mantri Ujjwala Yojana subsidy cluded the IEA.™

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