Kazakhstan riots highlight tricky terrain for fuel subsidy cuts Fossil fuel news

The government has announced a new policy that will raise fuel prices. Street protests erupted. Unprepared governments repressed with excessive force. This fueled public outrage, which eventually morphed into calls for greater democratic rights.

This is the story of Kazakhstan, where the end of price controls on liquefied petroleum gas (LPG) – a popular, affordable fuel – in early January sparked the country’s biggest protests since the collapse of the Soviet Union 30 years ago. But the current political crisis in the Central Asian republic is closely linked to a growing number of similar mass protests around the world related to increased taxes or reduced subsidies for fossil fuels in recent years.

From France to Ecuador, Pakistan to Iran, Zimbabwe to Lebanon, massive unrest over the past three years has revealed the tricky terrain governments have taken as they try to let the market determine energy prices without sparking mass uprisings.

Subsidies strain national budgets and make the planet addicted to fossil fuels. However, analysts say protests in Kazakhstan and other countries have also exposed troubling truths about democracies and authoritarian regimes. Often, governments prefer to cut subsidies to socially disadvantaged groups rather than targeting the interests of fossil fuel companies. In country after country, citizens have come to the conclusion that they can only influence energy policy by taking to the streets.

Democracy deficit and climate change

“There is a clear democratic deficit here,” said Naomi Hossain, a senior professional lecturer at American University in Washington who has done extensive research on the link between fuel prices and mass protests around the world. “When it comes to energy policy, citizens often just don’t trust their government.”

This lack of trust is fueling the world’s fight against climate change. “Fossil fuel subsidies lock in reliance on coal, oil and gas, while hindering the competitiveness of renewables,” Harro van Asselt, professor of climate law and policy at the University of Eastern Finland, told Al Jazeera.

There is a clear democratic deficit here.

Naomi Hossain, Senior Professional Lecturer, American University of Washington

According to the International Energy Agency and the Organization for Economic Cooperation and Development (OECD), 81 major economies provided $468 billion in financial support to the fossil fuel industry in 2019 (more than Nigeria’s gross domestic product). The COVID-19 pandemic has hurt global demand for energy, but demand for fossil fuels is also recovering as economic growth recovers. Many countries have opted to double down on coal, oil and gas.

“Instead of using it as an opportunity to reset, many countries went back to the traditional way of supporting fossil fuel-based energy,” Vibti Garg, an energy economist at the Institute for Energy Economics and Financial Analysis, told Al Jazeera. choose.” .

Generates billions of dollars in benefits for fossil fuel companies

However, experts point out that not all fuel rebates are created equal. Price controls and lower taxes for consumers often receive disproportionate attention, they said. But the government also distributes billions of dollars in benefits to fossil fuel companies every year. For example, in 2019, the world’s 50 largest and richest economies increased their financial support for fossil fuel production by 30% from the previous year. Together, these countries handed out benefits worth $178 billion that year.

Some governments even refuse to count energy company earnings as subsidies. “The UK insists on its ridiculous position that it doesn’t have fuel subsidies,” UK development economist Neil McCulloch told Al Jazeera. In fact, according to the OECD, the UK provided the industry with more than $13 billion in tax cuts and other rebates. Australia, the world’s largest coal exporter, spent $7.4 billion on subsidies in 2020-21.

These subsidies to fuel producers help the government attract investors, which in turn generate revenue from royalties and dividends, while also creating jobs, Garg said.

protect the most vulnerable

Brown Wintuck, co-manager of global public finances at Oil Change International, said all subsidies must be eliminated if the planet was to be saved, but it was crucial to avoid “leaving the cost of the transition primarily on the most vulnerable”. Track profits from fossil fuel subsidies. “The richest companies, countries and individuals must pay the price.”

The richest companies, countries and individuals have to pay.

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

However, in Almaty, and before that in the streets of Paris, Beirut, Tehran and Quito, protesters made it clear that they believed ordinary people were now bearing the brunt of fuel subsidy cuts. A proposed new fuel tax sparked protests in France in 2018. In Iran, Zimbabwe, Pakistan and Lebanon, governments have faced turmoil after sharp increases in fuel prices, which they capped with subsidies. In Ecuador in 2019, the government of then-President Lenin Moreno announced an end to all fuel subsidies in an attempt to balance the bill.

Analysts say that in some countries — especially energy exporters — governments use fuel price controls as a lazy alternative to building and maintaining robust social safety nets.

“It’s easier to keep fuel subsidies than to enact many other policies that create a better life for the public,” Tucker told Al Jazeera.

Hussain said that if that was the only major benefit the state gave people to ease price volatility, it was no surprise that protests erupted when fuel subsidies were removed.

U-turns and successful transitions

The Kazakh government reversed its decision to end price controls. France abandoned plans to impose new taxes. Ecuador ends attempt to end fuel subsidies. But experts say the lesson of these protests is not that countries should keep fuel subsidies unchanged.

Research by McCulloch and his colleagues shows that countries with strict caps on fossil fuel prices are more likely to experience mass protests when fiscally battered governments are forced to substantially raise energy costs.

“Countries need to gradually move towards flexible pricing mechanisms, while introducing targeted cash transfers and other benefits so that the burden is not overburdened on ordinary people,” he said. “Frankly, if the government doesn’t want their rule to be threatened by the protesters, it’s in their interest for this shift.”

Some countries have successfully made this transition. In 2015, Indonesia introduced reforms that drastically reduced diesel and gasoline subsidies. More recently, India used direct transfers to reduce price controls on diesel and end subsidies for LPG.

At the same time, fuel’s impact on people’s lives is more important than ever, Hussain said. “Energy today is like food 200 years ago,” she told Al Jazeera. “No one can live without it.”

problem? Unlike other sectors, including food, where citizen groups have a seat at the policy negotiating table in most countries, Hussein said, energy policy is viewed “as a top-secret national security issue.” That needs to change, she said, for meaningful reforms in fossil fuel pricing.

Without this, experts warn that other countries and regions where fuel subsidies are part of the social contract between countries and their people — such as the Middle East and Nigeria — could be followed by the kind of protests that have angered Kazakhstan.

“Before the democratization of energy policy,” Hussein said, “I see more protests in the future.”