Sunday,2007-1-21: Cambodia And Energy Policy
The Mirror, Vol. 11, No. 491
The price of gasoline – higher in Cambodia than in some neighboring countries – has been a subject of public debate for several years. As the price of gasoline indirectly affects the cost of transportation, and therefore also of all transported goods, it is of course of wide public concern. In spite of the fact that the Minister of Economy and Finance has been called to explain the situation in the National Assembly, the conflicting positions continue to be repeated, without much progress. The prices went up when the world market prices increased, but the did not go down in the same way when the world market prices dropped. Now there are calls to pressure the government to intervene in energy prices by considering demonstrations or strikes – and there are allegations that such threats may actually have secondary motives: to build up the profile of one political party, or even just to strengthen the call for the release of a high level member of that same party, who is detained under accusations related to a series of criminal robberies.
The setting of gasoline prices is very complex, and it may be useful to look what happens in some other countries, and why.
The price of fuel is not determined only by world market prices. If that were the case, there would not be such a big difference between average prices in – for example – the USA and in Germany. At the end of 2006, the price of 1 liter of regular gasoline in the USA was about US$0.60, while in Germany it was about US$1.55. (In US gallons: US$2.30 in the USA, US$5.90 in Germany). Why this big difference?
Since many years, the elected lawmakers in Germany decided on tax rates on fuel which are equal to or higher than the cost of the fuel itself. The tax revenue supports a well developed infrastructure of roads and also led to the development of cars which use less fuel. This not only saves fuel, lessens the dependence on imports from other countries, and saves money – it also reduces negative impacts on the environment.
Many Cambodians have noted that there are lower gasoline prices in Thailand than in Cambodia, thanks to government subsidies. But since some time, the Thai government has been lowering those subsidies step by step, because they were too much of a burden on the national budget.
Considerations about the use of gasoline include concern about the future of the earth under the threat of global warming. In 2006, the European Commission started a consultation on a European Strategy for Sustainable, Competitive and Secure Energy. During a period of six months, the public was invited to send opinions. This open process ensured that the issues had already been discussed among experts and citizens before the far reaching new policy was proposed. The result is a 27 page declaration of the European Commission published on 10 January 2007: An energy policy for Europe. It aims at a fundamental re-orientation of priorities. The paper says:
“How do we get there?
Meeting the … target will require a massive growth in all three renewable energy sectors: electricity, biofuels, and heating and cooling. But in all sectors, the policy frameworks set up in particular Member States have achieved results which show how this is possible. Renewables has the potential to provide around a third of EU electricity by 2020. Wind power provides approximately 20% of electricity needs in Denmark today, as well as 8% in Spain and 6% in Germany. Costs in other new technologies – photovoltaic, solar thermal power, and wave and tide, are projected to decrease from currently high levels. In the heating and cooling sector, progress will have to come from a number of technologies. Sweden, for example, has over 185. 000 installed geothermal heat pumps [which can both heat and cool]. Germany and Austria have led the way on solar heating… As for biofuels, Sweden has already achieved a market share of 4% of the petrol market for bioethanol, and Germany is the world leader for bio-diesel, with 6% of the diesel market.”
Changes are also coming in the country that uses the most energy per capita in the world: the USA. The newly elected majority of representatives in the national Congress started a process, contrary the past policies of the US president, to rescind nearly US$14 billion in tax breaks and subsidies for oil companies, and to redirect the money to develop alternative energy and conservation technologies.
One week after the European Commission, the leaders of the ASEAN nations and their dialogue partners made a similar commitment to strengthen programs to develop renewable energy sources such as biofuels and hydropower: “these resources are important aspects of our national energy policies.”
In Cambodia, the plan to build a large scale hydroelectric plant in Koh Kong, with technical and financial assistance from China, should be seen in this context. So, too, should smaller scale initiatives for solar power – Cambodia has a lot of sunshine! And decisions about the price of gasoline – and what to do with taxes or profits from setting prices above the world market cost of the fuel – should be oriented toward both economic improvement for citizens and long term investments in energy availability.
The future economic development of Cambodia will require a lot of energy resources. There is hope that oil and gas in the territorial off-shore areas of Cambodia will contribute to covering such needs. However, it will be essential to not repeat the mistakes of other countries which built their development on “cheap” energy and not on efficient use of renewable energy.