Wednesday, December 29, 2010

Nearest Neighbor News

In Indonesia fuels (petrol, diesel, gas) are subsidized. The logic behind some of these subsidies is understandable; to assist the poor.

Subsidized LPG
As part of the Indonesian drive to phase out kerosene stoves, promoted as a safety measure to prevent fires1, 3 and 12 kg bottles of gas were subsidized. The Government anticipated that restaurants would not choose to use large numbers of these smaller bottles. However, most warung (restaurants)  opted to use the 12 kg bottles. The Government then removed the subsidy from these bottles so that only the small 3 kg bottles were subsidized for the poor. The result was nearly inevitable.

Unlike in Australia (and I suspect New Zealand) the fitting used in Indonesia is a quick-fit and release arrangement, not your ‘standard’ brass gas fitting. Moving large numbers of these small bottles in a “swap and go” system to satisfy the demand increased wear and tear, and lowered inspection standards (if they existed). Now instead of moving a lesser number of the more heavy duty bottles, truck loads of small bottles stacked 10 high became a common sight. Even so, I estimate that to carry the same amount of fuel around, nearly twice as much metal (by weight) is needed – thus the overall “efficiency” is probably decreased. The fires caused from damaged bottles and bad fittings injured hundreds around the country.
Suspected LPG gas explosion injures three
Study reveals more than 200 LPG explosions in three years
Pertamina needs Rp 1.7t to replace uncertified LPG canisters
Govt blames market for exploding canisters
Letter: LPG explosions
There were also some suggestions that resellers were refilling the larger 12 kg bottles with the smaller bottles to take advantage of the price disparity due to the subsidy!

Subsidized Petrol
While the same logic (i.e. helping the poor) is the rationale behind this subsidy it is more a populist measure the country can no longer afford.  The supporters of these subsidies claim that it enables poor people to access transport, the ubiquitous motor (scooter).  However, as the Indonesian economy has grown, scooters have given way to (frequently large) cars that are consuming Indonesia's dwindled supplies ever rapidly.  Government officials are aware that this situation can not last long, but the Yudhoyono Government can not move quickly on this out of fear of the electorate. Critics of the subsidies point out that those rich enough to afford large cars benefit most from this scheme.
Price of non-subsidized fuel
The 2011 state budget’s assumption on the average global oil price stands at $80.
With that calculation, the total fuel subsidy would top Rp 95.5 trillion next year, up from Rp 88 trillion in 2010 and from Rp 45 trillion in 2009. The 2011 subsidy figure was set before the government decided to restrict the sales of subsidized fuels. The new fuel policy would cut subsidized fuel sales by 1.74 million kiloliters (about 4.5 percent).
Darwin added that a higher oil price would, of course, increase the burden of the state budget to subsidize fuels. He suggested that higher-income people buy non-subsidized fuels to ensure greater access to those who most need subsidized ones.
Not a likely result.
Subsidized fuels stock safe until mid-January
Pertamina vice president for retail fuels Basuki Trikora Putra said Tuesday that the company still had enough gasoline stocks for 22 days, kerosene for 50 days and diesel for 18 days.
Pertamina may borrow US$250m for subsidized fuel
The revised 2010 state budget has capped this year’s subsidized-fuel consumption at 36.5 million kiloliters. But Afdal said the actual consumption might exceed the regulated volume.
Pertamina expects fuel subsidies to cost Rp 2t next year (see last)
The Jakarta Post is the longest running daily newspaper published in English in Indonesia. If you want to practice your letter writing skills it’s an easy target as there are very few controls (essentially none) in the comments section and the editors occasionally take comments and repost them (with some introductory text) as full letters online. The opinion section is a strange beast in this paper, writers are often students or academics2 overseas or just returned.  The opinion pages often include some fairly open/frank views, including on energy, from public servants. Possibly as this paper is in English and not a major source for the general population.

Having said that, some heavy hitters also publish their views here.
Seeing REDD on climate change
George Soros, 12/14/2010
The official communiquĂ© from the CancĂșn climate-change conference cannot disguise the fact that there will be no successor to the Kyoto Protocol when it expires at the end of 2012. Japan, among others, has withdrawn its support for efforts simply to extend the Kyoto treaty.
This sounds like bad news, because it means that there will be no international price on carbon, and, without a market price, it is difficult to see how the reduction of carbon emissions can be efficiently organized. But appearances can be deceiving.
Even as the top-down approach to tackling climate change is breaking down, a new bottom-up approach is emerging.
It holds out better prospects for success than the cumbersome United Nations negotiations.
The market price of anything is always equal to the marginal cost. When there is a single price, all the various cost curves are merged into one and low-cost projects enjoy large rents.
This makes the cost of reducing carbon emissions much larger than it needs to be.
This was amply demonstrated by the working of the Kyoto Protocol in practice. The carbon-trading scheme that it established gave rise to many abuses.
Indeed, the greatest progress is now being made where the problem is the most urgent: It is much easier to preserve forests than to restore them.
There is money to be made in AND out of Indonesia's valuable forests, including possibly, out of the proposed CO2 minimization schemes surrounding forest protection.
A victory for climate and the world’s forests
Agus Purnomo, President Susilo Bambang Yudhoyono’s special assistant on climate change.
In sharp contrast to widespread predictions of failure, the recently concluded Cancun meetings captured a new spirit of thinking about sustainable development and efforts to combat climate change.
Important for Indonesia, delegates also acknowledged the important role curbing deforestation must play in meeting the global climate change challenge and offered new support for a set of programs and activities collectively referred to as REDD (Reducing Emissions from Deforestation and Forest Degradation).
Delegates were clear that reducing deforestation-related emissions does not mean reducing growth or lowering development aspirations. Just the opposite.
But it is little surprise that some chose to confuse this picture.  Alan Oxley, … wrote in The Jakarta Post on Dec. 15 that…
Alan Oxley is an Australian (by nationality) lobbyist, who sometimes appears to reside in Arlington, USA. In a previous life he was a lobbyist for the wonderfully “successful” US-Australia free trade agreement.
Free trade is costing millions: report
Mind the gap: benefits from free trade haven't quite gone the distance
But he has an extraordinary number of pieces in the Jakarta Post. Who does he work for now?
Palm oil industry and poverty reduction
Writing in the International Herald Tribune late last year, Tun Dr. Lim Yeng Kaik, a former senior Malaysian Cabinet minister, characterized the campaign of Western environmental activists to restrict the palm oil industry as the environmental version of the “White Man’s Burden”.
GHG emissions reduction: Switching off climate change
President Susilo Bambang Yudhoyono has committed Indonesia to make substantial cuts in emissions of greenhouse gases.  Several studies have been commissioned which recommend this. 
Others aim to set out what to do.  All, in one way or another, rely on the official United Nations report on assessments of climate change. 
But there are now serious doubts about the scientific soundness of those assessments.
Summit and RI’s environmental strategies
RI as a major greenhouse gas emitter
They haven't even got their environmental facts straight. Biodiversity is protected by setting up conservation areas, not freezing conversion of forest land. The UN decreed years ago that ten percent of the world's forests needed to be reserved for that purpose. That target has already been met. In Indonesia's case, over 20 percent of forest land has been set aside.
If you haven’t heard of him, it should be no surprise to learn where the lucre comes from, Source Watch tells us that,
Alan Oxley is an Australian academic, a lobbyist for free trade agreements, a climate change skeptic and trenchant critic of the Kyoto protocol on greenhouse gas emissions.
Oxley is the founder and director of Melbourne-based company ITS Global and is chairman of the Australian APEC Study Centre at Monash University in Melbourne, Australia. He is also the director of the Australia-United States Free Trade Agreement Business Group, a corporate lobby group which he established to lobby in favour of the Australia-United States Free Trade Agreement. He also consults to the Australian forest sector and Malaysian logging giant Rimbunan Hijau [1].
Oxley is a regular participant in Lavoisier Group events, and is the host of the Asia-Pacific pages of Tech Central Station - a conservative website funded by ExxonMobil and General Motors Corporation among others.
It is nice to see a few good souls refute him in the Jakarta Post and  Agus Purnomo (above) took the opportunity to correct him (again);
Furthermore, Oxley has deliberately blurred the distinction between estimates of our so-called “business as usual” emissions trajectory and our actual achievements in recent years in combating deforestation, forest fires and peatland degradation.
That Indonesia’s rate of deforestation is declining, as reported by the Food and Agriculture Organization (FAO) of the United Nations, demonstrates the seriousness of the Indonesian government in reducing its emissions on voluntary basis rather than, as Oxley contends, that reducing deforestation is unnecessary.
Most importantly, it is incorrect to assume that Indonesian decision-makers respond only to international pressure or global estimates of GHG emissions.
Indonesia has learned the hard way the costs of unsustainable development, not only in monetary terms but also from the loss of lives and damage to well-being from flash floods, uncontrolled fires, landslides, droughts, loss of watersheds and other eco-disasters.

1. My personal theory as to the ‘real reason’ for ending the domestic use of kerosene is that Garuda et al don't fly on palm oil… thus making cooking with kero a rather extravagant use of a valuable commodity.
2. Indonesian academics often do not (get to) do their PhD until they are in their 30s.

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