The Zambian government’s cuts to fossil fuel subsidies may be helping reduce the use of planet-heating oil – but they are causing hardship among groups that rely disproportionately on fossil fuels to make a living, including taxi drivers.
The green policy aims to boost both climate action and the heavily-indebted Zambian economy, but taxi drivers in Lusaka, the southern African country’s capital, told Climate Home they are suffering from rising prices for driving and food.
“We have been hit hard,” said 29-year old Masuzyo Kampamba, as he motored down a two-lane highway towards past crowds of children celebrating national youth day last month.
Kampamba doesn’t feel able to get married and start a family as he would not be able to provide for them due to the high cost of living.
Waiting outside the upmarket East Park Mall, driver Stephen Musanda said he is struggling too.
Filling up his regular Toyota taxi used to cost 17 kwacha ($0.70) a litre – for which he now pays 31 kwacha ($1.30). “It’s hard for a common driver like me to survive,” he said.
A Total petrol station near Lusaka’s Central Business District on March 10, 2024 (Photo: Joe Lo)
IMF’s global push
In debt-strapped developing countries like Zambia, the International Monetary Fund (IMF) is using its financial power to push for the removal of fossil fuel subsidies. Similar IMF-backed policies in Haiti and Ecuador have led to mass protests in the last few years.
At the Cop28 UN climate summit last December, governments agreed to contribute to a global effort to transition away from fossil fuels “in a just, orderly and equitable manner”. What that means in practice is still being worked out.
In Zambia and other places like Nigeria, many ordinary citizens feel the shift away from fossil fuel subsidies has not been done fairly so far, with the burden falling on those who cannot afford it. Even supporters of the reforms in Zambia admit they are “painful”.
On a global level, the IMF argues that subsidies incentivise the use of fossil fuels like oil and gas, making climate change worse, while also being expensive, wasteful and skewed towards helping the rich more than the poor.
My message at today’s @wef session on climate and nature: pull back on harmful fossil fuel subsidies and use those resources for climate action. With action, we can leave a heathy planet to our children and grandchildren. #wef24 pic.twitter.com/Uh7TcyafHI
— Kristalina Georgieva (@KGeorgieva) January 17, 2024
In a bid to boost sustainable development, the Washington-based lender has encouraged governments to spend the savings from reducing their support for fossil fuels on climate action, healthcare or education. Zambia has used the money it has freed up for paying down the national debt and making public schools free.
Richard Bridle, a subsidies expert at the International Institute for Sustainable Development (IISD), generally supports such reforms, but said proper analysis must be carried out to identify those most affected and compensate them.
“Generally, the poor don’t have cars,” he said, but there are “particularly affected groups” whose business costs are exposed to fuel prices – like taxi drivers – and they require special attention.
“You’ve got to have steps being taken to understand the impact, particularly on the most vulnerable groups, and – where possible – mitigate that impact,” Bridle said.
Education not petrol
When Zambian President Hakainde Hichilema was elected in August 2021, he inherited $800 million a year of spending on fossil fuel subsidies – 4% of gross domestic product (GDP) – and debt of almost $1 billion which the government was failing even to pay interest on.
He turned to the IMF for another loan – and in December 2021, Zambia was granted a $1.4-billion extended credit facility.
Announcing this credit, the IMF’s then mission chief for Zambia, Allison Holland, said the conditions were that Zambia should cut what the IMF sees as “inefficient” subsidies, reduce its debt level, and increase spending on education and health.
ZAMBIA’S #IMF PROGRAMME: Message from the IMF Mission Chief for Zambia, Ms. ALLISON HOLLAND.@S_Musokotwane @KGeorgieva @IMFAfrica pic.twitter.com/j17kCKck8t
— Ministry of Finance & National Planning – Zambia (@mofnpzambia) September 4, 2022
The IMF sees subsidies as “inefficient” if they hinder economic growth, exacerbate air pollution and climate change, and benefit those with high incomes. Holland said fuel subsidies were an example of spending that is “wasteful” and “doesn’t help the poor”.
In response, the government completely removed direct fossil fuel subsidies for 2022 and, in October that year, it restored taxes on petrol and diesel which the previous government had cut.
Hichilema also announced that public school education would be made free from January 2022. “When we removed fuel subsidies, this is what we intended for our people,” he said in a post on X, formerly known as Twitter.
Ever imagined that you’d be entering January without worrying about school fees? Jan 2022, if you have a child in public school, you won’t pay anything.
This is what we promised & have delivered. When we removed fuel subsidies, this is what we intended for our people. #Zambia pic.twitter.com/b49D9CTigV— Hakainde Hichilema (@HHichilema) December 29, 2021
The government is planning to boost spending on social protection too. In 2020, it spent just 0.7% of GDP on welfare programmes like giving money and food to poor people, but by 2025 it plans to raise this to 1.6%, bringing it in line with the African average.
“Overall, for low-income households, the benefits from increased social spending should outweigh the impact from the removal of fuel and electricity subsidies,” a 2022 IMF analysis said.
Painful but necessary
During a reporting trip this March, Climate Home asked Zambia’s environment minister, a farmer and a rural teacher about the fuel subsidy cuts. All said the measures had been painful, making driving, farming and eating more expensive – but they saw them as necessary.
Green economy and environment minister Collins Nzovu said “there is going to be pain” from removing subsidies, but asked “were we going to keep accumulating debt or we’re going to say this is where we end?”
In the village of Katoba in Lusaka province, secondary school teacher Constancy Mbwenya said spending on subsidies had previously diverted money from health and education.
The subsidy cuts are “a good policy”, he said, but required a period of adjustment. “People need to acclimatise to the new situation,” he explained. “That’s where the hassle is a bit, but then eventually people will understand the importance of removing the subsidies.”
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At the steering wheel, Musanda and Kampamba welcomed free education – although they questioned whether there are enough teachers per pupil, and whether the children can afford to eat at home because of food inflation.
“It’s right because those who were not going to school… are now going to school,” said Musanda. But, he added, “it is difficult for us who used to survive on subsidies”.
IISD’s Bridle compared the situation to France’s “gilets jaunes” (yellow vest) protests, sparked in late 2018 when the French government tried to hike taxes on petrol and diesel and spend the money on climate action.
The rural working class felt the costs of green policies were falling unfairly on them, while they failed to see direct benefits, Bridle said. The large-scale opposition to the policy forced the government into a U-turn and hurt the popularity of French President Emmanuel Macron.
Taxi driver Musanda said similar social unrest was unlikely in Zambia: “We are not used to doing protests.” Instead, many voters might look to bring in a new government at the country’s next elections in 2026, he noted.
According to Bridle, that risk is why governments often rush through reforms well ahead of the next election.
In Zambia, less than one in 20 people own a vehicle, so the vast majority are less affected by the subsidy increase than Musanda.
Corn and peanut farmer Benson Chipungu poses in his field on March 7, 2024 (Photo: Joe Lo)
Benson Chipungu, who spoke to Climate Home on his maize and peanut farm in Chongwe village, 50 km east of Lusaka, said it now costs him more to fill up his tractor with diesel – but he is willing to accept the change nonetheless.
“I think it’s fine because [the government] has made that decision knowing that maybe the subsidies were being a burden on the economy,” he said. “It can be painful – but if… they think it’s going to come out right, then it’s fine – you can try to hang in there.”
The post Zambia’s fossil-fuel subsidy cuts help climate and kids – but taxi drivers suffer appeared first on Climate Home News.
Zambia’s fossil-fuel subsidy cuts help climate and kids – but taxi drivers suffer
With the U.S. bombing Iran and the Strait of Hormuz closed, energy experts say countries transitioning to renewables will be more resilient in the “face of the shock.”
The United States’ war on Iran could fundamentally alter how countries consume and generate energy and hamper international progress in combating climate change, a panel of energy experts said today.
The Global Energy Supply in a Decade ‘Is Not a World We’re Going to Recognize’
One month into the US and Israel’s war on Iran, at least 60 countries have taken emergency measures in response to the subsequent global energy crisis, according to analysis by Carbon Brief.
So far, these countries have announced nearly 200 policies to save fuel, support consumers and boost domestic energy supplies.
Carbon Brief has drawn on tracking by the International Energy Agency (IEA) and other sources to assess the global policy response, just as a temporary ceasefire is declared.
Since the start of the war in late February, both sides have bombed vital energy infrastructure across the region as Iran has blocked the Strait of Hormuz – a key waterway through which around a fifth of global oil and liquified natural gas (LNG) trade passes.
This has made it impossible to export the usual volumes of fossil fuels from the region and, as a result, sent prices soaring.
Around 30 nations, from Norway to Zambia, have cut fuel taxes to help people struggling with rising costs, making this by far the most common domestic policy response to the crisis.
Some countries have stressed the need to boost domestic renewable-energy construction, while others – including Japan, Italy and South Korea – have opted to lean more on coal, at least in the short term.
The most wide-ranging responses have been in Asia, where countries that rely heavily on fossil fuels from the Middle East have implemented driving bans, fuel rationing and school closures in order to reduce demand.
‘Largest disruption’
On 28 February, the US and Israel launched a surprise attack on Iran, triggering conflict across the Middle East and sending shockwaves around the world.
There have been numerous assaults on energy infrastructure, including an Iranian attack on the world’s largest LNG facility in Qatar and an Israeli bombing of Iran’s gas sites.
Iran’s blockade of the Strait of Hormuz, a chokepoint in the Persian Gulf, is causing what the IEA has called the “largest supply disruption in the history of the global oil market”.
A fifth of the world’s oil and LNG is normally shipped through this region, with 90% of those supplies going to destinations in Asia. Without these supplies, fuel prices have surged.
Governments around the world have taken emergency actions in response to this new energy crisis, shielding their citizens from price spikes, conserving energy where possible and considering longer-term energy policies.
Even with a two-week ceasefire announced, the energy crisis is expected to continue, given the extensive damage to infrastructure and continuing uncertainties.
Asian crunch
Carbon Brief has used tracking by the IEA, news reports, government announcements and internal monitoring by the thinktank E3G to assess the range of national responses to the energy crisis roughly one month into the Iran war.
In total, Carbon Brief has identified 185 relevant policies, announcements and campaigns from 60 national governments.
As the map below shows, these measures are concentrated in east and south Asia. These regions are facing the most extreme disruption, largely due to their reliance on oil and gas supplies from the Middle East.
Nations including Indonesia, Japan, South Korea and India are already spending billions of dollars on fuel subsidies to protect people from rising costs.
At least 16 Asian countries are also taking drastic measures to reduce fuel consumption. For example, the Philippines has declared a “state of national emergency”, which includes limiting air conditioning in public buildings and subsidising public transport.
Other examples from the region include the government in Bangladesh asking the public and businesses to avoid unnecessary lighting, Pakistan reducing the speed limit on highways and Laos encouraging people to work from home.
Europe – which was hit hard by the 2022 energy crisis due to its reliance on Russian gas – is less immediately exposed to the current crisis than Asia. However, many nations are still heavily reliant on gas, including supplies from Qatar.
The continent is already feeling the effects of higher global energy prices as countries compete for more limited resources.
At least 18 European nations have introduced measures to help people with rising costs. Spain, which is relatively insulated from the crisis due to the high share of renewables in its electricity supply, nevertheless announced a €5bn aid package, with at least six measures to support consumers.
Many African countries, while also less reliant on direct fossil-fuel supplies via the Strait of Hormuz than Asia, are still facing the strain of higher import bills. Some, including Ethiopia, Kenya and Zambia, are also facing severe fuel shortages.
There have been fewer new policies across the Americas, which have been comparatively insulated from the energy crisis so far. One outlier is Chile, which is among the region’s biggest fuel importers and is, therefore, more exposed to global price increases.
Tax cuts
The most common types of policy response to the energy crisis so far have been efforts to protect people and businesses from the surge in fuel prices.
At least 28 nations, including Italy, Brazil and Australia, have introduced a total of 31 measures to cut taxes – and, therefore, prices – on fuel.
Even across Africa, where state revenues are already stretched, some nations – including Namibia and South Africa – are cutting fuel levies in a bid to stabilise prices.
Another 17 countries, including Mexico and Poland, have directly capped the price of fuel. Others, such as France and the UK, have opted for more targeted fuel subsidies, designed to support specific vulnerable groups and industries.
These measures are all shown in the dark blue “consumer support” bars in the chart below.
Such measures can directly help consumers, but some leaders, NGOs and financial experts have noted that there is also the risk of them driving inflation and reinforcing reliance on the existing fossil fuel-based system.
Christine Lagarde, president of the European Central Bank, spoke in favour of short-term measures to “smooth the shock”, but noted that “broad-based and open-ended measures may add excessively to demand”.
Measures to conserve energy, of the type that many developing countries in Asia have implemented extensively, have been described by the IEA as “more effective and fiscally sustainable than broad-based subsidies”.
So far, there have been at least 23 such measures introduced to limit the use of transport, particularly private cars.
These include Lithuania cutting train fares, two Australian states making public transport free and Myanmar and South Korea asking people to only drive their cars on certain days.
Clean vs coal
At least eight countries have announced plans to either increase their use of coal or review existing plans to transition away from coal, according to Carbon Brief’s analysis. These include Japan, South Korea, Bangladesh, the Philippines, Thailand, Pakistan, Germany and Italy.
These measures broadly involve delaying coal-plant closure, as in Italy, or allowing older sites to operate at higher rates, as in Japan – rather than building more coal plants.
There has been extensive coverage of how the energy crisis is “driving Asia back to coal”. However, as Bloomberg columnist David Fickling has noted, this shift is relatively small and likely to be offset by a move to cheap solar power in the longer term.
Indeed, some countries have begun to consider changes to the way they use energy going forward, amid a crisis driven by the spiralling costs of fossil-fuel imports.
Leaders in India, Barbados and the UK have explicitly stressed the importance of a structural shift to using clean power. Governments in France and the Philippines are among those linking new renewable-energy announcements with the unfolding crisis.
New renewable-energy capacity will take time to come online, albeit substantially less time than developing new fossil-fuel generation. In the meantime, some nations are also taking short-term measures to make their road transport less reliant on fossil fuels.
For example, the Chilean government has enabled taxi drivers to access preferential credit for purchasing electric vehicles (EVs). Cambodia has cut import taxes on EVs and Laos has lowered excise taxes on them.
Finally, there have been some signs that countries are reconsidering their future exposure to imported fossil fuels, given the current economics of oil and gas.
The New Zealand government has indicated that a plan to build a new LNG terminal by 2027 now faces uncertainty. Reuters reported that Vietnamese conglomerate Vingroup has told the government it wanted to abandon a plan to build a new LNG-fired power plant in Vietnam, in favour of renewables.
The post Iran war analysis: How 60 nations have responded to the global energy crisis appeared first on Carbon Brief.
Iran war analysis: How 60 nations have responded to the global energy crisis
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