NGOs call for an energy revolution at the Bonn talks. Credit: IISD

By Chris Wright and Jed Alegado
MANILA, Jun 16 2015 (IPS)

(Last week, Australian Climate Activist offered an apology to the Philippines for his country’s lack of action. Today, he partners up with climate tracker from the Philippines Jed Alegado to talk about what the Philippines can do to show its leadership in tackling climate change.)

There has been a lot of pressure on the Philippines in the last week. Climate Change Commission Secretary Lucille Sering faced a senate hearing about the Philippines’ commitment to its Intended Nationally Determined Contributions or INDCs.

Under the U.N. Framework Convention on Climate Change (UNFCCC), INDCs were introduced in Warsaw in 2013 to hasten and ensure concrete climate action plans from countries.We have already seen this year how cities like New Delhi and Beijing have become almost unlivable due to the dangerously polluted air. What will happen to the Philippines if it follows a similar path?

During the visit of French President Francois Hollande to the Philippines last February, Philippine President Benigno Aquino III announced that his country’s INDC will be submitted by August this year after he delivers his final State of the Nation Address. However, during the Senate hearing last week, Sering said that the Philippines aims to submit the INDC before the October 2015 deadline.

In an interview last month, civil society representative to the Philippine delegation, Ateneo School of Government Dean Tony La Vina, clarified the process conducted by the Philippine government for its INDC. According to La Vina,  INDC orientation and workshops were conducted among government agencies in January 2015. A technical working group was formed last March followed by stakeholder discussions last month which included civil society groups, key government agencies and the private sector.

For a country which has played a leadership role and has become a rallying point for the global call for climate action due to its former lead negotiator Yeb Sano and the Super Typhoon Haiyan which wreaked havoc in the central Philippines in 2013, there has been a lot of pressure for the Philippines to come up with a definitive and clear commitment for its INDC.

Last month, Sering announced that the Philippines’ INDC might focus on a renewable energy and low-carbon sustainable development plan: “low emission and long-term development pathway to involve private sector and other stakeholders”. Sering also said that the Philippines intends to increase the use of renewable energy.

However, last week, the Palawan Community for Sustainable Development gave the go-ahead to a company to construct a coal-powered plant in Palawan in the western part of the Philippines, often described as the country’s last frontier. Environmental NGOs based in the province have been trying to stop the construction of this 15-megawatt coal plant to be built by one of the major construction companies in the Philippines.

In the past two years, the government has also approved the construction of 21-coal powered projects despite the President Aquino’s declaration that the Philippines intends to “nearly triple the country’s renewable-energy-based capacity from around 5,400 megawatts in 2010 to 15,300 MW in 2030.”

In spite of these events happening in the Philippines, the second week of the Bonn intersession has also been characterised by developing countries who have stood proud and shown the world just what they can do to stop global warming.

Reform, Accountability and Ambition

It may therefore be timely for the Philippines to take some lessons from three recent INDC announcements that have each drawn great praise at the U.N.

Step 1: Reform

The first lesson comes from Morocco, which this week came out as the first country to address “fossil fuel subsidy reform” in their Climate Action Plan. As the first Arab country to make an international Climate Action Plan, they naturally shocked a lot of people.

However, when you dive into their commitment to reduce greenhouse gas emissions by 32 per cent by 2030 compared to what they call “business as usual”, I guess it’s understandable that some of us are having apprehensions.

But what is good about their efforts is to “substantially reduce fossil fuel subsidies”. This is one of the truly ‘unspoken’ aspects of transitioning away from fossil fuels.

According to the Intergovernmental Panel on Climate Change (IPCC), we need to stop using fossil fuels as soon as possible to keep us below two degrees of warming. In order to give Filipinos a chance at a safe future, we need a global phase-out of fossil fuels by 2050, and the first step to get there is to cut fossil fuel subsidies.

Globally, the IMF estimates that the fossil fuel industry receives 10 million dollars every minute. If the world is ever going to move into a fossil-free future, reforming these subsidies will be critical. This is one way the Philippines can show some real leadership with their Climate Action Plan.

Step 2: Accountability

Late last week, Peru publicly announced their Climate Action Plan. While they haven’t yet officially submitted it to the U.N., what they have produced is very impressive.

In developing their Climate Action Plan, Peru has carefully calculated exactly how much emissions they can cut based on a concrete number of projects which they clearly outline in the plan. As such, their plan to cut emissions by 31 per cent based on business as usual is backed up by 58 clearly outlined different mitigation projects.

This makes it very easy for Peru to ask for support from developed countries to help them improve on their commitments. In fact, they have even outlined how they can increase their emissions cuts to up to 42 per cent with an extra 18 projects.

While they haven’t made a specific ask for international assistance to meet this difference, this level of transparency could make it a very simple step in the future. What’s more, they have now opened this plan up to public consultations until July 17.

They will be holding workshops across Peru and asking a wide range of citizens what their views on the Climate Action Plans are.

If the Philippines want to ask for international support to help increase their ability to combat global warming, this level of international and domestic transparency will be a critical step to take.

Step 3: Ambition

It is definitely true that the Filipinos have not caused climate change. In fact, the Filipinos are among the smallest contributors to climate change per person. What’s more, the energy needs across the country are critical. But is coal really the answer?

With 26 coal plants planned over the next ten years, what will become of the air that everyone has to breathe? We have already seen this year how cities like New Delhi and Beijing have become almost unlivable due to the dangerously polluted air. What will happen to the Philippines if it follows a similar path?

One country seeking to link their development needs to combatting climate change is Ethiopia. Yesterday they released a Climate Action Plan which aims at a 64 per cent reduction on their business as usual predictions.

With 94 million people, and over a quarter of those in extreme poverty, Ethiopia is a great model for the Philippines to follow. They have focussed their emissions cuts around agricultural reform, reforestation, renewable energy and public transport. These are all reforms which are possible for the Philippines to also make.

Ethiopia is not simply giving in to a broken development model that relies on fossil fuels, but neither is it living a “green” fantasy. It is among the fastest growing countries in the world and the fastest growing non-oil-dependent African country.

With international support, it plans to double its economy while still achieving carbon-negative growth. This, Ethiopia believes, is best for not only for the health of its economy in the long term, but their people.

If the Philippines is going to show the type of global leadership it has strived for over recent years at the U.N. climate negotiations, there are three easy steps for them to take forward; Reform, Accountability and Ambition.

Edited by Kitty Stapp

The views expressed in this article are those of the authors and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service.

Excerpt:

An offshore oil rig drilling platform. Global subsidies of fossil fuels rose to 1.9 trillion dollars in 2013. Credit: Bigstock

By Samuel Oakford
NEW YORK, Feb 10 2014 (IPS)

Despite evolving public awareness and alarm over climate change, subsidies for the production and consumption of fossil fuels remain a stubborn impediment to shifting the world’s energy matrix towards renewable sources.

Collectively, fossil fuel subsidies amount to a nearly two-trillion-dollar oar left dragging in the water.“The economic story around renewables has shifted." -- Dr. Daniel M. Kammen

Today, lawmakers hold routine hearings on climate change’s costs and mitigation, citizens in developing nations demand reparations for extreme weather, and even multinational corporations have tepidly begun advertising that rising seas could spill over onto their bottom lines.

But talk is one thing, money quite another.

“If you can remove fossil fuel subsidies, then renewables are the clear choice, they are far cheaper in the long run,” said Philipp Tagwerker, research fellow at the Worldwatch Institute and author of a recent report tallying subsidies. “Renewables are competitive at the moment, but it takes political will to change.”

After the 2008 financial crisis, subsidies fell along with plummeting energy prices, but by 2011 they had rebounded to pre-crisis levels. That volatility, whether due to supply and demand or geopolitics and speculation, is partly why countries are looking to lessen their exposure to carbon-based fuels.

Though definitions vary, in 2013 the IMF found that when “post-tax” externalities like carbon emissions, effects on health and resource scarcity were considered, global subsidies of fossil fuels rose to “$1.9 trillion worldwide – the equivalent of 2.5 percent of global GDP, or 8 percent of government revenues.” Estimates for renewable subsidies top out at a comparably measly 88 billion dollars globally.

“That’s a pretty hard equation to overcome,” said Dr. Daniel M. Kammen, director of the Renewable and Appropriate Energy Laboratory at the University of California, Berkeley. “Fossil fuels not only have the advantage of subsidies, but they are the incumbent.

“That said we are seeing much faster growth in the renewable sector,” Kammen told IPS. “The economic story around renewables has shifted. It’s not just wind – solar is competitive now, and we are seeing big pushes for geothermal.”

Though critics of renewables often cite their higher cost per kilowatt-hour (kWh) compared to traditional sources, when externalities are considered, that dynamic is reversed. According to the Worldwatch report, customary analyses find it can take up to 15 cents of a renewable subsidy to generate one kWh, far higher than the 0.1 to 0.7 cents per kWh for fossil fuels. But including externalities immediately tacks on an additional 23.8 cents per kwh to fossil fuels but only half a cent to renewables.

Tagwerker writes that “accelerating the phaseout of fossil fuel subsidies would reduce CO2 emissions by 360 million tons in 2020, which is 12 percent of the emission savings that are needed in order to keep the increase in global temperature to 2 degrees Celsius.”

A mixed support system

Generally, consumption subsidies that lower prices at the point of sale have prevailed in the developing world, while producer subsidies have been more common in industrialised countries.

Over the past decade, while fossil fuel subsidies haven’t abated, their characterisation has shifted from one of necessity to troublesome vestige.

Last year, the G20 reiterated its pledge to “phase out inefficient fossil fuel subsidies that encourage wasteful consumption over the medium term.” And during his January State of the Union address, U.S. President Barack Obama told Congress “climate change is a fact” and called for the phasing out of an estimated four billion dollars in tax breaks and incentives – many dating back a century, when oil exploration was dangerous and far more expensive – that U.S. companies enjoy every year.

Yet politicians and investors alike still the find the long-term payouts from alternative energy projects don’t always jibe with their short-term electoral goals and the pressures of quarterly earnings – leaving policy to lag and projects wanting for infusions of cash.

The International Energy Agency (IEA) estimates that in the developing world, consumption subsidies alone cost countries over 500 billion dollars.

Media coverage tends to focus on these parts of the world when unrest follows moves to remove or reduce fuel subsidies. Indeed, last year several dozen people were killed in Khartoum during riots after the Sudanese government, facing a fiscal crisis brought on by the annexation of the oil-rich south, eliminated subsidies. Meanwhile in India, where the government has been more cautious, the oil ministry predicts fuel subsidies for the fiscal year will end up 750 billion rupees over budget.

For years, poorer governments found lower fuel prices the simplest way to keep basic goods just cheap enough that the poorest in society could survive – a sort of broad-stroke welfare. Today, they remain fearful that reform runs the risk of triggering inflation, raising prices for food and basic goods beyond the reach of millions.

But unlike traditional forms of state welfare that attempt to target the needy, consumption subsidies are nearly always flat and regressive, funneling wealth to those who consume the most. The IMF has found that in low and middle-income countries, the richest 20 percent of households receive six times the benefits from subsidies as the poorest fifth. Among gasoline consumers alone, the disparity widens to 20 to one.

Tagwerker says governments can look to places like Indonesia, where, despite snags, subsidy curtailments were coupled with targeted cash-transfer schemes to assist those most affected by higher prices.

“You can avoid the period of unrest if you carefully plan it,” said Tagwerker, adding that all countries should consider carbon trading, which has a track record of reducing emissions.

“You are already spending so much on importing fossil fuels and subsidising them to keep them at a low price, why don’t you set up a fund that puts this towards renewable energy? China, of all places, has a consumption tax on fossil fuel and they put it towards renewable energy.”

Investment quibbles

In May 2013, Goldman Sachs announced it would finance more than 500 million dollars’ worth of residential solar panels for U.S.-based SolarCity Corp, allowing the company to offer homeowners zero down payments. The Wall Street firm, which pledged to put 40 billion dollars towards renewable projects by 2021, has also pumped 1.5 billion into a Danish wind farm and invested 340 million into an Indian wind venture.

But despite headline-grabbing deals like Goldman’s, overall investing in alternative energy sagged 12 percent last year to 244 billion. Investors remain skittish of the higher initial outlays required by renewable projects, a problem made worse by austerity in Europe and the winding down of stimulus in the United States. The U.N. found that “developers, equity providers and lenders were unsure about whether commitments to subsidise renewable energy deployment would continue.”

However, Kammen believes the next few years will see larger sovereign wealth funds financing more alternative energy projects. As the sector consolidates and interest rates remain low, Kammen says money earmarked for real estate may be shifted to renewable electricity-generating ventures which financially mimic the purchase of office space or other rent-paying assets.

“Because renewables have very low fuel costs the real issue is up-front financing. If one doesn’t correct this fundamental over-subsidy of the incumbent fossil technology, it makes the issues of renewables that much more difficult.”

Re-allocating subsidies to renewables would help investment get over the initial hump, says Tagwerker.

“You’ve got to shift the paradigm from paying every month to ‘we pay everything in the first month then we don’t have to pay for the following year’. If you could use all the money that is spent on fossil fuel subsidies for that, you’d have [renewable] plants popping up everywhere.”

The wind industry set records in 2012, seeing some 25 billion dollars’ worth of investment and an increase of more than 13,100 megawatts nationally. Credit: Bigstock

By Carey L. Biron
WASHINGTON, Dec 17 2013 (IPS)

The U.S. wind industry looks set to enter a period of uncertainty, with an important government subsidy expiring at the end of the month and no clear plan for lawmakers to work towards an extension.

Because of the way the subsidy, known as the wind production tax credit (PTC), was extended in January this year, the industry has an extra cushion of time before the effects of the expiration would be felt directly. While this has muted some of the urgency around the issue, trade groups say inaction by Congress will become increasingly problematic during the coming year and are urging lawmakers to put in place policies that will offer longer-term stability.“The short-term expirations of the PTC have clearly wreaked havoc on the industry, creating a boom-bust cycle.” -- Steve Clemmer

“The change made in 2013 allows projects that start construction this year to qualify for the PTC … and will allow companies to continue to build projects past 2013,” Rob Gramlich, senior vice-president of public policy at the American Wind Energy Association (AWEA), the country’s largest such trade group, told IPS. “Meanwhile, our industry still faces uncertainty in the medium and long term, and needs Congress to address that next year.”

Since the PTC’s creation in 1992, Congress has often extended it only at – or even after – the last minute. Indeed, the reason for January’s tweaks to the current extension’s timeframe was due to the very late agreement, with proponents worried otherwise that no new wind projects would get built given that such a project typically takes upwards of two years.

Yet currently there are two obstacles to a typical extension for the PTC. First, in the current climate of fiscal austerity, federal government spending generally needs to be offset by savings elsewhere, thus requiring time-consuming haggling.

Second, the Congressional committee that would oversee energy credit “extenders” has announced plans to try to negotiate a complete overhaul of the U.S. tax system. While this would be lauded, it will be a dauntingly complex undertaking with no guarantee of success.

That leaves the PTC, and the broader wind industry’s health in the United States, hanging in the balance.

“We continue to see evidence that the Production Tax Credit is an effective tool that is working,” AWEA’s Gramlich says. “The legislative vehicle [for extension] could be tax reform, an extenders package, or something else, but ultimately our industry will begin to feel the impacts of uncertainty in 2014.”

Record year

The PTC, which offers a tax subsidy worth 2.2 cents per kilowatt-hour of wind energy produced for the first decade of a project’s lifetime, has been credited with substantially strengthening the role of wind energy in the United States. This has also resulted in a critical lowering in the price of production, which has come down by around 40 percent over the past four years.

The industry set records in 2012, seeing some 25 billion dollars’ worth of investment and an increase of more than 13,100 megawatts nationally. Combined with a somewhat slower year for the global wind energy leader, China, this put the United States essentially tied for the top spot internationally.

Yet the ongoing importance of the PTC – and the overall tenuousness of the domestic wind market – can be gauged by what happened next. Even though Congress only missed its deadline by a day or two in extending the PTC in January, it took much of the subsequent year for the industry to recover from the uncertainty this created for investors and utilities.

During the first six months of the year, AWEA reports just one wind turbine was constructed in the United States. Since then manufacturing and installations has again picked up as the impact of the new PTC assurances has been felt, and the extension’s tweaked timeframe means that this renewed momentum will last into next year.

Beyond that, however, the policy future is notably unclear. According to a new long-term forecast released Monday by the U.S. Energy Information Administration (EIA), U.S. wind energy production will increase through 2015 but then see no major rise for almost two decades.

Such an analysis appears to capture the increased production capacity from the current PTC extension, but then offer a bleak assessment of what would happen if the credit were not extended any further. (EIA estimates are based only on current legislation.)

In fact, despite ongoing, polarised debate here over taxpayer assistance in nurturing nascent alternative energy markets, there remains surprisingly bipartisan support for the PTC. To a great extent, this is because many parts of the United States best suited to wind energy generation are in Republican strongholds, thus offering enticing local boosts in jobs creation and investment.

Last month, a bipartisan group of 11 state governors wrote a letter to Congressional leaders, warning that some 5,000 people lost their jobs last year due to anticipation over whether lawmakers would extend the PTC.

“Congressionally sanctioned uncertainty has hit the nation’s wind industry incredibly hard,” the letter warns.

“We respectfully urge you not to repeat the legislative brinksmanship of 2012 and to adopt a responsible multi-year extension of the production tax credit … The nation’s wind industry developers do not need this tax credit forever, but they do need policy certainty in the near term to bring their costs to a fully competitive level.”

End all subsidies?

Indeed, many proponents of a longer-term extension of the PTC are not actually urging indefinite support for the industry, but rather any policy that can allow for long-term strategising.

“The short-term expirations of the PTC have clearly wreaked havoc on the industry, creating a boom-bust cycle,” Steve Clemmer, director of energy research at the Union of Concerned Scientists, an advocacy group, told IPS. “The industry definitely needs a long-term policy, whether that’s a long-term extension or phase-down or a transition to another policy.”

Clemmer notes that part of the reason the PTC and similar credits for renewable energy production were adopted in the first place was to level the playing field with other, more established, energy technologies. While that dynamic remains largely unchanged today, the new discussion on tax policy offers a potent opportunity.

“Fossil fuels and nuclear power have been getting much larger subsidies for much longer than renewables receive, around 10 times as much on an annual basis if you look back 50 years or so,” Clemmer says.

“To eliminate the subsidy for wind without addressing the others would be unfair. But that also gets you back to the current discussion over comprehensive tax reform – perhaps we can simply phase out all of these subsides at the same time?”

“Be a climate-protection hero, not a climate victim” is the message energy experts from around the world are bringing to San Francisco Tuesday.

Solar panel fields in Provence, France. Credit: Coralie Tripier/IPS

It is the first conference in U.S. history where the leaders in the 100-percent renewable energy revolution will share their knowledge and vision.

“There are powerful economic and environmental reasons for this transformation…and the sooner we get there the better for the climate,” says Diane Moss, organiser of the “Pathways to 100% Renewable Energy” conference at the FortMasonCenter Apr. 16.

“It’s already started but we need a serious global dialogue about how to successfully chart the course to a shared 100-percent renewable energy future,” Moss told IPS.

The clean-and-green-energy era is well underway in Denmark, Scotland, Iceland and in cities like Munich, Germany, Malmo, Sweden, and San Francisco, all of which are moving towards 100 percent renewable energy. Many towns in Europe have already have 100 percent pollution-free “eternal” energy sources from wind, solar, and biomass, she says.

In the United States, Greensberg, Kansas achieved 100-percent green energy in just a few years after the town was devastated by tornados in 2007. Dozens of other towns and cites totalling more than 40 million people have moved or are moving to 100 percent renewable, according to Go100% Renewable Energy.

In the first three months of this year, the U.S. added more wind and solar energy generating capacity than any other form of energy combined, although renewables remain a fraction of the grid – 13.2 percent in 2012, a little more than half consisting of hydropower.

“The next big step is create policies so communities and the general public directly benefit,” says Jose Etcheverry, co-chair, Sustainable Energy Initiative at YorkUniversity in Toronto.

“It’s not enough just to get a token payment, the public needs to be directly involved,” Etcheverry told IPS.

Coastal communities in Denmark have created trusts to finance renewable projects and in some cases green energy has become their main source of income, he said.

Using wind, water and sunlight to meet 100 percent or close to 100 percent of energy needs is both feasible and practical. StanfordUniversity energy expert Mark Jacobson published a detailed plan how New YorkState could reach that goal by 2030, IPS previously reported.

It’s not only doable but also “sustainable and inexpensive”, Jacobson told IPS

Air pollution, which comes mainly from burning coal, oil and gas, costs U.S. citizens hundreds of billions a year in healthcare, lost days at work and shortened lives. Globally, climate change is estimated to cost 1.2 trillion dollars a year from lost food production and extreme weather events, according to the DARA group, a non-governmental organisation based in Europe.

Much of the San Francisco conference will focus on the best local and regional policies such as feed-in-tariffs, green power purchasing and utility regulation, says Etcheverry.

Feed-in-tariffs are often portrayed as subsidies, which is inaccurate, says Paul Gipe, a wind energy expert from California. They are simply a negotiated price for energy from an energy provider to a user. The price has to be enticing enough for the provider or generator to make the capital investment.

“That is how the electricity sector in the U.S. functioned for years before de-regulation,” Gipe told IPS. “I’m opposed to subsidies, especially those the fossil fuel industry receives.”

According a new report from the International Monetary Fund (IMF), the fossil energy sector receives a “staggering 1.9 trillion dollars worldwide” a year in public subsidies, rebates and avoided tax on pollution. (1.9 trillion seconds is roughly 60,000 years) Removing those subsidies would strengthen incentives for “research and development in energy-saving and alternative technologies”, the IMF said.

None of this cheers the extraordinarily rich and powerful fossil energy industry. Nor are the nuclear industry and many big power utilities supporters of a renewable revolution. “Renewables threaten their business model and their profits,” Gipe says.

An intense public relations war is underway to persuade the public and political leaders that renewables are too expensive, unreliable, and not practical. Anti-wind movements have sprung up, sometimes in areas where there are no wind turbines.

“It’s actually an attack on renewables,” Gipe says. “Anti-wind advocates are often angry bullies who shout others down at meetings. My life has been threatened more than once.”

In California or Ontario, local utilities require 50 pages of paperwork for a homeowner to plug their rooftop solar panels into the electrical grid. And even then it could take a year or more to be connected. In Germany, the paperwork is four pages and residents have a legal right to connected as fast as possible, Gipe says.

To have a real opportunity to be climate heroes instead of climate victims, the silent majority will have to speak up and stand up to the propaganda and the bullies, he says.

A Shell oil refinery in Martinez, California. Credit: cc by 1.0

By Carey L. Biron
WASHINGTON, Mar 27 2013 (IPS)

The International Monetary Fund (IMF) is urging national governments around the world to roll back or eliminate subsidies on petroleum-based energy sources, estimating that this alone could result in a 13-percent decline in global carbon dioxide emissions.

In an unusual new paper marking its full entry into the climate change debate, the Washington-based fund on Wednesday said the cost of “pre-tax” subsidies for these products, when consumers pay less than the cost of supply, stood at about 480 billion dollars in 2011.

Further, the “post-tax” cost of these subsidies – wherein a government doesn’t charge enough to take into account the negative ramifications of energy consumption, including environmental impact – are far higher. Suggesting a figure far higher than previous estimates, the IMF puts this number at around 1.9 trillion dollars, or 2.5 percent of global GDP.

While developing countries and emerging economies account for much of the pre-tax subsidies, IMF researchers have found that developed countries make up some 40 percent of the post-tax total. The United States leads all countries in this regard, at nearly a half trillion dollars in annual subsidies, followed by Russia and China.

The implication is that these countries should be charging consumers far higher for coal, gasoline and other petroleum products, both in order to offset their negative impacts and to give consumers a clearer understanding of the full consequence of their use. Following on previously stated policy, the IMF is also reiterating its support for some sort of carbon tax.

“By boosting energy consumption and thus emissions, subsidies aggravate climate change and worsen local pollution and congestion,” David Lipton, the IMF’s first deputy managing director, said in a major speech here on Wednesday.

“Our estimates indicate that subsidy reform could play a significant role in offsetting climate change … These estimates point to the substantial benefits of using fiscal instruments to achieve climate change objectives. The time has come for subsidy reform and carbon taxation.”

The new estimates on the environmental and other costs of energy subsidies – what the IMF refers to as “externalities” – are far higher than previous such estimates. In part, this is because the IMF is incorporating traffic-related costs, such as from accidents and congestion.

But for the majority of this cost estimate, IMF officials say they are using a fairly conservative figure of 25 dollars per tonne of carbon dioxide, from a widely referenced 2010 study by the United States Interagency Working Group on Social Cost of Carbon. Other estimates for this number have been significantly higher, up to 80 dollars per tonne.

More productive spending

The new paper looks into the environmental impact of energy subsidies, including the distortions that subsidies cause by leading consumers to make decisions without reference to their full impact. But it also outlines several additional ramifications of these practices, particularly in developing countries.

For instance, over decades these subsidies have been found to crowd out investment in energy production, including in renewables. Simultaneously, they constrict state coffers such that governments have less money with which to fund public spending, for instance on education, health or infrastructure.

“In countries across sub-Saharan Africa, governments are spending an average of three percent of GDP on energy subsidies – the same as on public health – so reducing these subsidies would free up space for more productive spending that is much needed,” Roger Nord, a senior advisor in the IMF’s African Department, told reporters Wednesday.

“As elsewhere, energy subsidies in Africa benefit principally those who are already better off. Take electricity – the poor are typically not even connected to the grid; they don’t have air conditioning or SUVs.”

Subsidies have also discouraged much-needed investment in electricity production. Nord notes that the total production in sub-Saharan Africa is lower than that of Spain, while the past three decades have seen no per capita increase in electricity production.

There have been examples of success in this regard. Proponents point to Ghana, for instance, which was able to reduce subsidies and, in turn, to allocate part of those savings to rural electrification. Likewise, when Kenya liberalised its energy sector it was able to double new investments in power generation in just 10 years, a stark contrast with many other African countries.

Fierce politics

At a time of continued concern over mounting debt in capitals throughout the world, the IMF is emphasising the short-term implications that reducing or eliminating energy-related subsidies would have on governments in search of new revenues. And indeed, coupled with the new and increasing concern over global climate change, it would seem as though the push to roll back subsidies would be newly pertinent for many policymakers.

Yet while Wednesday’s paper constitutes the most significant public stance the IMF has taken on this issue, the fund’s research teams have telling governments for years that reducing subsidies would bring in additional revenue – with relatively little change on the ground.

Likewise, as energy costs have increased, other multinational groupings have begun to raise alarms. Most prominently, the Group of 20 (G20) countries have now twice committed to halting “inefficient” energy subsidies over the “medium term”.

Yet according to the new analysis, most countries have seen little progress in following through on this pledge. Certainly this is the case in the world’s largest subsidiser, the United States.

“The United States government has subsidised fossil fuels for the past 100 years,” Doug Koplow, the founder of Earth Track, an energy subsidy watchdog, told IPS.

“We subsidise the extraction, capital formation and clean-up of extraction sites, as well as offer corporate structures that entirely exempt oil and gas companies from corporate taxation. In the last two decades, we have also started significant subsidies for renewable energy. To a great extent, this is all just hardwired into the system.”

Meanwhile, despite widespread understanding that change is needed, significant political inertia on the subject here does not appear to be dissipating.

“Almost every year we get new proposals to reform these subsidies that inevitably get defeated, and I don’t have a lot of confidence that will change in the near future,” Koplow says.

“In some countries – New Zealand is a typical example – severe fiscal crises have indeed allowed governments to deal with all of their energy subsidies at once, and this could happen in the U.S. as well. But the politics on this stuff is fierce.”

Construction of the Santo Antônio hydroelectric dam in the Amazon region, one of the mega power projects that feed Brazil's power hungry industries. Credit: Mario Osava/IPS

By Mario Osava
RIO DE JANEIRO , Feb 13 2013 (IPS)

Brazilian President Dilma Rousseff, whose political career was fuelled by her stellar performance in the energy sector, is now faced with an ironic challenge: how to bring down the unusually high price of electricity predominantly generated by hydropower – the cheapest source – in this South American country of 196.6 million people.

Conditions today are unfavourable. The cost of power generation shot up due to the lack of rain throughout 2012, which meant the country had to resort in the last quarter of the year to the oil power plants that operate as backup for the hydroelectric stations during times of drought.

Despite this setback, the government kept its promise and lowered the price of electricity, one of the world’s highest. On Jan. 23, Rousseff announced an 18 percent reduction for households and a 32 percent reduction for industrial clients.

“The government wants to repeal the law of supply and demand by decree, with the absurd strategy of reducing utility rates and stimulating consumption in the middle of a power shortage,” economist Adriano Pires, head of the Brazilian Infrastructure Centre, told IPS.

Rates will have to go up again soon when the thermoelectric power plants “start collecting their bills” for operating overtime, as the scarce rainfall that is expected over the remaining summer months fails to fill the reservoirs, Pires added.

According to Pires, the high cost of energy in Brazil is caused by a failure to stimulate supply and competition in the sector, and by “monopolistic practices” and high taxes.

Roberto D’Araujo, director of the Ilumina Institute for the Strategic Development of the Energy Sector, also criticised the government’s strategy, although for different reasons. He told IPS that the government “is dismantling Brazil’s power system by using public companies” to meet the demands of industry in the southern state of São Paulo.

D’Araujo estimates that complying with the government’s measures will cost Furnas, a state-owned power company where he headed the Department of Energy Studies, 60 percent of its revenue. And he added that it would not be one of the hardest-hit companies.

The power companies run by the state operate either nationwide, like Furnas, or at a regional level. They all have a minority interest owned by private shareholders, and most are traded on the stock exchange.

The reduction in electricity bills will be made possible through subsidies and state companies that operate old hydroelectric plants under concessions whose terms will expire between 2015 and 2017. The government offered to extend these contracts in exchange for compensation and rate cuts of more than 90 percent in some cases.

Some of these companies, located in states governed by opposition parties, rejected the measure. But since they are controlled by the central government they had no choice but to comply and watch their stock prices plummet along with their investment capacity.

The situation in Furnas, which supplies 10 percent of Brazil’s electricity, is getting more complex. The company has 1,700 employees due to retire this year, and it will also have to let many other people go in order to absorb the rate reduction.

This will unfortunately deprive the company of “intelligence and experienced staff” said D’Araujo, who is a defender of energy as a public service within the context of the “natural monopoly” held by the hydroelectric power sector in Brazil.

According to D’Araujo, electricity prices “have doubled since 1995”, with the sector’s first privatisations and the implementation of the “market model”.

The government was unmoved by social protests and it was not until the industrial sector started demanding cheaper energy to regain competitiveness and overcome what analysts refer to as the country’s “de-industrialisation” that it lowered prices.

Before the January rate cut, industries complained that one megawatt/hour cost them 165 dollars on average, while the mean cost of energy for its top 27 trading partners is 108 dollars.

While residential rates vary enormously, in a middle-class neighbourhood of Rio de Janeiro, for example, one kilowatt/hour cost some 24 cents in December.

“Lowering the cost of energy is a good thing, but not if it’s done with subsidies that transfer resources from taxpayers to consumers in a blood transfusion that doesn’t get the patient out of the ICU,” Pires said.

He was alluding to the risk of blackouts and the use of power prices to contain an inflation rate that has exceeded the annual target of 4.5 percent for years now.

The government does the same with fuel, keeping consumer prices at artificially low levels since 2005 through Petrobras, the state-owned oil consortium, which sells fuel products on the domestic market at a lower price than what it pays to import them. This subsidy costs an estimated two billion dollars a month, analysts say.

On Jan. 30, the price of gasoline went up 6.6 percent and diesel 5.4 percent. The hike was authorised by the government because the impact on inflation will be neutralised by the reduction in electricity rates. But it will not offset the losses suffered by Petrobras, whose net profit dropped 36 percent last year, in comparison to 2011.

This is another snag in Rousseff’s otherwise excellent performance in the field of energy, which was instrumental in her political rise to the presidency in January 2011.

She had an outstanding run as energy secretary for Rio Grande do Sul, a state that was spared the crisis that forced the country into energy rationing from June 2001 to February 2002.

That position was the springboard for her appointment as mining and energy minister in 2003 and as chief of staff in 2005. This last post in turn paved the way for her nomination to succeed Luiz Inácio Lula da Silva (2003-2011) in the presidency.

As energy minister she led an electric system reform in 2004 to improve safety and planning.

The memory of the 2001 power shortage sparks fears of a new crisis, but the situation today is not the same, as new investments have been made throughout the system, said Emilio La Rovere, an engineering professor at the Federal University of Rio de Janeiro.

A number of thermoelectric plants were built to cover energy demand when low reservoir levels reduce hydroelectric power generation capacity, La Rovere noted. But he said there were no absolute guarantees as “zero risk is very costly”.

He added that while government planning has been adequate, there have been glitches in implementation caused by delays in the construction of several projects. He mentioned, for example, wind power plants that are not operative because transmission lines have not been installed.

The controversy over electricity prices is “a dispute among capitalists”, said Gilberto Cervinski, one of the leaders of the Movement of People Affected by Dams.

Cervinski told IPS that it was a battle between power companies, whose profits shot up in the wake of privatisation, and industries, which are now benefiting from the reduction in rates.

The movement – which estimates that more than a million people have been affected by the construction of hydropower dams over the last 30 years – supports the government’s rate cuts. But it is calling for even lower prices for Brazilian families, which it says could be achieved by trimming the profits of distributors and not just generators, as is currently done.

Cervinski also said it was unfair to favour industry with a 30 percent reduction, as it already benefited from cheaper electricity prices, while households were only granted an 18 percent cut.

In addition, he said he was worried that the high rate cuts would affect the financial health of the state power companies, and argued that rates should be double the less than five dollars per kilowatt/hour set by the government.

(END)

By Stephen Leahy
BERLIN, Jul 31 2009 (IPS)

Why is nuclear energy back on the table?

One reason is a powerful U.S. lobby where 14 energy companies spent 48 million dollars in 2007 alone to convince American politicians to give the industry huge loan guarantees because they cannot get financing anywhere else, says Ellen Vancko, a nuclear energy analyst at the Union of Concerned Scientists, a U.S.-based non governmental organisation (NGO).

This lavish lobbying effort by the energy and nuclear power sector has been ongoing since the mid-1990s, according to the Center for Responsive Politics, a U.S. NGO and now totals at least 953 million dollars.

Even more has been spent to convince the public that nuclear is one of the keys to energy security so that there is significant public support for new reactors, a Gallup Environment Poll reported this year.

"There are lots of senators and members of congress talking about nuclear as a clean, renewable energy resource," Vancko says.

The other reason is the French.

France gets about 77 percent of its power from 58 reactors and is often cited as the model for other countries. "France is a special case. The entire industry is 85 percent owned by the government," says Mycle Schneider, a Paris-based energy and nuclear policy analyst.

The industry gets direct and indirect subsidies, government loans and loan guarantees "on practically anything they want", Schneider told IPS.

And despite a well-polished reputation for efficiency and low-cost, the French nuclear industry has been plagued by cost-overruns, equipment failures, and relatively low levels of reliability. Even though French reactors are all of similar design, the cost to build a plant in 1998 was 3.5 times higher than the first plants built in 1974, says Steve Thomas, professor of energy policy at the University of Greenwich in the U.K.

Unlike wind or solar energy or virtually any other technology, the costs of nuclear go up over time rather than down even in pro-nuclear France, he said. "I think that is rather telling about the technology," Thomas told IPS.

The current Finnish nuclear experience echoes the industry's long history.

Backed by French government loan guarantees, Areva, the French government-owned nuclear energy company began construction in 2005 on what is supposed to be the world's largest and safest nuclear plant at Olkiluoto, Finland.

Plagued by thousands of construction and design problems it is currently 2 to 3 billion dollars over budget and three to four years behind schedule.

"It's a total disaster for Areva," Schneider says. Areva will have to sell another 12 reactors to cover the cost overruns thus far or else French taxpayers will, he said.

"The hype around a nuclear power revival or renaissance was based on nothing and is effectively dead."

Last month Canada backed out of ordering two 1,200-megawatt reactors because cost estimates of 10,000 dollars/kW were three times higher than expected.

However there is real danger that the nuclear industry will continue to promote itself as a 'silver-bullet' solution to climate change and give politicians the kind of mega-projects that gets them publicity, warns Schneider.

Equally important is that corporate shareholders of large utility companies can do very well financially on such projects when governments guarantee to cover any losses.

"The worst thing about new nuclear is that it steals billions of public dollars from other more effective things like energy efficiency," he says.

(*This is the second of a two-part series on nuclear energy and subsidies by Stephen Leahy, international science and environment correspondent for IPS.)

Excerpt:

By Stephen Leahy
BERLIN, Jul 31 2009 (IPS)

Climate change and the resulting need for low-carbon energy sources is driving the current interest in nuclear energy despite the industry's near universal legacy of staggering cost-overruns, technical difficulties and dependence on enormous government subsidies.

Government interest in new nuclear energy plants seems far more political than practical or economic in light of the fact that Europe's latest nuclear plant under construction in Finland is four years behind schedule and 50 to 70 percent over budget.

Any claims that nuclear is a viable low-carbon or clean energy source are negated by its extraordinary costs that have increased at least five-fold in the past decade.

"Nuclear energy has always been heavily subsidised by governments around the world," Ellen Vancko, a nuclear energy analyst at the Union of Concerned Scientists, a U.S.-based non governmental organisation.

Under proposed U.S. legislation to reduce greenhouse gas emissions (Waxman-Markey Energy Bill), billions more dollars are headed the nuclear industry's way in the form of research and development funding, production tax credits, and 20 billion dollars in loan guarantees.

Added to that a major push by some politicians in the U.S. Senate to dramatically expand government-backed loan guarantees to subsidise the construction of 100 new nuclear plants in the U.S. over the next 20 years, Vancko told IPS.

"The U.S. taxpayer could be on the hook for 360 billion to 1.6 trillion dollars. This potentially is as large or larger than the U.S. financial crisis," she says.

No nuclear energy plant has been built in the U.S. for the past 25 years simply because they are expensive to build.

Moreover, the U.S. government lost its appetite for funding nuclear because the industry's default rate on government-backed loans has been over 50 percent, according to the Government Accountability Office.

That meant U.S. tax payers have ended up paying off the industry's multi-billion dollar losses and, bizarrely, producing windfall profits for some power utilities, Vancko says in an interview.

And nuclear is even more expensive today.

In 2001, the industry estimated cost of a new plant to be 1,000 dollars per kilowatt (kW) or one billion dollars for a typical 1000 megawatt plant. In 2008 it was 7,000 to 9,000 dollars/kW, says Steve Thomas, professor of energy policy at the University of Greenwich in the U.K.

"Costs have risen to 9 or 10 billion dollars per plant and that does not include the cost of financing," Thomas said in an interview.

Financing costs could easily double the cost unless backed by government loan-guarantees, which would still add billions to the ultimate cost. And these costs do not include costs of uranium mining and processing, waste management and cleanup, or plant decommissioning.

These current industry cost estimates are not for the much-touted "Generation 4" nuclear technology and its claims of low-cost, hi-efficiency and safety. "Gen 4 reactors are 30 years away from implementation," Thomas says.

Ten billion dollars today buys nuclear reactor technology that is based on a 1980s design with some improvements in safety and efficiency, he said.

Meanwhile, there are stacks of studies that prove the fastest and cheapest ways to cut energy costs, boost energy security and reduce carbon emissions are through energy efficiency and alternative energy like wind and solar, Vancko says. "The U.S. could reduce its carbon emissions 50 percent by 2030 through energy efficiency alone."

(*This is the first of a two-part series on nuclear energy and subsidies by Stephen Leahy, international science and environment correspondent for IPS.)

Excerpt:

By Ernest Corea
UNITED NATIONS, Jul 6 2009 (IPS)

The world needs to overcome “the bizarre irony that rural areas, where food is grown, is home to cruel poverty and hunger,” says Ismail Serageldin, former chair of the Consultative Group on International Agricultural Research (CGIAR).

Ismail Serageldin Credit: www.serageldin.com

Serageldin, currently director of Egypt’s prestigious Bibliotheca Alexandrina, was the World Bank’s vice president for environmentally and socially sustainable development during most of his term as CGIAR chair.

While making the case for mobilising agricultural technologies as broadly as possibly in support of food security, Serageldin also cautioned against the indiscriminate use of technologies that work against the poor. Speaking specifically of biofuel technology, he said, “It is wrong to burn the food of the poor to drive the cars of the rich.”

In an interview with IPS contributor Ernest Corea, he said that poverty, hunger and environmental degradation “challenge us to transform agriculture yet again – as we did in the 1970s – to ensure that food security can become a reality, that productivity is sustainable, and that agriculture fulfils its potential as an engine of growth.”

The challenge is both technological (requiring the development of new, high-productivity, environmentally sustainable production systems) and political (requiring policies that do not discriminate against rural areas in general, and agriculture in particular), Serageldin explained.

Excerpts from the interview follow.

IPS: The global recession has aggravated both poverty and hunger. Around a billion people did not have enough to eat in 2008 and the instability of prices continues to threaten livelihoods and lives. Lack of food security, hunger, and malnutrition appear to be permanent features of life in so many countries. Is this a pessimistic assessment or is there a way out of what looks like a continuing dilemma?

ISMAIL SERAGELDIN: The key to handling food security is increasing production to increase the caloric coverage for both food and feed at rates that will match or exceed the quantity and quality requirements of a growing population, whose diets are changing because of rising incomes.

This increase must be fast enough for prices to drop (increasing accessibility of the available food to the world’s poor) and be achieved by increasing the productivity of the small-holder farmers in the less developed countries so as raise their incomes even as prices drop.

IPS: Increased food productivity and production have been goals of farmers and policymakers from the day of the “green revolution”. Yet, the goals have not been fully realised. Can they be met now?

IS: The required productivity increases will require all the available technology, including the use of biotechnology for food and feed products, an approach that every scientific body has deemed to be safe, even though that is being challenged by some organic food growers and various (mainly European) international NGOs.

Yes, of course, food production technologies must be safe and sustainable. At a time of incredible technological opportunities we need to harness all that can help to alleviate and eventually eradicate hunger and poverty.

IPS: Isn’t the expanding use of biofuel technology having an adverse impact on food security?

IS: Biofuels should not be allowed to compete for the same land and water that produces food for humans and feed for their livestock. We need to look into a new generation of biofuels, using cellulosic grasses in rain-fed marginal lands or from algae in the sea or other renewable energies (solar and wind) and not divert food and feed products for fuel production.

IPS: As we think ahead to the Copenhagen conference on climate change, do you feel there is adequate awareness of how climate change affects food security?

IS: Climate change has increased the vulnerability of the poor farmers in rain-fed areas and the populations who depend on them. Special attention must be given to the production of more drought resistant, saline resistant and less thirsty plants for the production of our basic staples that we rely on for both food and feed.

The rights and interests of smallholder farmers will need special attention in Copenhagen. These are the farmers whose efforts are particularly important in the rural areas of developing countries.

IPS: In addition to productivity, what other areas of agriculture or agriculture-related activity require more research than is being carried out at present?

IS: The qualitative aspects of food and feed and their production are important. Additional areas where research is needed and where specialists must provide guidance are to decrease post-harvest losses, increase storability and transportability of food, and increase the nutritional content of the food through biofortification of food crops.

Remember, also, that food security does not mean food self-sufficiency for every country. We need a fair international trading system that allows access to food and provides some damping of sudden spikes in the prices of internationally traded food and feed crops.

IPS: How can the strength of public opinion be mobilised in support of sustainable food security?

IS: Public education campaigns about food security and eating habits of people are needed, and eminent professional groups should get involved. Like the global anti-smoking campaign, we need a global pro-healthy food habits campaign.

But we also need to campaign with the governments to maintain buffer stocks and make available enough food for humanitarian assistance that will inevitably continue to be needed in various hot spots around the world.

Excerpt:

By IPS Correspondents
NEW DELHI, Jun 5 2009 (IPS)

India’s Tata Motors, makers of the ‘cheapest car ever made’, say they have received more than a million bookings for the first batch of cars said to roll out of its factory in a few months.

Meetings like this one which was addressed by Mamata Bannerjee forced the Nano out of Bengal in 2008. Credit: Paranjoy Guha Thakurta/IPS

The Nano is a rear-engined, four-passenger car aimed primarily at the Indian market. Pitched at between 2,500 and 3,500 dollars, the manufacturers claim the car provides affordable transportation together with a low carbon footprint.

Little is said about the direct and indirect subsidies given by various government agencies to Tata Motors for manufacturing the Nano car.

Environmental activists and concerned citizens have argued that these would be tantamount to supporting relatively privileged sections of the second-most populous country on the planet and would go against principles of equity in the world’s largest democracy.

Dubious Rights Record The Tata group has been embroiled in different kinds of controversies in the past with human rights and environmental activists. In January 2006, policemen at Kalinganagar in the eastern Indian state of Orissa, opened fire on a crowd of tribals killing some of them. The tribals were protesting against the construction of a boundary wall on land historically owned by them where a steel plant is to be set up by the Tata group. In November that year, survivors of the 1984 Bhopal gas tragedy – said to be the world’s biggest industrial accident – were outraged by Tata chief Ratan Naval Tata’s efforts as head of a government panel to bail out Dow Chemicals, the new owner of Union Carbide that ran the chemicals factory where poisonous gas leaked killing thousands in December 1984. Supplies of transport equipment made by Tata Motors to the military junta in Burma have also been criticised. The multinational industrial conglomerate is now looking at setting up a truck manufacturing plant in the neighbouring country with financial support from the Indian government. After protests by environmental groups, including Greenpeace, the Tata group has reportedly modified its plans of establishing a port at Dhamra in Orissa that could threaten one of the world’s largest mass nesting sites for Olive Ridley turtles, an endangered species. But the Nano car project is arguably the most controversial endeavour by the business group that prides itself on its ethical practices. Supporters of the car say it would be a boon for India’s upwardly mobile middle classes, but others worry that the Nano would only add to pollution and traffic congestion in Indian cities and should not have been subsidised by different government agencies.

With per capita income at 1,000 dollars, a bicycle is even today a prized possession for the poor while a two-wheeled scooter or motorcycle is what many middle-class Indians aspire for. While petrol is not directly subsidised, car owners (mainly middle and upper classes) pay very little or almost nothing for parking, on road tax or for cleaning the environment – in other words, their personal transport is indirectly subsidised.

According to an internal document that was leaked to the media, the Gujarat government is providing Tata Motors subsidies worth a substantial six billion dollars for locating its plant in the western Indian state.

"The total subsidy element work out to roughly half the market price of the cheapest Nano car model," says Anumita Roy Chowdhury, associate director of the Centre for Science and Environment (CSE), a non-government organisation.

In an interview with IPS, she adds that over and above the direct subsidies that have been provided there are various indirect subsidies that Indian government agencies are giving to providers of personalised transport thereby discriminating against public transport like buses.

The document referred to is an internal note that was prepared by state government bureaucrats for the Gujarat cabinet headed by Chief Minister Narendra Modi.

The total subsidies given by the Gujarat government to Tata Motors adds up to more than 30,000 crore rupees (six billion dollars).

The state government has granted Tata Motors 1,100 acres of land at a subsidised price of 400.65 crore rupees (80.13 million dollars) to be paid in eight equal installments at 8 percent compound interest with a moratorium of two years.

There was no charge for transferring the land from agricultural to non-agricultural purpose. Registration fees, too, were not charged, while the state government met the entire infrastructure cost of developing roads, electricity and gas supply and also allotted an additional 100 acres of land on the outskirts of Ahmedabad to build a township for Tata Motors employees.

The state government agreed to provide a soft loan of 9,750 crore rupees (1.95 billion dollars) at an interest of 0.1 percent per annum to set up the project and additionally allowed deferred repayment of the principal amount of the loan spread over 20 years.

The Nano project has been a topic of controversy virtually from its inception. The car was not merely meant to be the cheapest in the world, it was supposed to create many employment opportunities.

In May 2006, Tata Motors announced its decision to manufacture the Nano from Singur in the eastern-Indian province of West Bengal that has been ruled by a Communist coalition for over three decades.

Soon thereafter, the company and the state government had to encounter stiff opposition from agitating farmers claiming that their lands had been acquired forcibly; even those who voluntarily sold their land wanted higher compensation.

The agitation against the Nano project was spearheaded by Mamata Banerjee, who leads the All India Trinamool Congress, a regional political party opposed to the incumbent Left Front government in West Bengal.

As work on the project got delayed, in September 2008, Tata Motors stated it was suspending work at Singur.

Within a few months it had signed a new memorandum-of-understanding with the government of Gujarat for allocation of land for the Nano factory at Sanand near the state capital, Ahmedabad.

The Gujarat government also met the cost of shifting the project to the tune of 700 crore rupees (140 million) – this amount includes expenses for bringing machinery and equipment from Singur to Sanand.

Among other facilities provided by the state government are provisions for power supply of 200 KVA up to the project receiving station, exemption from electricity duty, 14,000 cubic metre water supply per day at the project site, facilities for disposal of hazardous waste, facility for a transport hub, and a pipeline for supply of natural gas to the project site.

"We can afford a car because our government pays for it," says Sunita Narain of CSE in Down to Earth magazine. "… we are not asked to pay the price of its running – the tax on cars (for instance) is lower than what buses pay …"

(*The story moved May 23, 2009 contained an error. The total subsidies given by the Gujarat government to Tata Motors adds up to six billion dollars not 600 billion dollars.)

Excerpt:

By Stephen Leahy
UXBRIDGE, Canada, Jun 5 2009 (IPS)

The world has turned a green corner toward a more sustainable future, with investments in clean energy outpacing fossil fuel power generation for the first time.

Wind farms, like this one off Copenhagen, Denmark (with sailboat in foreground), have attracted the most new funding, although solar power has made the greatest gains. Credit: Wikimedia Commons

More remarkably, that investment in clean energy topped 2007's record investments by five percent, in large part as a result of investments by China, Brazil and other emerging economies.

Achim Steiner, UNEP's executive director, says that "2008 was the first year where there was more investment in non-carbon energy sources than in high carbon and nuclear energy."

"That's hugely significant," Steiner told IPS in an interview.

UNEP has been calling for a "Global Green New Deal" to jump-start the global economy and use the various economic stimulus packages to make investments in clean technologies and 'natural' infrastructure such as forests and soils. Experts argue that this is the best bet for real growth, combating climate change and sparking an employment boom in the 21st century.

"There are literally millions of new jobs that could be created in the next few years," Steiner said.

Renewable energy like wind, solar, biomass and geo-thermal can be rapidly scaled up since the technologies are well-developed and costs have dropped dramatically. For example, the Chinese firm Suntech Power has gone from being a startup to the world's largest solar panel manufacturer in just eight years, Steiner said.

In the same period, China has gone from having practically no wind energy to becoming the world's largest generator of wind energy.

"Renewable energy has now reached a tipping point where it is as important – if not more important – in the global energy mix than fossil fuels," he said.

The 2008 investment is more than a four-fold increase since 2004, according to Global Trends in Sustainable Energy Investment 2009, prepared for UNEP's Sustainable Energy Finance Initiative by global information provider New Energy Finance.

Of the 155 billion dollars, 105 billion was spent directly developing 40 giga-watts (GW) of power generating capacity from wind, solar, small-hydro, biomass and geothermal sources. Wind attracted the highest new investment (51.8 billion dollars, one percent growth in 2007), although solar made the largest gains (33.5 billion dollars, 49 percent growth) while biofuels dropped somewhat (16.9 billion dollars, nine percent decrease).

A further 35 billion dollars was spent on developing 25 GW of large hydropower, according to the report.

And 2008 was the first time developing countries' investments surged 27 percent over 2007 to 36.6 billion dollars, accounting for nearly one-third of global investments.

China led new investment with an 18 percent increase over 2007 to 15.6 billion dollars, while Brazil followed with its 10.8-billion-dollar investment in ethanol. Investment in India grew 12 percent to 4.1 billion dollars in 2008 and Africa exceeded the billion-dollar mark for the first time ever.

Meanwhile, rich countries reduced their investments by 1.7 percent compared to 2007. Not surprisingly, given market conditions, private sector investment all but disappeared in 2008, but government investment took up much of the slack and continues to do so in 2009.

However, in the first quarter of this year global investments plunged 53 percent compared to 2008 and are likely to end up 25 to 35 percent lower than 2008 investments despite the trillions of dollars in various national economic stimulus packages, says Michael Liebreich, chairman & CEO of New Energy Finance.

Only about 180 billion dollars has been earmarked for clean, green projects, which Liebreich told IPS was "a modest percentage" and that "it was not clear when the money will actually be spent". More investment is needed and right away, he said.

UNEP estimates that a minimum of 750 billion dollars – or 37 percent of current economic stimulus packages and one percent of global GDP – is needed to finance a sustainable economic recovery by investing in the greening of five key sectors of the global economy: buildings, energy, transport, agriculture and water.

"Much more investment is needed to stabilise carbon emissions," said Steiner.

The latest climate science since the Intergovernmental Panel on Climate Change's Fourth Assessment report concludes that global carbon emissions must peak by around 2015 to avoid the worst consequences of climate change.

"Renewable energy investment has to get up to 70 or 80 percent of all energy investments to make countries' carbon emission targets," said Michael Eckhart, president of the American Council on Renewable Energy.

This year is an anomaly. The skyrocketing growth in the green energy sector will resume in the near future, Eckhart told IPS. "Renewable energy will be the first sector to recover," he predicted.

And the green energy sector could receive a huge boost at the upcoming U.N. climate meeting in Copenhagen this December. Steiner says a new climate agreement could be "the biggest renewables stimulus package of them all" and ratchet investment up from "second gear and into third and fourth gear" where it needs to be.

"Copenhagen is where governments must seal the deal on a new climate agreement – one that can bring certainty to the carbon markets, one that can unleash investments in lean and clean green tech," he said.

Excerpt:

By Stephen Leahy
UXBRIDGE, Canada, May 29 2009 (IPS)

Despite the economic slow down, growing numbers of world leaders are calling for urgent action on climate change while many governments used their economic stimulus packages to increase subsidies to the fossil fuel industry.

Consider Europe, with the strongest public commitment to reduce carbon emissions that are causing climate change.

In the past five years, 8 billion U.S. dollars of public money went to Europe's fossil fuel companies mainly to the natural gas sector. And in May the European Parliament approved an additional 3.35 billion dollars in subsides as part of Europe's 225 billion dollars economic recovery plan, according to a new research report by Friends of the Earth (FOE) Europe.

"We Europeans are supposedly leading the world on the path to a new green economy but we're putting billions of euros into fossil fuel sector that's taking us in the opposite direction," Darek Urbaniak of FOE Europe.

CCS: ‘Unproven’ Technology Carbon capture and storage (CCS) is the shiny new subsidy to complement the more common production subsidies such as tax rebates, investment credits, low royalties, capital cost allowances, insurance guarantees and so on. While developing world subsidises the cost of fuel, the rich nations of the world subsidise costs of fuel exploration and production. CCS is yet-to-be developed technology intended to strip carbon from the emissions from coal, oil and natural gas energy production which are responsible for 25 percent of global emissions. The carbon is then to be stored underground, under the ocean or somewhere else, hopefully forever. CCS is behind the much-promoted claims for "clean coal" and clean fuels. Research into CCS has been ongoing for a number of years at a number of small research centres mainly funded by governments in Europe and North America. "It's an unproven technology. Only a few research centres will receive all that money. That's not going to stimulate economic growth," said Darek Urbaniak of FOE Europe. Apparently Canada isn't worried about economic growth either since the majority of its 860 million dollars for clean energy in its recent economic stimulus also went in CCS research. In addition, the Canadian province of Alberta has committed an extra 1.75 billion dollars to CCS research, according to John Dillion of Karios, a Canadian social justice organisation. Alberta, located in western Canada, has become the Saudi Arabia of the North because of its extensive deposits of tar sands. The region has become Canada's largest oil producer and ships over 1.3 million barrels of oil to the U.S. every day. However making oil from the tar sands – deep tar laden sands underneath the boreal forest – results in the world's "dirtiest oil" with 300 percent higher carbon emissions, making the region Canada's biggest source of emissions. U.S. President Barack Obama has spoken about the need to use oil from low-carbon production and tax those from higher. And that's why there are massive new investments by government in CCS, Dillion told IPS. "Everything is focused on keeping the tar sands going." And this newest subsidy is in addition to the estimated 300 million dollars a year that oil companies in the tar sands have been getting the last few years. And they've been on the dole since the 1970s. "There'd be no tar sands without all that government investment", he said.

"Its complete hypocrisy," Urbaniak told IPS from Brussels.

Perhaps recognising this fact, global business leaders at the World Business Summit on Climate Change that concluded May 26 called on governments to "strive to end the current perverse subsidies that favour high-emissions transport and energy".

Speaking at the opening of the summit, Secretary-General Ban Ki-moon said: "Continuing to pour trillions of dollars into fossil-fuel subsidies is like investing in sub-prime real estate." And he concluded: "We must direct investment away from dirty energy industries."

The United Nations Environment Programme (UNEP) has recommended that one third of the around 2.5 trillion dollars worth of planned economic stimulus packages worldwide should be used to 'green' the world economy, as this would help "power the global economy out of recession".

Instead the European parliament decided the 5.36 billion dollars dedicated to new energy projects be split so that the source of the climate problem, the fossil fuel industry got 3.35 billion dollars while green solutions like wind, solar, biomass energy sources receive just 2 billion dollars in new funding, the FOE Europe analysis ‘Public money for fossil fuels in the EU’ reported.

"Wind only received a half billion euros (670 million dollars) while 1.25 billion (1.67 billion dollars) is being used to subsidise research into carbon capture and storage," Urbaniak says.

Canada has spent more on oil and gas subsidies than all of its climate change programmes in the past three years, says Albert Koehl of Ecojustice, a Canadian environmental NGO.

Indeed since Canada first agreed to the Kyoto Protocol in 1997 to reduce its carbon emissions, it has spent more than 2 dollars in tax subsidies to the industry for each 1 dollar spent on action to implement the accord.

"It’s a pure windfall for the oil and gas industry. Taxpayers are paying for the industries' pollution," Koehl said in an interview from Toronto.

"We're trying to build a new green economy but much of our money is going to a dinosaur industry."

Canada is evidently not very interested in going green, spending 13.7 times less per capita than the U.S on renewable energy notes John Dillion of Karios (see sidebar).

Although nowhere near the one-third that UNEP recommended, the Obama administration has earmarked some 70 billion dollars out of its 787 billion dollars economic stimulus for greening the U.S. economy.

Of this 32 billion dollars is for clean energy production, including at least 4.4 billion dollars for carbon capture and storage (CCS) research and development, according to an analysis by Taxpayers for Common Sense, an independent and non-partisan NGO based in Washington DC.

That's a surprising turnabout. After investing billions in CCS projects such as FutureGen, a private-public partnership to build the world's first near-zero emissions power plant, even the fossil-fuel friendly George W. Bush administration abandoned the effort as too costly.

Whether there are additional subsidies to the fossil fuel industry in the rest of the economic stimulus, the research simply hasn't been done in the rush of bailouts, budgets and new legislation says Janet Larson, Director of Research at the Earth Policy Institute, an environmental policy NGO in Washington DC.

Taxpayers for Common Sense haven't analysed the 1,500 page stimulus bill yet either. But in last fall's 700 billion dollar bailout for the U.S. financial sector they noted there were some new tax breaks worth 2.2 billion dollars through 2013 for the oil and gas industry.

And of course there haven't been any significant reductions in subsidies although President Obama's proposed budget for 2010 does.

"There is an awful lot money in the stimulus bill," Larson told IPS. And alternative energy is getting some of it. But one fact remains clear: "Alternative energy is never going to catch up to what the fossil fuel industry has received."

Excerpt:

By IPS Correspondents
NAIROBI, May 16 2009 (IPS)

Following training by the Alliance for a Green Revolution in Africa, a hundred farmers in central Kenya, armed with an improved understanding of their local markets are commanding higher prices for their bananas.

"These farmers used to sell bananas by just looking at the bunch. A trader would come and dictate the price. Before, they were selling at three shillings per kilo (0.04 U.S. cents), now they are selling for up to ten times more," Anne Mbaabu, director of the Market Access Programme of the Alliance for a Green Revolution in Africa (AGRA) told IPS.

AGRA, an organisation which unites farmers, research scientists, business and governments to boost productivity and incomes, has been working with the Kamahuha Farmers Group, connecting the farmers with buyers who they communicate with directly using mobile phones.

"The buyer may say, 'I want bananas that are not injured, I want them of this maturity and in this quantity.' The farmer will then negotiate the price as opposed to previously, when he would just estimate the price," Mbaabu said.

Improving access to market information and building the capacity of African farmers to understand market trends and needs, was the highlight of a meeting of agricultural experts held May 13-15 in Nairobi.

With the theme of the event being the role of markets in accelerating Africa’s economic growth while improving incomes of poor farmers, it was stressed that for farmers to gain, they must not only produce, they must have effective access to markets in order to sell their harvests at fair prices.

Think local

Markets in Africa, it emerged, are poorly-organised and volatile. Farmers lack market information on current wholesale or retail prices that they need to negotiate good prices for their produce.

"You have to know where the market is first. If you do not have access to information, the farmers cannot even access markets or participate in them. So the big issue is providing adequate information for farmers to be aware of markets, but also to be aware of the needs of markets because market needs are changing a lot," noted Akinwumi Adesina, AGRA’s Vice President for Policy and Partnerships.

Experts like Ade Freeman of the International Livestock Research Institute (ILRI) argue that domestic and regional markets provide the greatest opportunity for African farmers, rather than markets further a field.

The population of the East African Community – Kenya, Uganda, Tanzania, Rwanda and Burundi – is roughly 100 million; over 389 million people live in the countries that form the Common Markets for Eastern and Southern Africa.

"We are talking about huge markets, in terms of the numbers of people that are involved. And people will always need to buy food. Some of these countries have been experiencing economic growth of about five to six percent per annum. So, all factors that favour increasing demand for agriculture in these markets are moving in the right direction, providing an opportunity for regional and domestic markets to be exploited," Freeman said.

There are several hurdles that have stifled regional trade, including high tariffs. "Tariff structures in Africa are actually much higher between countries than they are between Europe and Africa. So this makes it difficult for us to trade between ourselves," Adesina pointed out.

There have also been calls for customs regulation standards (requirements which someone exporting or importing goods or services is expected to adhere to, and they vary from country to country) to be harmonised to make it easier for people to transport goods across borders.

Access alone is not enough

But for poor farmers to increase productivity and enter these markets, they need to be supported with improved seeds, fertilisers, irrigation, and pest management technologies. And government intervention to provide this support constitutes subsidies, a thorny issue at international trade talks.

Mbaabu’s take is a different one. "These subsidies, as they are called, are targeted. It's not just mass subsidies; it is targeted at those who cannot be able to afford, and then once they are able to get these inputs, they become self-sufficient in their food production and then you end up reducing poverty. So let us not criminalise subsidies; it is support, targeted support to our farmers."

In Kenya, the government has over the last year reduced fertiliser prices from about 79 dollars to the current 33 dollars. This is still too costly for many farmers, according to Peter Njoroge, chair of the League of Small-Scale Coffee Farmers. He told IPS that a good number of farmers were abandoning farming due to the high input costs, and he wants authorities to reduce further the fertiliser prices or even distribute them free of charge to small producers.

The Malawi government was commended for going against the grain to provide subsidised hybrid maize seeds and fertilisers to its farmers beginning three years ago. It has since moved from a serious food deficit to becoming a net maize exporter.

And the results of farmers using high-yielding inputs are tangible. "The standing point is an increase in productivity in areas where farmers use improved inputs," Joseph Mwangangi, the regional director of Agribusiness Strengthening Programs at CNFC Inc, an organisation dedicated to increasing and sustaining rural incomes through empowering farmers in developing countries, told IPS.

Mwangangi, whose organisation works with the Agriculture Commodity Exchange in Malawi pointed to a recent study by the Bunda College of Agriculture at the University of Malawi, which found that up to 86 percent of farmers were using improved inputs. This, the study says, has led to increased or improved household food security.

Even with these gains, not everyone is in favour of subsidies to poor farmers. Hans  Binswanger, a private consultant on agriculture and rural development from South Africa, cautioned about potential risks associated with subsidy programmes.

"If not designed and implemented properly, they can cause disruptions in markets, resulting in high prices which are completely unnecessary, and which are costly to the government, costly to its people. This undermines the intended benefits of the fertiliser and seed subsidy programme," he stated.

Excerpt:

By Stephen Leahy
ANCHORAGE, Alaska, USA, May 5 2009 (IPS)

More than 20 million hectares of farmland in Africa and Latin America are now in the hands of foreign governments and companies, a sign of a global "land grab" that got a boost from last year's food crisis.

Acacia savannah in Zanzibar, Tanzania Credit: Public domain

"There is a major lack of transparency in these land deals," von Braun said in a telephone press conference from Washington.

The IFPRI study, "'Land Grabbing' by Foreign Investors in Developing Countries," by von Braun and Ruth Meinzen-Dick, which was presented last week, estimates that 15 to 20 million hectares have been acquired or are in the process of being sold.

Von Braun pointed out that this is equivalent to about 25 percent of all the farmland in Europe.

Because hard data is difficult to come by – the study was based primarily on information from press reports – IFPRI conservatively estimates that the deals represent 20 to 30 billion dollars being invested by China, South Korea, India and the Gulf States, mainly in Africa.

"About one-quarter of these investments are for biofuel plantations," von Braun said.

China started leasing land for food production in Cuba and Mexico 10 years ago and has extensive holdings in Africa, including pending or attempted deals for millions of hectares in the Democratic Republic of Congo, Zambia, Zimbabwe, Uganda, and Tanzania, with many thousands of Chinese workers brought in to work on these lands, according to the report.

The largest foreign ownership or control of African farmland is in Sudan – in this case a group of Gulf States, including Saudi Arabia. Last year, the United Arab Emirates negotiated several farmland deals with Pakistan. Qatar has agricultural land in Indonesia, the Philippines, Bahrain, Kuwait and Burma.

The huge Korean company Daewoo Logistics Corporation signed a deal to lease 1.3 million hectares in Madagascar to grow maize and oil palm, which reportedly played a role in the political conflicts that led to the overthrow of the government in 2009, the report noted.

"The number of land deals is much higher than the IFPRI numbers. No one is monitoring all the private land deals," says Devlin Kuyek, a researcher at GRAIN, a Barcelona-based non-governmental organisation dedicated to global agricultural issues.

GRAIN published its own "Land Grab" report six months ago, concluding that rich countries are buying poor countries' soil fertility, water and sun to ship food and fuel back home, in a kind of neo-colonial dynamic.

Kuyek told Tierramérica that this 21st-century land rush is driven in part by countries that no longer want to be held hostage by the big, multinational food trading companies.

But increasingly the private capital is coming from pension funds, which are staking their bets on farmland as the next profitable commodity to invest in after the collapse of the global stocks and financial sector and continuing weak prices for oil and metals.

"A huge chunk of the Australian cattle industry is now owned by a private equity firm. The two biggest pork producers in China are owned by Goldman Sachs (a private investment firm)," Kuyek said.

As a result, he noted, ranchers and farmers have turned into employees.

But it could be far worse than that for hundreds of millions of small landholders, pastoralists and indigenous people who do not hold formal land titles, because they are at risk of being driven off their land, he said.

Most of African farmland is under local customary land holding, without formal land title, acknowledges IFPRI researcher Meinzen-Dick.

"When outsiders come they don't recognise those customary land rights. Such rights must be respected," she told Tierramérica.

IFPRI is calling on the international community to develop a code of conduct that would uphold local peoples' rights to their land, guarantee transparency, share benefits, foment environmentally sustainable production and ensure local food security.

Von Braun sees great potential in such land deals because they bring badly needed capital to the agricultural sectors of poor countries, contributing to infrastructure and research. "China is creating several research stations in Africa to boost yields in rice and grain," he said.

Kuyek disagrees: "These investments are not about agricultural development. This is all about making money and shipping food back to home markets."

Food processing companies and even food retailers are involved in this because they are anxious to ensure "security of supply" as efficiently as possible, says Janice Jiggins, of the International Institute for the Environment and Development, in London. One of the world's biggest banks, the Netherlands' Rabobank, is one of the main financiers for these kinds of deals, Jiggins told Tierramérica via e-mail.

The 2009 report from the United Nations Special Rapporteur on Food Sovereignty, Olivier de Scutter, detailed the legal implications of the farmland deals, warning that they completely override existing rights, enshrined in laws, constitutions, and customs, Jiggins wrote.

(*This story was originally published by Latin American newspapers that are part of the Tierramérica network. Tierramérica is a specialised news service produced by IPS with the backing of the United Nations Development Programme, United Nations Environment Programme and the World Bank.)

Excerpt:

By Mercedes Sayagues
MAPUTO, May 4 2009 (IPS)

Cash transfers are the new darlings of proponents of welfare programmes. Mexico, Brazil, Bangladesh, lately New York City, and about two dozen developing countries presently dole out money to poor families, usually with conditions attached, such as taking their children to school and health checkups.

Reduce the burden on women, not increase it, Hanlon suggests - 'Income-generating projects usually mean more work for women.' Credit: Mercedes Sayagues/IPS

Hanlon is editor of Mozambican Political Process Bulletin, and in 2008 with Teresa Smart authored a critique of Mozambique's aid and development model titled "Do More Bicycles Equal Development in Mozambique?"

He spoke to IPS at a seminar on poverty dynamics organised by the Institute for Social and Economic Studies in Maputo at the end of April.

IPS: What are you proposing?

Joseph Hanlon: Just give money to the poor. People cannot pull themselves up by the bootstraps if they have no boots.

IPS: Cash with no conditions?

JH: If there are schools and clinics nearby, the poor send their children. Conditionalities for the poor only placate the tax-paying middle classes.

IPS: How would the cash be targeted?

JH: Choosing a small group is socially divisive. Imposing conditions and excluding people is both time-consuming and expensive and, in the case of Mozambique, quite ineffective and unfair. Seventy per cent of Mozambicans are poor.

IPS: Then who should get it?

JH: Eventually, all poor families. To begin with, since most Mozambicans live in extended families with children and older people, the most efficient and non-divisive system of cash transfers would be a universal child benefit and non-contributory pension.

IPS: Your paper does not mention the feminisation of poverty. Why?

JH: In Mozambique, women-headed households are not significantly poorer than others. Poverty is a general problem. It makes more sense to improve the whole family’s economic standards and productivity.

IPS: Why not target women specifically?

JH: The NGO and the aid industry’s stress on gender is not always helpful. Income-generating projects usually mean more work for women. This is not to say that women are not discriminated, in inheritance rights, for example, but the aid industry approaches the problem as if it were one more fault of the poor that women are not treated fairly.

IPS: Yet you suggest giving the cash transfer to the senior woman in the family.

JH: It is easier to give the cash transfer to families, not individuals, but we must a bit careful with family dynamics. There is some indication that women spend money on food for the family but, at the same time, money may be invested in consumption rather than production. It is a horrible trade off that the poor face.

IPS: What would the cost of the programme be?

JH: The current monthly subsidy for the elderly is 100 meticais (about US $4), and 50 for a child. A scheme of pensions for over-65s and school-age children aged 7 to 14 would equal 0.8 percent of GDP, or $80 million. It is practical and affordable.

IPS: Where would the money come from?

JH: A five percent increase in donor aid could fund the program, from the additional aid promised at the Gleaneagles Summit. In the future, when Mozambique becomes a mineral and energy exporter, it should set aside a portion of mineral revenues to fund social protection, like Bolivia and Alaska.

IPS: How will this cash transfer help the economy?

JH: Research shows that increased rural income is largely spent on local services and locally produced farm and non-farm goods, especially for goods produced by the poor.

IPS: How do cash transfers relate to the Millennium Development Goals?

JH: The focus on MDGs has led to disproportionate spending on health and education by donors and governments, forgetting MDG 1 – halving poverty. More aid to create jobs and economic development is needed. So, let’s put the money in the hands of the people. The poor invest wisely.

IPS: Any examples to follow?

JH: I would opt for either the Brazilian or South African models. In Brazil, recipients are self-declaring families below the poverty line. In South Africa, children and old people. What is important is that both programs are rights based, largely unconditional, and universal.

IPS: Social protection in the form of old age pensions and child grants is not new. What is new about cash transfers?

JH: The neo-liberal and aid agency models blame both poor people and poor countries for their poverty; they must be educated and controlled. The poverty trap model says the poor know what to do but lack the money to feed their children and invest, so give them money.

The key issue of underdevelopment is lack of demand (due to the poverty trap), not supply (as in the neo-liberal model). Demand looks at the poor, while supply looks at the rich as the engine of development.

Excerpt:

By IPS Correspondents
MASERU, May 4 2009 (IPS)

The Lesotho government – battling against the challenges presented by an ever-growing population of orphans whose parents have succumbed to the AIDS pandemic – has embarked on an ambitious programme aimed at alleviating the suffering of these vulnerable children, in partnership with the European Union and UNICEF.

For the next year, 1200 households in three districts of Mafeteng, Maseru and Qacha’s Nek will receive a quarterly cash grant of 38 dollars in the pilot phase of this programme. The grants are expected to be extended to similar households in other districts of the country by the end of 2011, with the main objective being to keep these children in school by catering for their school fees, uniforms, health care and other basic needs.

Finance Minister Timothy Thahane announced the quarterly grants when presenting the 2009/10 budget in February this year, saying they were part of government’s intervention strategies aimed at militating against the ravages of the AIDS pandemic.

Lesotho has the third-highest HIV prevalence in the world, with an estimated 23.2 percent of the country’s population of 1.8 million being infected. In 2007, UNICEF estimated that Lesotho had 160,00 orphans of which 110,000 had lost one or both parents to AIDS.

The government of Lesotho has since embarked on various child support services in partnership with such donor agencies as the European Commission, which announced it would provide 16 million dollar package over five years through UNICEF, covering such areas as access to education, health, psychosocial support, protection, HIV prevention and food security.

On Apr. 22, government was supposed to hand over the first batch of cash grants at Mathula in Mafeteng but deferred the disbursement for security reasons following a foiled attempt on Prime Minister Pakalitha Mosisili’s life on the same day. But there was a handover of 12 vehicles and office equipment by the European Union Ambassador to Lesotho, Peter Beck Christiansen, with the cash grants to follow at a date yet to be announced.

The Lesotho Child Grants Programme is an initiative of the government to provide money to supplement the income of poor households caring for orphans and other vulnerable children and child-headed households. A Village Verification Committee is formed in each community and supports government in identifying the poorest and most vulnerable households with children, in their communities.

For this pilot project being implemented in Mathula (Mafeteng District), Semonkong (Maseru District), and Thaba Khubelu (Qacha’s Nek District), the next cash payments will be disbursed in July, with further payments in October and January next year.

Speaking at the handover ceremony, Christiansen said without a shift in the sexual behaviour of Basotho men, the nation is in grave danger.

"We discovered that all aspects of fighting HIV/AIDS had been done, but the biggest gap was to mitigate the effects on the innocent orphans and other vulnerable children, who are paying the price and society’s lack of understanding of how to fight the disease individually and as a group," he said.

"May the adults of Lesotho have the energy, desire and will to change their behavior to avoid adding more orphans to the communities. Multiple concurrent sexual relations seem still to be the norm and not the exception, and the only real protection – condoms – are still being used far too little both inside and outside marriages. If everyone does not say enough is enough, the Basotho nation may not be here in 20-30 years and certainly living conditions will only deteriorate."

Christiansen added that the Health and Social Welfare Minister should appeal to cabinet for the speedy enactment of the Child Protection and Welfare Bill, for the protection of the country’s youngest citizens. He also implored government to ensure children get the necessary attention and proper representation in national programmes dealing with such vulnerable children.

UNICEF representative in Lesotho,Aichatou Diawara-Flambert, said their major concern was ensuring children – especially the vulnerable ones – are never denied their basic needs.

"Evidence from other cash-transfer initiatives around the world indicate that the additional income provided through cash grants is used for health, nutrition and education. The benefits enjoyed by the direct recipients are often shared by other household members across generations. Apart from that, cash transfers do not replace other forms of assistance but complement other mechanisms supporting the needy," said Diawara-Flambert.

Sengoe Monyetsane, speaking on behalf of the Mathula Community, Thaba Tsoeu constituency, expressed gratitude to the European Commission and UNICEF for supporting OVC.

"We are very pleased that Mathula is among centres to pilot this programme, and we promise the money shall be used profitably for the benefit of these children," he said.

The Matsieng Principal Chief, Mr Masupha Bereng Seeiso also thanked the donors for their support. He advised Basotho to change their behavior in an effort to minimize the escalating rate of deaths caused by HIV/AIDS.

Mrs Moliehi Khabele, MOHSW deputy Principal Secretary, said government had developed intervention strategies in treatment, prevention and mitigation through the Social Welfare Department by launching a national action plan – OVC, Policy and Strategic Planning 2004.

"These documents were shared with our development partners so that they could buy-in and identify how they could support their implementation. I am pleased to say the European Commission and Global Fund were among the first partners," she added.

Excerpt:

By Fabiana Frayssinet
RIO DE JANEIRO, Apr 29 2009 (IPS)

The Brazilian government announced it is overhauling the country's energy basket with more emphasis on renewable resources, while continuing to plan for future expansion of local production of traditional fossil fuels, like oil and gas.

This new balance of energy sources was presented by Environment Minister Carlos Minc at the Apr. 22-24 ministerial meeting of the Group of Eight (G8) most powerful industrialised countries in Siracusa, Italy, which Brazil attended as a guest.

Brazil's plan reflects the spirit of the fifth Summit of the Americas, held this month in Trinidad and Tobago, which discussed a proposal for the countries of the Americas to generate half of their energy from renewable sources by 2050, thus reducing emissions of greenhouse gases which cause global warming.

Seventy-five percent of Brazil's energy comes from hydroelectric power, and the government wishes to build more such stations, but without causing further deforestation in areas like the Amazon rainforest.

According to Minc, sites will be chosen in river basins that would involve less flooding of forested areas, using underwater river turbines that harness the water flow and generate more energy in smaller areas.

The government expects to produce 50 million megawatts from this kind of hydroelectric plant in the next two years.

The Environment Ministry pointed to other measures, like one recently adopted by the Brazilian Institute for the Environment (IBAMA), which requires new thermoelectric plants fuelled by coal or diesel to compensate for their greenhouse gas emissions by planting trees.

"That way we raise the cost of energy produced by thermoelectric plants, while implementing policies to lower the cost of renewable sources like wind energy," the Ministry says.

But the government of President Luiz Inácio Lula da Silva will invest more heavily in other renewable energy sources, like biodiesel made from oil-bearing plants such as palm trees, sunflowers, castor beans and peanuts, and especially in expanding production of the biofuel most consumed within this country, ethanol, manufactured from sugarcane.

The government counters objections to biodiesel production, which could fuel deforestation in crucial areas like the Amazon, by saying that it will foment the recovery and use of degraded land to plant sugarcane.

According to the Sugarcane Industry Association (UNICA), 46 percent of the Brazilian energy mix is already based on renewable sources, while ethanol accounts for 16 percent.

In Brazil, 90 percent of new vehicles, which currently make up 25 percent of all cars in the country, have flex-fuel motors that can run on gasoline or ethanol or both.

The head of UNICA, Marcos Sawaya Jank, said this has cut Brazil's emissions of carbon dioxide, the main greenhouse gas, by 50 million tonnes since 2003, equivalent to planting 150 million trees in the same period.

UNICA's promotion of ethanol has drawn criticism from those who are concerned about competition between planting crops for energy or food and argue that using food grains for energy production could cause food to become scarce and expensive.

The supposed benefits of biofuels for the environment are also questioned in some quarters. The International Council for Science (ICSU) reported that biofuel production may increase, rather than reduce, global warming.

According to the ICSU, the process of farming crops like sugarcane in Brazil and maize in the United States releases amounts of nitrous oxide, another greenhouse gas, that more than counteract the benefit of lowering emissions of carbon dioxide generated by burning ethanol instead of gasoline.

Energy expert Jean Paul Prates says "the question of direct competition" between biofuels and food is "real" and "should not be hidden."

But Prates, energy secretary for the Brazilian state of Rio Grande do Norte, told IPS that this competition depends on the amount of idle and arable land in each country.

In that respect, his state in the northeast of the country, and the rest of Brazil, have extensive degraded land areas where biofuels can be produced without causing deforestation, he said.

Brazil and the United States contribute 70 percent of the world's ethanol output. The Brazilian government's energy policy aims to produce 23.3 billion litres of ethanol a year, and to export five billion litres. For biodiesel, the goal is to reach an annual production of 3.3 billion litres by 2010.

Even Brazil’s state-run oil giant Petrobras is producing biofuels, and has joined efforts to expand their production and promote scientific research on them.

Petrobras has three new biodiesel plants and plans to produce 640 million litres a year by 2013. Including ethanol, the company has announced that it will spend 2.8 billion dollars on biofuels up to 2013.

In the view of Petrobras president José Sergio Gabrielli, the important thing is to increase exports to make Brazil one of the top players in the world ethanol market.

"Forty years of experience with ethanol in this country shows that this biofuel is not a threat to food security; on the contrary, food production has increased," Gabrielli told IPS.

Production capacity on land "appropriate for ethanol cultivation" has increased, and labour conditions for sugarcane workers have improved, he said.

"We believe it is possible to increase production of crops for biofuels in degraded areas, on land that is not being used for food production," he added.

According to the government, only one percent of the land suitable for agriculture in Brazil is used to grow sugarcane.

Petrobras' main focus in this area is to develop technologies for producing second and third generation biofuels on an industrial scale.

Second generation biofuels can be obtained from the cellulose of any plant, using the whole plant and not just the grains, and thus reducing water consumption, for example, Prates said.

For the third generation, algae and other organisms from which biofuels can be extracted can even be grown in extreme environments such as deserts, frozen regions or the sea, he said.

The goal is, in fact, "to try to tone down the debate about direct competition between energy and food crops," Prates said.

"If Brazil can grow biofuels in the present conditions – without compromising land for growing food – and also make progress toward second and third generation biofuels, we have a promising future," he added.

But neither the government nor Petrobras are willing to stop producing oil and natural gas, or even to increase output.

Petrobras currently produces 1.9 million barrels of crude per day. But the discovery of new deep sea reserves, thousands of metres deep and under a salt layer, has raised expectations that it could increase production to 3.1 million barrels per day by 2020. The company is also building five oil refineries to increase its refining capacity to 3.2 million barrels per day by 2020.

"We want to increase our refining capacity in order to become a large producer of refined products. We aim to make Petrobras not only a major exporter of crude, but also of oil by-products," Gabrielli said.

According to Prates, this model will be "completely different from that of traditional oil exporters, like the Arab countries or Venezuela."

"It will be a model oriented toward domestic consumption, to satisfy our energy needs first, and then export the surplus. And it will still generate wealth for the country," he said.

Excerpt:

By Kelvin Kachingwe
LUSAKA, Apr 2 2009 (IPS)

Responding to years of complaints over the management of the Fertiliser Support Programme (FSP), the Zambian government has now proposed that the private sector takes over its running to reduce cases of corruption.

Permanent Secretary in the Ministry of Agriculture and Co-operatives, Isaac Phiri, told the Parliamentary Public Accounts Committee that the government should concentrate on the payment of suppliers while distribution be left to the private sector.

He says this is line with Zambia's broad policy of encouraging private sector participation and competition as well as having the private sector driving the agricultural marketing and input supply system.

"It’s not easy to run the FSP. We want the private sector to play an active role and not the ministry, but we are trying to review the programme," Phiri said.

The FSP was launched in 2002 to enable about 150,000 small-scale farmers to access fertiliser at half price. The number of beneficiaries was later raised to 200,000 and the subsidy increased to cover 75 percent of the cost of fertiliser.

Small-scale farmers play an important role in both Zambia’s agricultural output and the nation’s food security. Although there are no official figures of the number of small-scale farmers, they are estimated at about one million. Even those who have only a small piece of land are expected to provide sustenance not just to their immediate families, but also extended ones.

Dickson Bwaanga, a small-scale farmer in Chongwe district, says if his crop fails, his entire family’s main food source is threatened.

"However, erratic weather, poor soil and faulty seed can all jeopardise a small farmer’s chance of a good yield. To overcome this, fertiliser and good seed are crucial, but these are expensive and only a few small-scale farmers can access the money or credit to buy it," he says.

Against that background, FSP remains a popular initiative in Zambia. By subsidising inputs, the government provides farmers with the opportunity to grow crops. From the government's point of view, it helps to stabilise production and maintain a steady maize price thereby keeping political unrest at bay.

Increasing costs, but production flat

Despite having an immediate impact in the 2002/2003 farming season, with maize production improving so much that some stock was exported, the programme has attracted criticism in recent times.

Yields have barely risen since the jump recorded in the first year of the FSP, in spite of a steady increase in budget allocation. In fact in the 2007/2008 farming season, Zambia's total output dropped to about 1.2 million tonnes of maize, 100,000 less than it had recorded in any of the last six farming seasons.

The government attributed this to floods but observers point out that the country faced the same scenario in the first, bumper, year of the FSP.

The biggest problem with the FSP seems to be not in the concept but the execution. Even its critics agree that small scale farmers need financial support but add that the way the FSP is administered means that the system is open to abuse and inputs often do not reach the intended beneficiaries or are delivered late, thereby delaying planting.

Many small-scale farmers say the system is corrupt. Farmer Organisation Support Programme (FOSP) executive director, Michael Muleba, says the distribution of fertiliser and seed by the Ministry of Agriculture through co-operatives has led to mushrooming of new co-operatives solely to secure inputs.

Muleba says these bogus co-operatives then sell the inputs on at full price to commercial farmers and sometimes export them outside the country. "The best way forward is for government to change the programme operational framework and policy without completely disrupting this support to small scale farmers," he says.

In a recent policy debate, several Members of Parliament challenged the government to devise a better mechanism for distribution of agro inputs under the FSP so that it reaches its intended beneficiaries.

"We have to revisit the FSP because at the rate we’re moving, everyone is politicising it," Katuba MP Jonas Shakafuswa said.

However, other than proposing that the private sector take up the running of the programme, the Agriculture Permanent Secretary did not give any other details of the proposed reforms nor did he give an over-view of the performance of the programme.

Hyde Hantuba, co-ordinator of the Agriculture Consultative Forum, [ID], says one consequence of the government’s direct involvement in the distribution of inputs is that it is, to an extent, stifling private sector development, which in itself is against government policy.

And although there is demand for fertiliser outside of the programme from medium and commercial farmers, which as a group use about 25 percent more fertiliser than the small farmers each year, critics argue that the FSP makes it difficult for small companies to compete.

"The FSP has not promoted private dealer networks. Small dealer networks have to wait until the government has exhausted the year’s inputs because it can’t sell at market rates. It (FSP) depresses the efforts of local dealers and small shops to sell seed and fertiliser inputs at full costs," Hantuba says.

Agriculture researcher Coillad Hamusimbi says there is a need to stimulate market competitiveness and in turn encourage the development of a private sector-led agro-dealer input supply network in agricultural areas, something the current FSP has not done.

"Private sector participation in agricultural input importation, manufacturing and in-country distribution are among the other attendant benefits of a well-planned programme," he says.

This, he says, is in line with the government's long-term policy of encouraging the private sector to take a leading role in the overall development of the agricultural sector in the country.

In a study of fertiliser subsidies and sustainable growth in Malawi, Zambia and Kenya, Isaac Minde and his fellow researchers assert that if subsidy programmes are implemented they should be designed in ways that involve the full range of private importers, wholesalers and retailers.

"Providing tenders to two or three firms can entrench their position in the market, cause other firms to cease making investments in the system or drop [out] altogether," they write, "leading to a more concentrated input marketing system and restricted competition when the input subsidy programme comes to an end."

Fertiliser just part of boosting production

Beyond settling on a role for the private sector, it has been argued that while the government has increased the amount of money allocated to FSP, it continues to hold back funding for other programmes supporting agriculture such as research and development and extension services.

Extension services in particular are important because they teach farmers techniques needed to maximize yields. Methods such as conservation farming have been shown to have a significant impact on production but there are not enough extension officers in the field.

In fact, many blame a lack of investment in extension services for Zambia’s failure to significantly increase maize yields despite the fertiliser subsidy.

However, one option that has proven successful in other Southern African countries such as Malawi is an input voucher system which has improved food security. Rather than government distributing inputs directly, vouchers are given to farmers to obtain subsidised fertiliser from the companies or dealers themselves.

This option was discussed by the Zambian government at the start of the FSP but it was rejected in favour of co-operatives buying the fertiliser from government appointed agents at 50 (now raised to 75 ) percent of the market price.

However, it is clear that the FSP is creating frustration within the agriculture sector. Dropping the programme altogether is not an option. Support to small farmers is vital if poverty-reducing goals outlined in the Fifth National Development Plan are to be met.

Without it, few poor farmers would have access to fertiliser while Zambia’s overall maize output could drop significantly because small farmers are a major contributor to national maize production.

But the question is how to ensure more benefit from the programme. Looking at less corruptible alternatives like a voucher system is one option. However, if the government sees the current system as a useful political instrument, it will be difficult for it to make any meaningful changes to the programmes.

(ENDS/IPS/AF/SA/DV/IF/AG/HU/SB/MD/KK/TG/09)

Excerpt:

By Servaas van den Bosch
WINDHOEK, Mar 21 2009 (IPS)

There was no mention of a special grant to tackle poverty in the Namibian national budget speech delivered on Mar. 19, much to the disappointment of campaigners for a Basic Income Grant (BIG) for all citizens.

Children in Otjivero settlement: campaigners say a pilot programme for a universal income grant is working here. Credit: Servaas van den Bosch/IPS

A year ago the Otjivero-Omitara settlement, 110 kilometres outside the capital Windhoek, was little more than an agglomeration of corrugated iron shacks. Hardly anyone lived there before 1992. The community grew as more and more people, evicted from the nearby white-owned farms, settled in the village.

Otjivero, located along the Trans-Kalahari highway, was a dead end street. There was no industry, no work, high crime and disastrous levels of alcoholism. It, in a sense, represented everything that was wrong with Namibia.

That was until a coalition of NGOs started a project to distribute cash grants to villagers in January 2008. Everyone under 60 receives $10 a month, regardless of their position or income.

"The universal grant is the only one of its kind in the world," claimed Reverend Claudia Haarmann, project director of the Social Desk of the Namibian Lutheran churches.

"Although cash grants have become an accepted way to alleviate poverty, they are always either means-tested or conditional. Often this excludes the really poor. It also means very high administrative costs to test everyone. We are convinced that you don’t need conditions to change behaviour,"

Residents had to register with the BIG coalition to qualify for the grant. Disbursements are made through a savings account with the post office, Nampost. Fingerprint verification is employed to eliminate fraud and ensure a watertight payment system.

"Of course people are happy, they think manna is falling from heaven, but that doesn’t mean they will squander the money," Otjivero community leader Steven Aigowab told IPS.

An interim evaluation by the BIG Coalition six months into the project seems to confirm this. Child malnourishment is down from 42 percent to 17 percent, employment up from 36 percent to 48 percent, and payments of school fees have doubled. The income of the local clinic has increased five-fold and crime has been reduced by 60 percent, according to the evaluation outcomes.

"There is no evidence that alcoholism is less, but it is also not worse", explains Haarmann.

Data from a second evaluation will be released in April and, according to the coalition, the positive trends are continuing. The research has refuted claims by researcher Rigmar Osterkamp of the Namibian Economic Policy and Research Unit (NEPRU) that the impact of the grants "is not very dramatic".

The coalition exposed methodological errors in the NEPRU research to which the institution acceded and Osterkamp returned to Germany in disgrace.

"They discredited themselves, but the ideology behind it is not gone," lamented Haarmann. She said the coalition often has to fend off arguments that black people cannot handle money responsibly.

"There is a school of thinking that you shouldn’t dish out money to people. That it is better spent on a project or something," Haarmann told IPS. "Show me one project that improves living standards across the board for 930 people at a cost of about $11,000 per month. Even the big public works programmes in South Africa only manage to attract a couple of thousand people and at a much higher cost."

It is estimated that it would cost the government about $280 million to roll out BIG to the entire country and that it could be financed through tax adjustments to luxury goods and income tax. The idea is not new. In 2002 the Namibian Tax Commission made similar proposals as a response to Namibia’s income inequality. According to the government’s National Planning Commission (NPC) 30 percent of the population is considered poor to extremely poor.

Critics of BIG say it is morally laudable but not economically feasible.

"The introduction of a Basic Income Grant may place too great a strain on public finances, especially at this time," the Institute for Public Policy Research noted in a report on the impact on Namibia of the global economic downturn.

Government skepticism stems from fears that the grant is not only unaffordable but would create dependency on the state. But with an election looming later this year, attitudes appear to be softening.

"Empirical evidence indicates that as long as the poor cannot meet their basic needs, we cannot empower them," the head of the NPC, Peter Katjavivi, told an international conference in Germany. "In this respect BIG programmes could be in the forefront of economic development."

The BIG coalition will take heart from this and continue to build on the success of its Otjivero project.

Excerpt:

By IPS Correspondents
NAIROBI, Mar 17 2009 (IPS)

The Nairobi-based International Livestock Research Institute estimates 250 million people in Africa – a quarter of the population – rely on livestock for their livelihoods, yet African governments invest almost nothing to support the sector.

There is evidence that at the household level, livestock improves the lives of the poor better than crop-related agriculture. Credit: Glenna Gordon/IRIN

Tumusiime was speaking at the Fourth Ordinary General Assembly of ALive, a global partnership of organisations involved in supporting livestock development in Africa, held in Nairobi on Mar. 12-13.

"There has been low and declining investment in livestock – not only in livestock but in agriculture and rural development in general. And in order to succeed in enshrining a system of development in Africa you need to consider agriculture. It needs to be the engine of growth and it will have a trickle-down effect to the livestock sub-sector," Dr François Le Gall, the outgoing programme manager of ALive told IPS in an interview.

It is argued that if investment in agriculture as a whole goes up, it will result in a higher allocation of funds to the livestock sub-sector, which will enable governments to provide improved services to livestock farmers, particularly in the rural areas where 70 percent of the people rear livestock on a small scale, according to ILRI.

At the African Union summit in Maputo, Mozambique in 2003, African leaders pledged to allocate 10 percent of their national budgets to agriculture within five years, in recognition of the fact that thirty percent of Africans are chronologically undernourished and that the continent had become a net importer of food. AU heads of state committed themselves to increase budgets for agriculture, including livestock. But the continent is far from achieving this target, observed Tumusiime. For example Kenya’s budgetary allocation for agriculture stands at 4.5 percent.

"I think it is extremely important to step up efforts in livestock development because empirical evidence indicates that at the household level, livestock improves the lives of the poor better than crop-related agriculture. But both of them are extremely important for both economic growth and food security," Tumusiime told IPS.

The dynamism of the livestock sub-sector is unquestionable. It accounts for over 50 percent of the agricultural capital stock in sub-Saharan Africa and is a significant contributor to agricultural GDP, according to the Food and Agriculture Organisation (FAO). Livestock is also a major source of food, particularly of high-quality protein, minerals, vitamins as well as micronutrients for the majority of people in Africa. It is estimated that meat, milk and eggs provide about one-fifth of the protein in African diets, says FAO.

But to increase livestock productivity and realise its full potential as a development tool, it is crucial that governments offer support to farmers. For instance establishing a communal cattle dip to remove ticks from the animals, and stationing a veterinary officer there to assist farmers with additional treatment to ensure their animals stay healthy.

"This reduces the cost immensely because engaging services of a veterinary officer is very expensive for many small farmers and that’s why many of them lose their animals from treatable diseases," said Lucas Simiyu, an official of Sirende Livestock Farmers Association, told IPS in a telephone interview from Sirende, in western Kenya.

Providing small livestock farmers with subsidies is also crucial to helping them lower production costs, in much the same way as subsidies to maize farmers in Malawi have quickly restored food security.

The government of Malawi took a bold decision to begin subsidising fertilisers and high-yielding seeds to small farmers in 2005. The result – the small landlocked country graduated from its status as a chronic recipient of food aid to become a net exporter of maize in just two years. It is now a food donor to other African nations.

"The conventional wisdom has been that we don’t want any subsidies; that has been sort of the religion of the last 10, 20 years. But I think the Malawi experience with fertilisers is a very controversial one, but in general there seems to be a consensus that it has helped in the short term in making them competitive," Carlos Sere, Director General of ILRI told IPS at the meeting.

According to Sere, this success story can be scaled up in the livestock sub-sector. "Small farmers can be competitive but they need support from governments. Large companies can do it themselves; small farmers need the right environment of public services including subsidies. These are inputs into ensuring increased productivity."

But the issue of subsidies for African farmers has been a thorny one, which has faced opposition from donors.

Aside from subsidies, increased productivity in livestock could also be enhanced through early warning systems to alert farmers of any looming calamities. Such systems have proved effective in countries like Uganda where frequent floods in the north have in the past caused severe loses to farmers with their cattle being infected with fascioliasis (liver fluke infection), a fatal disease of the liver.

In flood-prone Karamoja and Soroti regions, in northern and eastern Uganda respectively, agricultural officials have now taken advantage of early warnings from research institutions. "We have learnt a lesson. During each phase of floods we warn the farmers that after the floods they should de-worm the animals immediately and in that way we have been able to prevent fascioliasis from occurring," said William Olaho Mukani, director of Animal Resources in the ministry of Agriculture and Animal Industry in Uganda.

But the capacity to respond is still limited in many African countries, where bureaucracy in government stands in the way of getting finances to help deal with threats of disasters. "Frequently it makes early warning not helpful because by the time the vaccination teams get out for example, the disease has already spread and has killed people or animals," argued Sere.

He added, "We need to think how we organise ourselves in the veterinary services in a more effective manner, to quickly have a task force which can move, have budgets ready which the head of veterinary services can use for outbreaks for instance. You need a less bureaucratic way of tackling these emergencies."

Unless such basic details are addressed, ensuring productivity of livestock and the wider agricultural sector in Africa may be a daunting task.

Excerpt:

By Kelvin Kachingwe
LUSAKA, Mar 10 2009 (IPS)

In an attempt to mitigate rising food insecurity and malnutrition, the Zambian government and the World Food Programme (WFP) have started to hand out food vouchers to the country’s urban poor.

A woman preparing nshima, a thick porridge made from maize meal on a brazier in one of the townships of Lusaka. Credit: Kelvin Kachingwe/IPS

The food voucher programme will run for the next twelve months and is expected to feed 10, 000 households, mostly in and around Lusaka district.

Civil society groups are concerned, however, that the food voucher programme is merely an emergency intervention that will fail to bring long-term, sustainable change to the country’s capacity to feed its population of twelve million. Instead, they ask for direct, financial support of Zambia’s one million small-scale farmers to increase local food production.

An urban vulnerability assessment by Lusaka-based Jesuit Centre for Theological Reflection (JCTR) research institute in October 2008 revealed a harrowing food insecurity scenario for a substantial proportion of the population.

About 47 percent of Zambians suffer chronic malnutrition – which, according to the Food and Agriculture Organisation (FAO), is the tenth highest malnutrition rate in the world. In addition, food price hikes of 25 percent to 75 percent have exacerbated the situation.

"The assessment showed that a substantial increase in the cost of staple food commodities had occurred in many areas of the country. Price hikes were often a direct result of soaring fuel prices, which led to under production of food and higher consumption of staple food crops," explained WFP public relations officer Precious Mumbi.

Food rations

The food voucher programme aims to alleviate this situation by providing urban poor with monthly food rations so that they have enough money to spend on education, health and basic households needs.

A recent vulnerability assessment study determined households that qualify for the vouchers, which will be handed out by community volunteers, with local city council support. Government officials hope that the monthly food rations will help urban poor to spend more money on education, health and basic households needs.

An average urban family of two adults and four children needs a purchasing power of $120 just to meet basic food and nutritional requirements, according to the JCTR. Yet, one third of urban households earn less than $100 a month.

Children have been affected the most by ongoing food insecurity. According to the 2006 Living Conditions Monitoring Survey by the Central Statistical Office (CSO), more than half of Zambian children under the age of five are stunted, while 19.7 percent are underweight and 5.9 percent are wasted.

The Department of Health has noted heightened levels of malnutrition cases in hospitals throughout the country. A November 2008 meeting of the department’s nutrition emergency task force found, for example, an unusually high level of severe, acute malnutrition admissions at the University Teaching Hospital (UTH) in Lusaka of up to 20 children per day.

The problem of malnutrition has been exacerbated by a shortage of drugs, hospital food and health care personnel to attend to sick children, a development which prompted government to launch the voucher programme as an emergency measure to quickly assist food insecure and low income households to access food.

Long-term interventions

Zambia Council for Poverty Reduction programme co-ordinator Joe Ndalasa argues that while the food voucher programme addresses the immediate food needs of the vulnerable sections of the population, what is really needed is an intervention that can secure food security in the long run.

"For a long time now, we’ve have been asking the government to help the small-scale farmers because they are more in numbers than the commercial farmers and they also contribute more to food needs of the country than the commercial farmers," he explained. "But unfortunately, most of the measures aimed at improving agriculture in this country are aimed at assisting the commercial farmers."

He says by subsidising agricultural inputs, government would give smallholders the opportunity to grow crops, stabilise production and maintain a steady maize price.

"To counteract this [crisis], farmers need fertiliser and good seed," agreed Organisation for Social Development (OSD) executive director Sylvester Mbewe. "Fertiliser is expensive, and only a few farmers can access the money or credit to buy it."

"Even those who have access to only a small piece of land will provide sustenance, not just to their family but also to their neighbours," he reckoned.

Christopher Chingobe, who runs a small farm on the outskirts of Zambia’s capital Lusaka, agrees. He says he wishes the Department of Agriculture would broaden its existing fertiliser support programme that subsidises 200,000 smallholders instead of handing out food vouchers.

"The problem is that only a few farmers benefit from the fertiliser subsidy. It needs to be expanded so that we can all benefit," he explained. "If I can be provided with the fertiliser, I can produce enough food for my family and also be able to sell [surplus produce]."

Excerpt:

By Daniela Estrada
SANTIAGO, Mar 9 2009 (IPS)

In 2008, Chile’s state coffers took in just over one billion dollars from the specific tax on fuels. But at the same time, the government injected 700 million dollars into a fund that year to shore up fuel prices and made another 500 million available in case the price of oil continued to rise.

"Stay out – refueling" reads a barrier at a gas station in Santiago. Credit: Daniela Estrada/IPS.

The fuel tax, levied since 1986, and the Fuel Price Stabilisation Fund (FEPCO), created in 2005, drew public attention last year because of the soaring oil prices, which hit a record high of 147 dollars a barrel in July.

Under pressure from the transport industry and drivers in this oil importing country, the government decided to lower the tax and strengthen the FEPCO fund with part of the state’s savings based on windfall earnings from copper exports.

Controversial tax

In 2008, the specific fuel tax brought in 1.07 billion dollars, 27.5 percent less than the 2007 total of 1.36 billion dollars, and equivalent to 5.2 percent of all taxes and to one percent of GDP.

Although both the tax and the fund drew criticism, the issue seemed to fade into the background in the wake of the collapse of fuel prices and the outbreak of the global economic crisis.

But in January, when the government presented its national action plan against climate change, environmentalists raised their voices to complain about what they saw as "doublespeak".

By lowering the tax and channeling funds into FEPCO, President Michelle Bachelet "literally facilitated the burning of fossil fuels," Luis Mariano Rendón, spokesman for the Alliance for Climatic Justice, a local NGO, told IPS.

Chile’s greenhouse gas emissions have increased, on top of the fact that Santiago is one of the most polluted cities in the world, with vehicles responsible for 48 percent of the smog.

More than 6,000 deaths a year are attributed to air pollution in Chile, according to figures from 2004.

The tax on fuels "can be seen as a mechanism for raising funds, for taxing the use of roads, or as an environmental tax. Without expressing a judgment as to which is the best alternative, today we can see that it is poorly designed to fulfill any of these objectives," economist Sebastián Ainzúa, with the environmental group Fundación Terram, told IPS.

Missed its purpose?

The tax on imports or sales of diesel fuel and gasoline was established in 1986 to help rebuild roads destroyed by the 1985 earthquake. But once that goal was fulfilled, the tax continued to be collected, even though the state later held public tenders and awarded the contracts for the construction of highways to private companies, which charge tolls to maintain them. In addition, vehicle owners pay a circulation permit each year.

In Chile, all taxes go into the general budget and funds are later allocated to the areas of health, education, social security, etc.

The head of the Association of Fuel Distributors, Sydney Houston, complains that the tax only applies to drivers and users of the country’s roads, and not to other large oil consumers, like mining companies, shipping firms and power plants.

In 2008, taxes on gasoline – brought in by the specific fuel tax plus the value added tax – represented just under 42 percent of the final price of fuel, according to the Economic Commission for Latin America (ECLAC). The cost of refining accounted for just over 52 percent, while the remaining six percent represented distribution and marketing.

For diesel fuel, taxes accounted for 24.1 percent of the final price, refining 69.4 percent and distribution and marketing 6.5 percent.

Since the fuel tax was created, it has undergone modifications in response to pressure, mainly from truckers, who held a several day long strike last year. While the tax on diesel fuel has remained steady at 1.5 monthly "Unidades Tributarias Mensuales" (UTM – Monthly Tax Unit – currently set at roughly 60 dollars) per cubic metre for cars, the cargo transport association obtained a 25 percent reduction for trucks in 2001, and a year-long 80 percent reduction in June 2008.

At this time, truckers are paying 0.3 UTMs per cubic metre of diesel.

The tax on gasoline, meanwhile, went up from two UTMs per cubic metre in 1986 to six UTMs in December 2001.

In March 2008, a decision was taken to make the tax more flexible for two years, lowering it to 4.5 UTMs per cubic metre if the average price of oil for the previous 12 months was above 75 dollars a barrel. On the other hand, if the price of oil dropped below an average of 65 dollars, the tax would once again go up to six UTMs.

And in August, another variable was introduced: if the price averaged more than 85 dollars a barrel, the tax would be cut to 3.5 UTMs per cubic metre.

What is disturbing, said Ainzúa and Ana Luisa Covarrubias, of Freedom and Development, a think tank linked to the rightwing opposition alliance, is that the tax is lower for diesel fuel – more polluting than gasoline – which is used mainly by buses and trucks, despite the fact that they take a heavier toll on roads than cars.

In addition, the lower tax on diesel has encouraged imports of diesel-fueled cars, casting into doubt any supposed environmental objective of the tax, they said.

Since demand for fuel did not significantly drop despite last year’s soaring prices, some experts recommend that with respect to rates and fees for circulation permits, newer cars should pay less than older ones – the opposite of the present system – to help reduce pollution, traffic jams and accidents.

A subsidy for everyone

Meanwhile, to keep down the prices of gasoline, cooking oil and household kerosene – which have been driven up by the fuel tax – FEPCO provides subsidies to consumers in the form of credits when oil is higher than a set price band and collects taxes when it drops below the band.

The system was to have guaranteed the fund’s self-sufficiency, but "FEPCO has in general given out subsidies more than it has collected taxes," said Covarrubias.

The fund was initially set up in 2005 with 10 million dollars, for the period up to Jun. 30, 2006, at which point it was extended to Jun. 20, 2007, when it received another 60 million dollars and a law was passed to keep it in effect until 2010.

In January 2008, 200 million dollars went into the fund, and in June another one billion dollars was approved, although only 500 million dollars have so far been transferred. The other half will be available if oil prices go up, although for now an additional transfer is unlikely because as of December the fund still held 430 million dollars.

That means that in just one year, the government authorised the transfer of 1.2 billion dollars to FEPCO, two-thirds more than what was earmarked for the promotion of non-conventional renewable energy sources – and 32 times more than what is to go into the construction of 690 kilometres of bike paths in the capital.

Subsidise my car

"Does it make sense to subsidise a resource like oil, which is just going to get more and more expensive?" asked Ainzúa.

The government defends its support for FEPCO by pointing out that it enabled it to lower the price of fuel, especially gasoline and cooking gas, two of the products that have the heaviest influence on the cost of living.

But ECLAC and other institutions have recommended against across-the-board subsidies, saying they should instead target the poor, like cash transfers.

FEPCO benefits medium and low income sectors that use domestic liquefied gas and kerosene, as well as the better-off, who are the big consumers of gasoline.

Two municipalities in Santiago illustrate the gap in the use of the automobile: while there are 81,886 privately owned cars in wealthy Vitacura, home to 84,903 people, there are just 7,329 cars in the low-income district of La Granja, population 143,673, according to the National Statistics Institute.

Lack of transparency

Another aspect of the debate is transparency, for example with regard to the functioning of the Empresa Nacional del Petróleo (ENAP), which refines and sells more than 80 percent of all fuel sold in Chile.

Last year, the National Economic Prosecutor’s office launched an inquiry into alleged collusion on prices among fuel distributors, due to price rises that went beyond the reference prices set weekly by ENAP, as well as delays in implementing price reductions when necessary.

In Houston’s view, "officials tend to forget that this is a free, competitive and deregulated market." The head of the Association of Fuel Distributors argues that the best way to make the industry transparent would be a debate on a hydrocarbons law.

In January, the lower house of Congress approved the makeup of a committee established to investigate the huge losses that ENAP reported in 2008, supposedly the result of importing oil at a higher price than what fuel was fetching on the domestic market, as the global price of oil plunged.

In June 2008, the government had earmarked 250 million dollars from the state coffers to shore up the state-run oil refinery.

Today opinions are divided. Some propose eliminating both the fuel tax and FEPCO, so that prices will be free of distortions, and later provide subsidies to the poorest consumers. Others argue that the tax should be modified so the state will continue to pull in funds and so it will not backtrack on environmental questions.

A source at the Finance Ministry told IPS that the government has asked the Inter-American Development Bank (IDB) for a study comparing the current value of the fuel tax "with the one it should have, if the key external factors associated with road transportation were taken into account."

But the debate on the fuel tax and FEPCO will almost certainly be postponed, say analysts, because the next year will see a volatile mixture: the global economic crisis and the December presidential and parliamentary elections.

Excerpt:

By Pilirani Semu-Banda
LILONGWE, Feb 6 2009 (IPS)

Malawi has taken major strides towards reducing poverty and hunger in the country. Government’s cash transfer scheme has managed to reach many of those usually unable to access grants due to lengthy and complicated bureaucratic processes and assessments.

Beneficiaries of Malawi's cash transfer scheme are nominated by local community leaders based on need. Credit: Mick Yates

Before they started receiving the grant, life was tough for the Kondwerani children. "Sleeping on an empty stomach was not unusual for us. For four years, we had to do with one meal a day or none at all," said Kondwerani.

The teenager wakes up early every morning to collect firewood, fetch water, prepare food and make sure her brothers and sisters are bathed before they go to school.

Before the family qualified for the grant, the siblings’ education was put on hold, because the need to find food had been a daily priority. "We had to go scavenging for food that has been thrown-away in rubbish pits instead of going to school?" Kondwerani said.

But since they became part of the social cash transfer scheme two years ago, the welfare of her family has improved drastically. Kondwerani receives $19 a month, which is an average monthly income in a rural community in Malawi. "I am now able to provide for the whole family, and we are able to afford food," she said. The grant also enabled her to buy goats, chickens and fertiliser to grow maize.

Poverty reduction

Like all beneficiaries of the cash transfer scheme, which was launched in September 2006, Kondwerani’s household was nominated by a local Community Social Protection Committee (CSPC) made up of respected community members, including the chiefs of the area. The CSPC lists families in dire need and forwards those to the district Social Protection Sub-Committee (SPSC), a body of social workers and provincial government officials, which verifies and approves nominations.

CSPCs put forward names of the ultra poor, child-headed households, those unable to work due to disability, illness or old age. The money is disbursed to beneficiaries without any conditions or the need to fill out complicated application forms.

The amount of the monthly grant, which is coordinated through a partnership of the Malawian government, the United Nations Children Fund (UNICEF) and the National AIDS Commission (NAC), is dependent on household size.

The smallest monthly grant is $4.20 for a one-person household. To encourage school enrolment and retention, an extra $1.30 is disbursed for children enrolled in primary school and another $2.60 for households with children in secondary school.

"It is also an investment in children's health and nutrition and protection of children from exploitation and abuse, such as child labour or early marriages," said UNICEF chief of social policy in Malawi, Mayke Huijbregts.

"Cash transfers have made a positive impact on the well-being of the poorest, and especially children, in the areas of health, nutrition, school enrolment, retention and performance," she explained.

The scheme also helped to reduce child labour from 53 percent to 18 percent in Malawi, enhanced food security and diversity, investments in livestock, housing, hygiene and clothes, Huijbregts further noted.

According to government statistics, 65 percent of Malawi's 13.1 million people live below the poverty line of less than a dollar per day.

More than four million children live in poverty, which is deep, widespread and characterised by low income, low literacy, food insecurity and high rates of child malnutrition, according to UNICEF. Almost half of Malawi’s children under the age of five are stunted due to malnutrition.

To make matters worse, 13 percent of the country's more than seven million children under the age of 18 have lost their parents, mostly to HIV and AIDS. As a result, more than half of children of primary school going age have dropped out because of poverty, hunger and cultural barriers.

Easy access to grants

Faced with such extreme poverty, the Malawian government had to ensure that available grants reach the poor quickly and efficiently. According to the Malawi Economic Justice Network (MEJN), a coalition of 100 civil society organisations, the cash transfer programme is well targeted to make a difference to the population’s welfare.

"The scheme works better than the farm input subsidy programme, for example, which is also being implemented by government, where the poor get seed and fertiliser regardless of their ability to farm or not," said MEJN executive director Andrew Kumbatira.

Preliminary survey data on the social cash transfer scheme show that the money is being used wisely by recipients and invested in meeting people’s immediate, basic needs. The grant is spent on soap, food, education materials, healthcare, clothing, shelter, livestock, poultry, seeds and fertiliser. Some families even manage to make small savings.

By the end of 2008, 12,000 households and 40,000 children have benefited from the scheme. Government aims to increase the number of households accessing the scheme to 250,000 by 2015, and the number of children benefiting from it to 700,000.

Excerpt:

By Daniela Estrada
SANTIAGO, Feb 6 2009 (IPS)

Chile has set its sights on producing second-generation plant-based fuels from forest biomass within the next five years. But before that it must consider the environmental and socioeconomic impacts of such an endeavour, warn experts and activists.

Palownia tree shoot. Credit: Photo Stock

Biomass – renewable organic material from plants and animals – serves to generate electricity, for thermal energy production and the output of liquid fuels like bioethanol or biodiesel.

A law passed in April 2008 requires that as of 2010 at least five percent of Chile's electricity must come from non-conventional renewable sources, including biomass. Beginning in 2015, the proportion must increase 0.5 percent annually until reaching a full 10 percent in 2024.

Two consortiums were created in October for research and development of lignocellulosic biofuels, that is, fuels based on woody fibres.

The goal is to "surpass the expansion limits and the grave conflicts that the current crop-based fuels (made from foods like maize or sugarcane) can create," said Guilherme Schuetz, coordinator of the regional biofuels group of the United Nations Food and Agriculture Organisation (FAO).

Germany, United States and Sweden lead the world in researching these products in the laboratory or pilot project phase. In three to five years, Europe could be using second-generation biofuels on an important scale, "though some countries may be on the verge of doing so," Schuetz told Tierramérica.

The International Energy Agency estimates that production costs of second-generation bioethanol and biodiesel today run 80 cents to one dollar per litre.

That would be 100 to 130 dollars per 159-litre barrel, noted Schuetz – expensive given current petroleum prices. "However, those costs could be cut in half by 2030 if the new generation of biofuels is produced commercially," he said.

According to the 7th National Agricultural and Forestry Census 2006-2007, in Chile there are 15.8 million hectares used in farm production and 15.9 million hectares of forest: 2.7 million planted and 13.2 million of native forest.

"With the premise of reconciling agroforest production" for the domestic and foreign market, and "maintaining sustainable farming activity that is also sustainable over time, preserving water and soil," producing second-generation biofuels is "a viable option" for Chile, Iván Nazif, director of the governmental Office for Agrarian Policy and Research, said in a Tierramérica interview.

They would be generated from farming and forest waste and from plantations of poplar, paulownia and acacia trees or maiden grass. Also considered important sources are the microalgae found in northern Chile and the animal fats from livestock in the south, noted Schuetz.

But the species of fast-growing plants would be cultivated at high density so would quickly use up soil nutrients in addition to requiring a great deal of water, warns Daniela Escalona, of the non-governmental Latin American Observatory for Environmental Conflicts, and the Action Network for Social and Environmental Justice.

They also contain high caloric value and are the most appropriate for energy use.

According to Nazif, "the production of second generation biofuels necessarily should include the experience of the first generation fuels," which is why the market has been regulated and there are pilot experiments under way in some regions, mainly with biodiesel.

Second generation crop-based fuels "only bring good news" to a country with a consolidated forest industry, says Aldo Cerda, forestry expert with the Chile Foundation, a public-private institution dedicated to innovation and development of the country's human capital.

"We will have more demand for wood fibre, with benefits for all owners, and more demand for management of native forests," and the recovery of degraded areas, Cerda told Tierramérica. He believes the industry will have "sophisticated actors" who will work with certified plots to avoid criticism from the environmental sector.

The Chile Foundation is participating in Bioenercel, one of the two consortiums promoted by the government, along with the country's leading forestry companies – Masisa, CMPC and Arauco – and two public universities.

With a five-year budget of 10 million dollars, the consortium is developing protocols to produce "cheap and competitive" bioethanol.

However, activist Escalona expressed concern about the effects that these fuels would have on the environment and on the peasant and indigenous communities of Chile's forested regions.

For Schuetz, the risks "depend on the scale of production and the availability of raw materials," which is why he sees advantages in biodiesel made from agricultural and forestry waste.

"With respect to native forest, it is very important that legislation only permits using lignocellulosic waste that is obtained through forest maintenance," he stressed.

The loss of natural habitat as a result of monoculture and the possible spread of genetically modified trees with unknown impacts are other potential dangers to be studied, he said.

The country needs to "carefully weigh the pros and cons" of this activity, including "the balance of carbon dioxide throughout the cycle, the repercussions on biodiversity, the nutrient cycle of the soils and the hydrological cycle," as well as its socioeconomic impacts, said Schuetz.

(*This story was originally published by Latin American newspapers that are part of the Tierramérica network. Tierramérica is a specialised news service produced by IPS with the backing of the United Nations Development Programme, United Nations Environment Programme and the World Bank.)

Excerpt:

By Humberto Márquez
CARACAS, Dec 29 2008 (IPS)

The world’s most inexpensive gasoline is sold in Venezuela, through a longstanding subsidy programme that benefits car owners while depriving the oil industry of a large source of funds for reinvesting.

Credit: Fidel Márquez/IPS

For the past 10 years, gasoline has cost between three and four cents of a dollar per litre. Soft drinks cost 20 times more, a bottle of mineral water 25 times more, and an espresso in a local café 30 times more.

Customers often leave more in tips to service station attendants than what they actually pay in gas.

"Gasoline is practically given away here for free," said Finance Minister Alí Rodríguez, who has done stints as energy minister, secretary-general of the Organisation of Petroleum Exporting Countries (OPEC), and president of the state oil monopoly PDVSA.

"It is obscene to sell our gasoline this way. We might as well give it away!" President Hugo Chávez said in a January 2007 speech, when he ordered studies to be carried out into the possibility of raising domestic gas prices. However, such a move would be almost tantamount to political suicide in Venezuela.

PDVSA and the state heavily subsidise the price, mainly to the benefit of the owners of the four million private vehicles circulating in this country of 27 million.

"According to our numbers, Venezuela consumes nearly 750,000 barrels a day of liquid fuels, 70 percent of which is gasoline, and the difference between domestic prices and prices paid in net oil consumer countries will amount to 26 billion dollars this year," economist Asdrúbal Oliveros with Ecoanalítica, an economic consultancy in Caracas, told IPS.

If Venezuela were to sell fuel at cost on the domestic market, the subsidy would still total 17 billion dollars, said the analyst.

When the price of Venezuelan oil stood at 116 dollars a barrel in July, former Central Bank chief economist José Guerra estimated the annual subsidy at around 19 billion dollars. But by mid-December, the price of oil had plunged to 31 dollars a barrel.

According to official figures, the vehicles circulating in Venezuela consumed 400,000 barrels a day of gas and diesel, which meant a subsidy – based on the difference between domestic and export prices – of 12.5 billion dollars

It costs PDVSA two cents of a dollar to produce one litre of gas, which it sells domestically for three cents.

"By giving away more than 3,000 dollars a year away to every car driver, PDVSA has been left without money that could be reinvested with a view to improving the domestic system of fuel distribution, stimulating other sectors, or reducing the company’s debt," Ramón Espinasa, who was PDVSA chief economist from 1992 to 1999, told IPS.

And although Venezuela is a major oil exporter, it is facing growing purchases of oil derivatives, including 50,000 barrels a day of gasoline blending components, according to José Suárez Núñez, a veteran journalist who specialises in the oil economy.

PDVSA purchased 2.59 billion dollars in oil derivatives in 2006 and 4.03 billion in 2007, according to its reports.

The low price of gasoline "is essentially a regressive subsidy, because most of the fuel is consumed by private vehicles belonging to the middle and upper classes, while the poor use the deficient public transport system," said Espinasa.

"Eighty percent of the gasoline is used in private vehicles, which transport just 20 percent of the population, while 80 percent of citizens depend on public transport, which consumes 20 percent of the gasoline. It is a backwards case of Robin Hood," said economist José Luis Cordeiro.

High economic growth rates, low domestic gas prices and government incentives like the Family Vehicle Programme, which exempts certain cars from the value added tax, have fueled a buying spree of cars, with new records set each year since 2004, until reaching a total of 400,000 new cars sold in 2007.

However, restrictions on imports reduced sales to 252,000 cars between January and November 2008, according to the Venezuelan automotive industry chamber.

"Small service stations, on the other hand, are hurt because with these prices, the cash flow is small and it’s not worth investing in installations, we cannot seek large loans, and our employees are poorly paid," José Costa, the manager of a gas station in Caracas, commented to IPS.

Through its broad range of social programmes, the Venezuelan government has made public spending not only the engine of economic activity but of improved living standards as well, based on soaring oil prices. For that reason, it must feel the burden of the heavy subsidy for domestic gas prices, said Oliveros.

In the 1990s, a World Bank study on subsidies in Latin America showed that with the four billion dollars that the Venezuelan state shelled out to gasoline consumers, "41,000 primary schools or 7,000 secondary schools a year could be built," said Cordeiro.

PDVSA contributed nearly 14 billion dollars to the government’s social programmes in 2007, according to the company’s annual report.

The social programmes, or "missions", include literacy training, primary health care provided by Cuban doctors in the slums, food for the poor at subsidised prices, soup kitchens for low-income women and children, free eye operations, dental care, microbusiness loans, support for cooperatives, scholarships at all educational levels, and stipends for the unemployed who agree to take training courses.

According to the National Statistics Institute (INE), the poverty rate was reduced from 43.9 percent in 1998 – when Chávez was first elected – to 28.5 percent in 2007. And the Planning Ministry reports that the proportion of households under the poverty line has now shrunk to 23.4 percent, while the proportion of households in extreme poverty has dropped to nine percent.

But with the price of Venezuelan oil plunging to one-quarter of its high of over 120 dollars a barrel, the country will be hit hard by the current global crisis.

"The fiscal situation could become so critical that the government will turn to measures like devaluation, hiking taxes or increasing the price of gasoline. But what it is not likely to do is cut spending," said economist Emeterio Gómez.

Subsidies, whether direct or indirect, usually translate into a comparative advantage that boosts the industry’s competitiveness.

"But that is not the case in Venezuela, because the advantage of cheap gasoline is cancelled out by price controls on other products, exchange controls, traffic jams and the poor state of the roads," said Oliveros.

Because of the lack of road transport corridors, a truck hauling merchandise from the Colombian border in the west to industrial or consumption centres in eastern Venezuela must drive through Caracas and other large cities.

The low gas prices also stimulate contraband with Venezuela’s neighbours – Colombia, Brazil, and to a lesser extent, Guyana – estimated at 25,000 barrels of fuel a day by the Energy Ministry, which at an average price of 90 dollars a barrel in 2008 would represent 800 million dollars a year.

Investigative reports by the local press estimated that some 80,000 families in northeastern Colombia depend on smuggling of fuel for all or part of their income. The fuel is carried across the border in plastic containers and jugs on bicycle or by foot, or in trucks that form part of large-scale smuggling rings.

"The problem is the difference in prices, because fuel in Venezuela is 20 times cheaper (than in Colombia), and if this problem is not resolved, it will be impossible to combat smuggling," said Lino Iacampo, president of the association of gasoline distributors in the border state of Táchira.

"And people in Táchira are often angry because they can’t find gas, or because it is rationed out," he added.

In the United States, young people become independent when they move into their own place; in Venezuela, middle-class youngsters become independent when they get their own car, says Oliveros.

The cult of owning one’s own car has become so entrenched that municipal authorities in Caracas are requiring that in certain lanes during rush hour, each vehicle must carry at least one other person besides the driver.

During rush hour traffic jams, cars carrying an average of 1.2 people move at an average speed of five kilometres an hour.

But as Oliveros and other analysts point out, the lack of safety on buses, where there has been a rash of armed robberies, and in taxis has led people to desperately seek to purchase a car of their own.

Nearly all major arteries in Caracas are packed from dawn till late at night. Aliana Giménez, who lives in the commuter city of Guatire, east of the capital, told IPS that "my life has been reduced to sleeping on the bus, working, getting home, showering and changing my clothes, taking what amounts to a little nap at night, and setting out for Caracas again before the sun comes up."

Economists say the first step towards a solution could be gradually increasing gasoline prices to the halfway point between the domestic and export prices.

"But that measure would only work if economic policies are modified to keep inflation down; otherwise it would cause more problems," said Oliveros.

Venezuela has the highest inflation rate in the hemisphere: around 35 percent a year, and over 50 percent for foodstuffs, which in this country are transported mainly by road.

But in the past, gasoline price hikes have sparked severe social protests, the worst of which was the 1989 "Caracazo", in which hundreds of people were killed in the brutal crackdown by security forces.

In Venezuela, such a move could be extremely costly in terms of votes and support.

And Chávez – who has not touched the price of gasoline since he took office in 1999, and who has held elections of some kind nearly every year – may be planning an early 2009 referendum to seek a constitutional amendment that would make it possible for a president to run for indefinite reelection.

Excerpt:

By Marcela Valente
BUENOS AIRES, Nov 17 2008 (IPS)

Companies that produce and distribute liquefied petroleum gas (LPG) in Argentina are benefiting from large government subsidies aimed at bringing down the price of the fuel, which 40 percent of the population depends on for cooking and heating.

Woman carrying gas cylinder in Buenos Aires slum. Credit: Malena Bystrowicz/IPS.

"The supplier still sells me a 10-kg garrafa for 35 pesos (just over 10 dollars)," Norma Gutiérrez, who lives in Villa 31, a Buenos Aires slum neighbourhood, told IPS. "I told him that on TV they said the price had been lowered to 16 pesos (4.80 dollars), but no luck."

Gutiérrez runs a soup kitchen that serves lunch to 150 children a day. "I buy between two and three gas refills of the garrafa per week," she said, adding that she had no idea how to find a 16-peso refill.

That was the price set for sales of LPG to the public in an agreement reached on Sept. 19 by the Secretariat of Energy and companies that distribute the fuel, which in exchange are receiving hefty subsidies.

Consumer defence organisations estimate that the government will spend some 150 million dollars on subsidies to keep the price at 16 dollars a unit through late 2009. But the funds may not serve the stated purpose.

The agreement on keeping the price of gas cylinder refills stable was signed by the national government, the Argentine Federation of Municipalities (FAM), and the oil companies and other firms that produce, bottle and distribute LPG.

The FAM signed the pact with the aim of guaranteeing that the fuel was sold to the public at the agreed price. But most municipal governments do not have safe warehouses for storing the cylinders or trucks to distribute them in the poorest neighbourhoods in their districts.

The text of the agreement, which was seen by IPS, underscores that LPG "is a source of energy used by the lowest income sectors," and states that the aim of the new fund is "to subsidise household consumption of LPG" by keeping the price down.

As a result of the agreement, oil companies like the Spanish-Argentine firm Repsol-YPF, the U.S.-based ESSO, Brazil’s Petrobras and the BP-controlled Pan American Energy are selling LPG to the gas bottling plants at a price of 30 cents of a dollar for 10 kgs, while receiving a 1.60 dollar subsidy.

The bottling plant, which pays 30 cents of a dollar for 10 kgs, sells the cylinders to the distributors for 1.51 dollars, while receiving 1.66 dollars per cylinder in compensation from the government.

And the distributor, who pays five pesos per 10-kg cylinder, sells them to the retailer for 16 pesos.

But the price paid by consumers varies widely.

In this South American country, 40 percent of households use 10-kg LPG cylinders for cooking, heating and heating up water. In four northeastern provinces, where there are no natural gas pipelines, that proportion climbs to 100 percent.

Since 2001, the price of a 10-kg refill of an LPG cylinder has risen fourfold, while the price of natural gas piped directly into the home – the system used in middle and upper-income neighbourhoods – has been frozen since then by the government.

The gap between the price of piped natural gas and bottled LPG has grown, and by the middle of this year, studies showed that consumers of piped gas were paying seven to 10 times less than people who use cylinders, for an equivalent amount of fuel.

The studies also point out that a large proportion of the subsidies actually end up financing better-off sectors of the population, and that the difference in prices has aggravated inequalities.

In March, at the end of the southern hemisphere summer, when consumers who depend on gas cylinders began to worry about the rise in prices, the distributors of piped gas in Buenos Aires began to offer their wealthier clients special water heating deals to keep their swimming pools warm year-round at a low cost.

In September, the government authorised an increase in rates for customers with middle to high levels of gas consumption, and allowed oil companies to raise the wellhead price. It also signed the agreement for the drop in the price of gas cylinder refills.

The growing subsidies that the government has shelled out to the private sector in the energy, transportation and food industries since 2002 could total 35 billion pesos (10 billion dollars) this year, according to the EcoLatina consulting firm.

"It is doubtful how much of a redistributive impact the subsidies have had," according to the consultancy.

One of the frequent formulas used by the government to transfer public funds to the private sector is through fiduciary funds. Some 96 million pesos (equivalent to 96 million dollars at the time) were channeled through such funds in 2001, compared to six billion pesos (1.8 billion dollars) in 2007.

A portion of the funds raised through the rise in rates for piped gas that was authorised in September goes into the fiduciary fund for residential gas consumption, created to finance the expansion of the natural gas network and to compensate for the reduction in the price of gas cylinder refills that was agreed with the companies.

According to the national budget office’s mid-year report, the gas fiduciary fund should hold around 63 million dollars in 2009. But as a result of the price agreement, the total will be higher than that.

There are about 600 gas distributors around the country that sell gas refills to retailers for the agreed-on price of 16 pesos. But it is the tens of thousands of businesses that sell a total of four million 10-kg cylinders a month that have benefited from the reduction in price, rather than the consumers, Pedro Busetti, with the non-governmental consumer defence organisation Defensa de Usuarios y Consumidores (DEUCO), told IPS.

Furthermore, the price is double for home deliveries.

"The price of home deliveries is not regulated; it depends on the distances involved and other factors like safety levels" in the different neighbourhoods, Osvaldo Spanu of the Chamber of Liquefied Gas Distributors, which signed the price agreement, told IPS.

Spanu said the agreement established a mixed commission to monitor compliance with the 16-peso price. But a source with Enargas, the government gas regulatory agency, told IPS that the commission "is just now being set up."

Busetti said the gas subsidy "is not reaching those who need it the most."

"It only benefits the gas producers, who control the entire production chain, up to the distributors," Susana Andrada, with the Centro de Educación al Consumidor (CEC) consumer protection group, remarked to IPS. And the distributor itself raises the price when it delivers directly to people’s homes, she said.

In the province of Jujuy, at the extreme northwest tip of Argentina, Rosario Andrada with Warmi, an indigenous women’s organisation, told IPS that in the provincial capital, the price of the gas cylinder refill had dropped from 30 to 22 pesos, for customers who go to pick up the cylinder at the city government warehouse.

"For people who live in towns, it’s easier, because the municipal governments are having the cylinders trucked in, and some customers even go to pick them up by bicycle. But it’s harder to feel the benefits of the price agreement outside of the towns and cities, where gas cylinder refills still cost 32 pesos (10 dollars)," said the social activist.

In the northeastern province of Chaco, opposition legislators are demanding that the provincial government cover the cost of trucking in the cylinders, in order for consumers to benefit from the agreed price reduction negotiated by the central government.

A driver from Chaco, Juan Magallanes, told IPS that gas refills cost 33 pesos in his province. "Out at the YPF plant, you can get a cylinder for 16 pesos, but it’s located seven km from Resistencia," the provincial capital, he complained.

Excerpt:

By Zofeen Ebrahim
KARACHI, Oct 16 2008 (IPS)

As Pakistan’s food crisis deepens, with an estimated 60 million people facing food insecurity, the GCAP (Global Call to Action Against Poverty) plans to hold rallies through the weekend demanding ‘’public accountability’’ even for hunger and poverty alleviation initiatives.

A busy 'sasti roti' (subsidised bread) outlet in Lahore. Credit: Qaiser Khan/IPS

Even an initiative such as ‘sasti roti’ (cheap unleavened bread) being provided by the provincial government of Punjab is suspect. Questions are being asked about its sustainability on the one hand and, on the other, why it cannot be extended to provinces like Sindh.

Haris Gazdar, a Karachi-based economist, said: "We must know who is paying for it. Is it the government, farmers through lower procurement rate or other provinces through forced up market prices due to reduced supply from (largely farming) Punjab?"

"It is coming out from our own (provincial) budget. We are slashing down our non-developmental budget and the administrative expenditure significantly," said Sajjad Ahmed Bhutta, district coordination officer in Lahore, capital of the Punjab.

"Out of 5,000 tandoors (clay ovens) in Lahore, 3,200 are registered with the government’s scheme to sell the rotis at fixed rates,’’ said Bahadur Khan, president of the Nanbai (leavened bread-makers) Association of Lahore. The scheme has also been introduced in other big cities of the province including Rawalpindi, Faisalabad, Muzaffargarh, Sargodha, Liah, Dera Ghazi Khan, Bhakkar and a few others.

For its part the government is providing these tandoor shops with flour at a subsidised rate of Rs 250 (three US dollars) per kg when the same is selling in retail shops at Rs 333 (four dollars) per kg.

"But this solution can't go on indefinitely without fixing the local production problem which is in the hands of big feudals," said Najma Sadeque, a senior journalist and development expert. "It also means there was no major physical wheat shortage in the first place.’’

Many believe that it was the food crisis more than terrorism or anything else that proved to be former president Pervez Musharraf’s undoing at the February elections where irate voters trounced the party that backed him.

Musharraf appeared aware of the brewing crisis and, during the last two years of his nearly nine years in power, resorted to dishing out massive subsidies on wheat and other staples that economists say the country is still paying for.

Musharraf’s successor, President Asif Ali Zardari, is now trying his best to convince Pakistanis that his government is capable of steering the country out of the mess – mainly by seeking a bailout worth 10 billion dollars and stave off bankruptcy.

Zardari is pinning hopes on a meeting in Abu Dhabi, later this month or early next, of the ‘Friends of Pakistan,’ a consortium which includes the United Arab Emirates, China, Japan, the United States and Europe.

The World Bank has pledged 1.4 billion dollars in aid and the Asian Development Bank has already released 500 million dollars as the first tranche. And the U.S. has pledged to arrange, through the World Food Programme (WFP) and other U.N. agencies, approximately 11,000 metric tonnes of wheat for over 1.6 million Pakistanis, starting this month.

Zardari has unveiled his own subsidy scheme, a 450 million dollar fund to support the poor, called the Benazir Income Support Programme. According to Ali, if implemented in its true spirit, the scheme will benefit three million people (14 percent of the population in the low income group). "But only if it is carried out by people who are honest."

"It’s not that we lack resources; what we need is a strong political will to overcome our economic crisis," said Ali. Ali, who is campaign coordinator United Nations Millennium Development Goals (MDGs) in Pakistan, said hunger can adversely impact labour productivity, health, education and overall economic growth.

"Managing our resources astutely and working towards forming pro-people policies without corruption are the only way out of this mess."

Zardari, for his part, has promised "complete transparency" and said that the programme would be free of "political affiliations".

"For over a year we have been busy bickering over like whether Musharraf should or should not doff his uniform, the reinstatement of the chief justice and now parliament is busy with national security. No doubt it is a serious challenge but when will the common man’s plight be noticed?" asked Ali.

What is needed is ‘’public accountability, just governance, alleviation of poverty by providing education to all, food for all, environment-friendly initiatives to boost industry and agriculture, lowered spending on defence and also taking the nation into confidence when securing foreign loans,’’ argued Ali.

Excerpt:

By IPS Correspondents
NEW DELHI, Oct 13 2008 (IPS)

Participants at The Third India-Brazil-South Africa (IBSA) Business Forum 2008 came together here to debunk the belief that development of bio-fuels would invariably exacerbate global hunger. Conventional wisdom has it that increased production of bio-fuel – particularly ethanol – will invariably result in decreasing acreage for food grain production, rising food prices and a surge in hunger and malnutrition. Participants at the Forum – held in New Delhi during the lead-up to the third IBSA Summit – declared that this was not necessarily true.

"It’s not true that growing bio-fuels will force up food prices," argued Indian delegate Abhay Chaudhari, executive vice president of Praj Industries Limited. "Bio-ethanol production did not decrease at all in the past six months. Yet, food prices have come down. This is a clear indication that bio-fuel production and food prices are not correlated."

Less than three percent of world food grain production goes towards the production of ethanol and any minor change in this percentage cannot affect the production and prices of food grains, Chaudhari argued, adding that the recent surges in food prices have more to do with export controls than with any global downtrend in food production.

Countries like India are exhausting their foreign exchange reserves to import oil and petroleum products and thereby using up their capacity to invest in critical infrastructure – including energy and support for the rural sector. Chaudhari pointed out that Brazil – which embarked on a bio-fuel production programme more than three decades ago after the oil shocks of the mid 1970s – today has replaced 50 percent of petroleum products by bio-fuels.

"If we can do the same thing in India not only would our balance of payments improve radically, but our currency the rupee would stabilise to the benefit of the economy," Chaudhari asserted. This lesson he claimed is applicable for all developing countries crippled by the latest oil shock.

So why all the ruckus about bio-fuels? "Powerful commercial interests are involved," said Eduardo Leeao de Sousa, executive director of Brazil’s Uniao Da Industria De Cana-De-Acucar.

"We have reduced our dependence on petroleum by 50 percent by allocating just one percent of our arable land to the cultivation of bio-fuels," said de Sousa. While Brazil's thrust on bio-fuels began in the mid 1970s, food grain production has only increased and in the last 10 years it has doubled, according to the delegate from Brazil.

The total area devoted to sugarcane production for ethanol is only one per cent according to the Food and Agriculture Organisation (FAO), said de Sousa. Even in India there is sufficient surplus arable land to produce bio-fuels, asserted Syamal Gupta, Chairman of Tata International.

"The global energy market is full of competitive forces today and many interests want to prevent the rise of bio-fuels," claimed de Sousa. He said the three member countries of IBSA must come together to counter these ideas and force the Northern economies to allow the creation of a global market for bio-fuels. Powerful multinational companies and their national supporters are preventing the emergence of a global bio-fuels market like the one in hydrocarbons. The reason is that the hydrocarbons sector is dominated by the rich developed nations and their companies, according to de Sousa. "A global market for bio-fuels would catalyse bio-fuel production and usage globally," said de Sousa.

Gupta, who moderated the Forum, agreed that India and other developing countries had much to learn from Brazil in the area of bio-fuels. He announced that a team from India’s Confederation of Indian Industries (CII) would be formed to study ethanol technology, production and usage in Brazil.

De Sousa claimed that bio-fuels – especially those derived from sugarcane – – could not only help countries attain energy security but also help reduce emission of green house gasses, generate electricity, and ultimately aid in the democratisation of the rural masses.

One of the most astonishing revelations was that bagasse – the dry pulpy residue left after the extraction of juice from sugar case – was meeting all the electricity needs of Brazil’s sugar mills. Not only are these mills fully self sufficient in energy but have begun to supply electricity to the national power grid. By 2015, as much as 15 percent of Brazil’s electricity will be provided by the sugar mills.

The other remarkable development pioneered by Brazil is the ‘flexi-fuel’ vehicle which can use either ethanol or petrol or any combination of the two. While most ‘flexi-fuel’ vehicles can run on ethanol and petrol mixes from E10 (10 parts ethanol and 80 parts gasoline) to E85 (85 parts ethanol and 15 parts gasoline), Brazil’s ‘flexi-fuel’ cars can run on up to 100 percent ethanol. Today, more than 26 percent of Brazil’s light vehicles – cars and small commercial vehicles – use flexi-fuel engines.

The environmental and social impact of bio-fuels has also been radical. De Sousa claims that the greatest benefit of bio-fuels is the more than 90 percent reduction in green house gas emissions. It has been estimated that bio-fuels save about 25 million tonnes of carbon dioxide emissions in the city of Sao Paulo alone.

Sugarcane is the preferred source of bio-fuels in Brazil because it is presumed to be grown widely by all classes of farmers and is more energy efficient than other plants used for fuel. Corn – used widely in the U.S. for bio-fuel – yields only 4,000 litres of ethanol per hectare as compared to 7,000 litres per hectare in the case of sugarcane.

Chaudhari felt that India and South Africa had much to learn from Brazil. He criticised the Indian government for its inconsistent policies. India, however, had made some strides in this field by mandating a minimum of five percent ethanol with commercially marketed petrol. The aim was to increase the blend to 10 percent. South Africa – for the moment – had mandated only a 2 percent ethanol-gasoline blend.

The vital role of bio-fuel production was underscored by India, Brazil and South Africa assigning their senior most ministers to address the issue of joint co-operation on the issues surrounding bio-fuel production.

Miguel Jorge, Brazilian Minister for Foreign Trade, Industry and Development, observed that industries from all the three countries should draw up an objective and articulate strategy – taking advantage of their respective strengths – to further boost trilateral trade. Bio-fuels clearly would be an important component of trade and technology transfers for IBSA in the months and years to come.

Excerpt:

By IPS Correspondents
TAMPA, Florida, Oct 10 2008 (IPS)

If an experiment to plant sweet sorghum in rural Florida and convert it to fuel ethanol pans out, it could herald a fundamental change in how the U.S. and other countries create and use renewable bio-energy, researchers say.

Biofuels, like ethanol, are widely blamed for driving food prices higher, sparking food riots in many countries. At least 25 percent of the U.S. maize crop is diverted to biofuel, and extensive areas in Indonesia, Malaysia, China and Brazil are also devoted to growing fuel rather than food.

With sweet sorghum, however, only the stalks are used for biofuel production, while the grain is saved for food or livestock feed. It is not in high demand in the global food market, and thus has little impact on food prices and food security.

In August, Florida's first sustainable energy farm began operations in Destiny, located in the central-eastern part of the state. The Destiny Energy Farm is a collaborative effort involving companies, individuals and academic research institutions, ranging from the private consulting firm Green Technologies LLC to the University of Florida.

The farm's first agricultural experiment is the planting of sweet sorghum, a drought-resistant crop which somewhat resembles corn, and is often used in similar ways as is maize. The two most common byproducts of sweet sorghum are syrups and molasses.

"Ultimately, the goal is to get the maximum sugars out of the sweet sorghum and see if it's commercially viable for fuel ethanol," explained Ben Scheffres of Global Renewable Energy, the chief engineer of the project. "That's something that is applicable to people not just here in Florida but the United States and also the entire world."

Distilling sugar from sweet sorghum as a way to create fuel ethanol has been done before – but on much smaller scales.

Zane Helsel, a visiting professor at the University of Florida, has been involved with the Destiny Energy Farm since the early part of this year. "I check planting rates and such things as what kind of fertilisers need to be used and how low the seeds need to be planted," he said.

"The U.S. Department of Energy and the U.S. Agriculture Department have identified sweet sorghum as some of the easiest crops used to produce ethanol but, locally, very, very little research had been done with sweet sorghum in central Florida and we really had to do our work," he told IPS.

Dr. Amir Varshovi, president of Green Technologies, said, "Our focus is to be able to supply renewable energy sources for these [sweet sorghum] crops. We give them some of our expertise about agronomic issues, such as when you want to produce crops for food, rather than fuel."

Although future experimental crops at the Destiny Energy Farm will include algae and jatropha, which produces an oily nut, the sweet sorghum crop experiment is now the agricultural engineers' primary focus. The idea is to make the Destiny Energy Farm totally sustainable. For example, farm equipment engines used at the site could be lubricated from the oil of the jatropha nut.

Eight different varieties of sweet sorghum have been planted, so harvesting happens at different times of the year.

"We've done sampling, once the sweet sorghum is mature enough, of the sugar in the plant's stalk. So we've harvested some of it already. The varieties of the sweet sorghum mature at different levels," said Scheffres.

"When you have a 365-day growing season, which we pretty much have here in Florida, it gives you more opportunities and time to experiment with sweet sorghum," explained Helsel. "What makes sweet sorghum viable for the Energy Farm is that it rations, which means that when you cut it off, it grows from new stems from the base of the plant."

The main problem for the Destiny Energy Farm has been the lengthy bureaucratic process of getting the project green-lighted. Eventually, developers plan to build the nation's first prototype "eco-sustainable" city there, with biking and hiking paths, clean renewable energy sources, and a minimal impact on the environment.

"Our land [the 41,300 acres owned by Destiny in central Florida] is set aside primarily for preservation and also sustainable agriculture and development," said Roz Gatewood, vice president for business development at Destiny.

"The entitlement process wouldn't be completed until 2011 – that's when all of the different state and federal government agencies would approve it," she said. "As some business owners are interested in bringing their production plants here, we need to keep these owners interested in the energy farm and to make sure that they are continually informed about what we're doing at the farm."

Both presidential candidates have publicly extolled the virtues of eco-friendly crops to help the United States wean itself from imported oil, but Scheffres believes that the work being done here on different types of clean energy technologies will continue regardless of who is elected next month.

"Part of the reason for the talk about all of this, I'm sure, is due to the presidential election," admitted Scheffres, "but the price of fuel gets people started on the topic and that's something that people all over the world have in common."

Excerpt:

By Bankole Thompson
GRAND RAPIDS, Michigan, Oct 3 2008 (IPS)

Democratic presidential nominee Sen. Barack Obama sat down with IPS correspondent Bankole Thompson again on Thursday for a one-on-one interview in Grand Rapids, Michigan, where over 15,000 enthusiastic Obama supporters turned out to hear his message of change at downtown's Calder Plaza.

Sen. Barack Obama Credit: Bankole Thompson/IPS

Obama answered questions ranging from what U.S. relations would be like with Pakistan if he wins the White House, to how Washington could re-engage with Latin America as China's influence also grows in that part of the world, cutting the massive subsidies for big oil companies like ExxonMobil, and increasing U.S. foreign aid to bolster the floundering U.N. Millennium Development Goals (MDGs).

IPS: There are supposed to be built-in-protections for the middle class and poor in the bailout of Wall Street. How would a Barack Obama administration ensure that those protections are maintained?

BO: What I've done is written into the legislation, that there is going to be an independent oversight board to monitor what the Treasury is doing. We have legislation that says that the money from the sale of assets that are purchased all goes back into reducing the national debt so that taxpayers are getting their money back.

But it's going to require that the next administration is diligent about these protections and it's going to be very important that the next administration does everything it can to strengthen the underlying housing market and to prevent the foreclosures that have been devastating in so many communities, particularly in the African American and Hispanic communities.

IPS: You talk about oil companies a lot. What about the 20 to 40 billion dollars they get from the U.S. government in subsidies every year? Under an Obama administration, would that be eliminated or cut to invest in alternative energy?

BO: Well, I think there is no doubt that we should not be giving them tax breaks when they are making 12 billion dollars a quarter. You've had three consecutive quarters now where ExxonMobil made almost 12 billion dollars a quarter and the notion that they need subsidies makes no sense. And so we would, I think, be trying as part of a comprehensive energy plan to make sure that those subsidies are shifted to alternative fuels like solar and wind, biodiesel that can be so important to our long-term energy future.

IPS: Would the United States under an Obama administration increase foreign aid given the importance of achieving the U.N. Millennium Development Goals to ease global poverty?

BO: Well, I have said that I think it is important for us to increase foreign aid. Now I have to say that my plans were structured prior to this recent financial crisis. So we are going to have to see what is possible in next year's budget. I can make an assurance that we will not cut foreign aid, that we will increase it. We may not be able to increase it as quickly or by as much that I wanted to do when I put my plans together last year.

IPS: You've said China is engaged with South America and the United States is absent. What would your administration do?

BO: Well, I think it is a matter of reaching out to these countries and asking, how can we not only work with them around critical issues like anti-drug efforts, cracking down on criminal gangs; I think we also have to be thinking, how do we help these countries that still have millions of poor people in them? Provide job opportunities and growth opportunities. And part of that is trade structured not just for corporations but for workers. Part of it is basic infrastructure, public health infrastructure, educational infrastructure. That makes a huge difference.

IPS: Switching quickly to labour. You've talked about the North American Free Trade Agreement (NAFTA) and that there will be some modifications when your administration takes over. What about the Central American Free Trade Agreement (CAFTA)?

BO: I think any of our trade agreements has to have strong labour provisions, strong environmental protections and we have to enforce it. We have not been good at enforcing our agreements. That's something that is going to change in my administration.

IPS: How do you intend to address the repercussions of the Wall Street bailout on Mexico's economy, since the two economies are tied together?

BO: Well, I think it's not just Mexico. The entire world economy is now tied together. Europe is now seeing huge problems similar to what we've been seeing on Wall Street. So that's why it is important for us to coordinate with the G-20 countries [a bloc of developing nations] to do everything we can to make sure that when we have regulations in place here, that they are mirrored overseas that there is just one system of rules that all of global capital has to play by.

IPS: Pakistan has been in the news a lot, and it came up in your Sep. 26 debate on foreign policy. Under your administration, what would the relationship be between Washington and Pakistan, in light of the fact that a lot of U.S. tax dollars are going there?

BO: Well, Pakistan is a difficult problem. You've got a fragile democracy after years of military rule. These hills and mountains of Pakistan where the Taliban and al Qaeda have made base camps are very difficult to access. I think Pakistanis are worried that if they go after them too hard that they would see more of the bombings like they saw at the Marriott Hotel.

So what we are going to have to do is to work diligently with them, explaining, "We would continue to provide you support and aid but you have to take this issue of terrorism much more seriously than you are taking it right now." And in fact conditioning it on their willingness to cooperate and hunting down those who killed 3,000 Americans [on 9/11].

*NOT FOR PUBLICATION IN ITALY

Excerpt:

By Stephen Leahy
UXBRIDGE, Canada, Sep 30 2008 (IPS)

Why do U.S. oil companies – some of the most profitable corporations on the planet – receive 20 to 40 billion dollars a year in subsidies from the U.S. government?

'US taxes on a gallon of gasoline are 45 cents compared to four dollars in most of Europe.' Credit: Steve Leahy/IPS

"Those are very good questions," said Doug Koplow of Earth Track, Inc., an independent energy information research organisation in Boston, Massachusetts.

"I don't have a good answer other than to say we've been subsidising American oil companies since 1918," Koplow told IPS.

Koplow's 2007 report to the Organisation for Economic Cooperation and Development puts the annual U.S. subsidy at an average of 39 billion dollars a year, when the costs of guarding oil lanes in the Persian/Arab Gulf, and the Alaska Pipeline are included. This does not include any costs from the Iraq war.

Official U.S. government statistics from the Energy Information Administration (EIA) offer a different picture, stating that the oil and gas industry only received 2.15 billion dollars in 2007.

"The EIA has a very narrow definition of what constitutes a subsidy," said Koplow.

Like many industrialised countries, the U.S. subsidises oil production, not oil consumption. Consumption subsidies reduce the cost of buying fuel to the public while production subsidies reduce the cost of finding and producing oil for oil companies.

Experts agree that both forms of subsidies encourage consumption and thus increase the price of oil.

Estimating U.S. oil and gas subsidies is very challenging. Subsidies rarely involve cash payments. Instead scores of U.S. government agencies and departments create hundreds of programmes to support the U.S. energy sector. And there is no requirement for the federal government to keep track of all this.

Among the most common subsidies are construction bonds and research-and-development programmes at low interest rates or tax-free, assuming the legal risks of exploration and development in a company's stead and income tax breaks. Despite record high prices at the pump, the federal sales tax on petroleum products is lower than average sales tax rates for other goods. And on it goes.

Originally these production subsidies were intended to help the nascent industry meet a growing nation's energy needs. Despite record-high prices, that rationale remains firmly in place. In 2007, U.S. oil giant Exxon corporation made history with 40.7 billion dollars in profits, the most any U.S. company has ever achieved in a single year.

And subsidy programmes from 1918 are still in place.

"I'm not aware of any oil and gas subsidy that has ever been phased out," said Koplow, the leading expert on U.S. energy subsidies.

Energy subsidies are often simply hidden from public scrutiny. It's only recently been revealed that 40 companies granted leases between 1996 and 2000 for drilling in the Gulf of Mexico do not have to pay royalties for the publicly-owned resource. This is worth nearly a billion dollars a year in lost revenue to the federal government, according to a 2008 study by Friends of the Earth (FOE), a U.S. environmental NGO, and may ultimately total 50 billion dollars.

That study also revealed that the Energy Policy Act of 2005 would generate an additional 32.9 billion dollars in new subsidies in the form of tax breaks, reduced royalty payments, and accounting gimmicks over a five-year period.

"The report only includes the explicit subsidies we could find," said Erich Pica, an energy analyst at FOE.

"There are a whole lot of others out there that are less explicit," Pica told IPS.

U.S. businesses, for example, can deduct far more from their taxes on the purchase of a large SUV than they can for a fuel-efficient vehicle. "Every dollar spent subsidising oil companies is a dollar not spent on reducing oil use," he said.

These production subsidies do nothing to lower the price of petrol at the pump for U.S. consumers. It simply boosts companies' bottom line, Pica said.

Skyrocketing oil company profits and prices did put some pressure on the U.S. government to cut some subsidies and shift them to renewable energy sources which currently receive very little support. However, the much-touted 14-billion-dollar plan announced in January 2007 has stalled and is unlikely to pass this year, if ever, said Pica.

"It's outrageous that the big five oil companies who made 123 billion dollars in profit last year [ExxonMobil, Royal Dutch Shell, BP, ConocoPhillips, Chevron Texaco]continue to be subsidised by the U.S. taxpayer," he said.

The United States is a great place to be in the oil business. Energy analysts report that the U.S. government charges some of the lowest royalties and receives the least amount of taxes from oil and gas companies to extract a limited resource from public lands.

"U.S. taxes on a gallon of gasoline are 45 cents compared to four dollars in most of Europe," said Janet Larsen, director of research at the Earth Policy Institute, a U.S. NGO based in Washington.

"It's very easy to be in the oil business in the U.S. companies can drill wherever they want and make enormous profits, a lot of which is at the expense of taxpayers," Larsen said in an interview.

And the public is largely none the wiser, she said.

This massive government intervention distorts energy markets, making it very difficult for alternative energy sources to compete without similarly massive subsidies. "And it promotes America's addiction to oil," Larsen added.

While reducing consumption subsidies results in people taking to the streets in India, merely talking about reducing U.S. production subsidies brings floods of silk-suited corporate lobbyists into the White House. And they are welcomed since the oil and gas industry is now a part of the current government, she said.

The energy sector's control of the government is the strongest and clearest evidence of the corruption of the U.S. political process, said award-winning journalist and author Ross Gelbspan.

"The private sector is manipulating the government for its own ends," Gelbspan, author of books on the energy sector's influence over government, told IPS.

Meanwhile the U.S. government said it cannot afford to invest 200 billion dollars in clean energy over the next few years. That investment would be enough to "jumpstart" the clean energy revolution that would see the U.S. able to dramatically reduce its emissions of carbon from fossil fuels, Gelbspan said.

The pace of global warming is already moving into overdrive and will become catastrophic without urgent action to reduce emissions. But action will not come from the White House, no matter who is charge, he lamented.

"We have taken the typical developing country corruption scandal to new heights in this country," he concluded.

Excerpt:

By IPS Correspondents
PENANG, Malaysia, Sep 26 2008 (IPS)

Who will foot the bill for the Murum resettlement? ''Is it Sarawak Energy or will it be passed on directly to the state government and hence the tax payer,'' asked one Sarawak-based activist, who declined to be identified.

By end-2007, Sarawak Hidro, the Bakun Dam developer, had outstanding borrowings of 1 billion dollars from a state-managed workers' pension fund and pension trust fund. Credit: Raymond Abin/IPS

Sarawak Energy Berhad (SEB), which is 65 percent owned by the Sarawak state government, will fund the dam. It was reported in June that SEB would issue bonds to finance the project.

SEB has been in negotiations with infrastructure firm Cahaya Mata Sarawak (CMS) and the multi-national Rio Tinto Alcan to supply 900-1,200MW of electricity to power a huge smelter. A power purchase agreement was supposed to have been signed by Aug 31, and there has been no news since.

Both CMS and Rio Tinto are in a consortium, the Sarawak Aluminium Company (Salco), to build the 2 billion dollar aluminium smelter with an initial annual capacity of 550,000 tonnes, which could later be expanded to 1.5 million tonnes. The smelter is located in the Similajau area of Sarawak, not far from the proposed Murum and Bakun dams.

CMS, a listed infrastructure firm controlled by Sarawak Chief Minister Taib Mahmud's family, is a major producer and supplier of steel, cement and other construction materials in the state. Taib has been chief minister of Sarawak for more than 20 years.

According to the firm's 2007 Annual Report, the substantial shareholders of CMS are the chief minister’s daughters Jamilah Hamidah and Hanifah Hajar, son-in-law Syed Ahmad Alwee Alsree, and family concern Majaharta Sdn Bhd, each with a 14 percent stake. Taib's wife Lejla has an 11 percent stake while sons Sulaiman Abdul Rahman and Mahmud Abu Bekir own 9 percent each.

Taib’s brother-in-law, Aziz Husain, on the other hand, happens to be managing director of SEB. Rio Tinto Alcan, which has a 60 percent stake in Salco, owns bauxite mines, alumina refineries and aluminium smelters around the world.

Sarawak plans to lure such energy-hungry industries by providing an abundant supply of cheap electricity within the 320-km long Sarawak Corridor of Renewable Energy (Score), an economic development region, managed by the state, where abundant power would be supplied to energy-intensive private industries. Score, launched by Malaysian Prime Minister Abdullah Badawi in February 2008, aims to tap into the state's 20,000 Mw hydropower potential by building even more dams in the longer term.

Sarawak's current installed capacity is just 980 Mw, adequate for its current needs of about 750 Mw, but it aims to expand its hydro capacity to 7,000 Mw or more over the longer term by building a string of dams along the various rivers in the state.

While smelters could create jobs and contribute to GDP, the funding for the dams required to supply cheap electricity will have to be raised by the state or borrowed from public pension funds (as in the case of Bakun). And while indigenous communities are displaced, many foreign workers will have to be brought in for the construction of the dams. And then there are the environmental costs.

''Will that justify building Murum at a probable estimated cost of 3 billion ringgit, with likely cost overruns to 5 billion ringgits (1.5 billion dollars)?'' asked a Sarawak-based academic, who declined to be identified.

In the case of Bakun, ''cost over-runs of 708 million ringgit (207 million dollars) were approved by the Finance Ministry even though the contract was for a fixed lump sum with all risks to be borne by the main contractor (a consortium of private Malaysian companies and China interests),'' chided the Auditor General in his report.

Sarawak Hidro, the Bakun Dam developer, has outstanding borrowings (as at end-2007) of 3.4 billion ringgit (1 billion dollars). It had received 3 billion ringgit (0.9 billion dollars) from a state-managed workers' pension fund known as the Employees' Provident Fund (EPF) in 2007 and 0.4 billion ringgit (0.1 billion dollars) from a state-owned pension trust fund in 2002. The EPF loan is guaranteed by the federal government. The federal government had also allocated 1.8 billion ringgit (0.5 billion dollars) for the project between 1997 and 2004. Sarawak Hidro has already spent 4 billion ringgit (1.2 billion dollars) on the project.

So is Murum really necessary? ''For energy needs in Sarawak, we don't need the Murum, because Bakun is more than enough to supply the state's needs,'' says Raymond Abin of the Borneo Resource Institute (Brimas). ''Of course, (much of) this will not go to the really rural areas but will supply industry's needs."

"The impression among many sceptics is that these are all self-serving projects," said another senior academic in a Sarawak-based university, carefully weighing his words while requesting anonymity.

All these funds are not helping the most affected communities like the Penan. ''This is not development for the Penan. This is not assisting the Penan,'' says Weng, a Penan whose home will be submerged. ''This is killing the Penan. As our old headman said before, better bomb us now than 'kill' us slowly!''

(*This is the second of a two-part feature on a dam in power surplus Sarawak that is being built with public funds for private gain.)

Excerpt:

By IPS Correspondents
PENANG, Malaysia, Sep 26 2008 (IPS)

Preliminary work on a 3 billion ringgit (875 million dollar) dam in Murum in the north Borneo state of Sarawak has put the spotlight on a controversial scheme to build a string of public-funded dams to provide cheap electricity for energy-intensive industries to the state.

The proposed Murum Dam is just 60 km upstream from the 2,400 Mw Bakun Dam (in the picture.) Credit: Raymond Abin/IPS

But while private firms may benefit from the dam construction work and cheap electricity, critics argue that the human cost, the financial burden and risk to the state and the public, and the environmental cost could be too high.

Sarawak Energy Berhad (SEB), 65 percent owned by the Sarawak state, officially informed the Malaysian stock exchange on Sep. 2 that the Murum Dam project had been awarded to China’s Three Gorges Project Corporation, which reportedly submitted the lowest bid among eight companies.

SEB also told the Malaysian stock exchange the same day that a ''detailed Environmental Impact Assessment has been submitted to the relevant authorities for final approval'' – which means that the project was awarded before the final approval of the detailed EIA was obtained.

While the state is using its resources to build the dams, about a thousand indigenous folk in the Murum Dam catchment area will lose their homeland. Most of these are Penan, amongst the last of the world’s hunter-gatherers, living near the Murum, Plieran and Danum rivers and tributaries.

Weng, a Penan, whose longhouse, traditional wooden houses, and ancestral land will be flooded, laments: ''The good things we ask for, they (the government) do not give. We ask for schools, clinics, but till now we have yet to see them. What we don't want, what is bad for us, that they provide – logging, oil palm plantations, acacia plantations …''

The haste to commence work on the dam leaves activists worried that there might not be proper consultation and inadequate work on the resettlement of one of the most marginalised and disenfranchised peoples in the country.

The experience of the problem-ridden 2,400 Mw Bakun Dam, whose reservoir area will cover 695 sq km, is hardly inspiring. The 8 billion ringgit (2.3 billion dollar) Bakun Dam is expected to be completed in June 2010 and start generating power in 2012.

Some 11,000 indigenous people – mainly Kenyah, Kayan, Lahanan, Ukit and Penan – were displaced and just over 9,000 of them were transferred to a resettlement scheme in Asap River from 1997. A delegation from the Malaysian Human Rights Commission, visiting the area in 2006, found shoddy housing, poor drainage and roads, delays and disputes in the compensation payment.

Critics point out that a large portion of the dams' catchment areas has already been degraded by massive plantation developments.

"The whole Bakun catchment is being destroyed by logging and plantation," points out Raymond Abin, programme development officer at the Borneo Resources Institute (Brimas), a group working closely with indigenous communities to monitor environmental and development issues. Forests have been logged to plant oil palm, pulp and wood tree plantations.

Moreover, the Murum Dam, just 60 km upstream from Bakun, lies in one of the three main catchment areas for Bakun.

''Has any work been done on cumulative impacts? How will all this affect the micro-climate or local climate, the hydrological regimes, the animal life of the area, already much devastated by the logging and plantation development?'' asked a Sarawak-based academic, who declined to be named.

''Indeed, how will Murum affect Bakun? Doesn't the public deserve to know the results of these cumulative impact assessments?'' the academic added.

The plan for the Murum Dam comes at a time when uncertainty hangs over what to do with all the electricity to be generated from the 205-metre high Bakun Dam. The original plan was to transmit the electricity via cables under the South China Sea to the peninsula, making it the world's longest undersea electricity transmission. But in 2001, the plan was changed to confine the supply to Sarawak and neighbouring Sabah state.

In 2005, however, the government decided it would not be cost effective to transmit electricity to Sabah because of the distance. The Cabinet decided the following year to once again channel Bakun's electricity to the peninsula even though the peninsula currently has a comfortable reserve capacity.

SEB entered into a "heads of agreement" this May to supply 3,000 Mw of electricity to national electricity corporation Tenaga Nasional Bhd in the peninsula from 2017 and another 5,000 Mw from 2021.

But these plans were thrown into uncertainty after Sime Darby, a government-linked corporation, worried about the plan's viability, pulled out in August from an understanding to lead the laying of 15 billion ringgit (4.4 billion dollar) undersea cables.

The electricity from the Bakun Dam will now be channelled to the aluminium smelter plants until the Murum Dam is ready, the Sarawak Energy managing director said in June. If and when the submarine cables are laid in the South China Sea, the electricity from Bakun would then be channelled to the peninsula.

(*This is the first of a two-part feature on a dam in power surplus Sarawak that is being built with public funds for private gain.)

Excerpt:

By IPS Correspondents
WASHINGTON, Aug 26 2008 (IPS)

U.S. taxpayers shell out 20 billion dollars a year to pad business chiefs' earnings and to prop up the world's most lopsided corporate pay scales, say activists seeking to highlight inequality in this election year.

Various tax and accounting loopholes encourage excessive executive pay and serve to allow company chiefs to pay taxes at lower rates than their employees, the groups Institute for Policy Studies and United for a Fair Economy said on Monday. Taxpayers foot the bill in the form of forgone public revenues, they added in a report.

''It's outrageous that our tax dollars are inflating executive pay cheques,'' said Sarah Anderson, an author of the annual "Executive Excess" report. ''Surely in these troubled economic times we can find better ways to spend our nation's wealth.''

The U.S. government misses out on 10 billion dollars a year in estimated revenues because current rules allow firms paying executives stock options to deduct more than their actual expenses, the report said.

It cited the example of United Health Group, which it said paid its chief executive, William McGuire, nine million stock options. The company claimed a tax deduction of 317.7 million dollars for the compensation even as it issued financial statements suggesting the arrangement had cost it nothing, according to the report, which drew its information from official sources and media reports.

Other loopholes unavailable to ordinary taxpayers allow executives to defer unlimited amounts of pay, to move earnings to offshore tax havens, and to stash unlimited sums in tax-deferred retirement accounts, according to the report.

It urged politicians to close all the loopholes and to change labour laws to make it easier for workers to bargain collectively for better wages.

Senators John McCain and Barack Obama have incorporated tirades against corporate excess into their respective campaigns for the U.S. presidency. Neither candidate has endorsed the sweeping changes favoured by the report's authors.

"The bipartisan attacks on runaway pay are encouraging but if the candidates are serious about change, they should vow to plug every single loophole that allows our tax dollars to flow into the pockets of top business leaders," said Anderson.

The report was timed to coincide with Monday's opening of the Democratic National Convention and to precede next week's Labour Day holiday and Republican National Convention.

Large U.S. firms paid their chief executive officers (CEOs) an average of 10.5 million dollars in salary, stock options, incentives, and bonuses last year – 344 times what the average worker earned. The report said this disparity likely would worsen because job growth is mainly concentrated in industries with the widest pay gaps.

The United States has long had the industrialised world's widest pay gaps. CEO compensation swelled from 85 times what workers earned in 1990, to 209 times in 1996 and 419 times in 1999, according to the government's Bureau of Labour Statistics. It peaked in 2001, at 525 times workers' average earnings.

Comparable figures for other wealthy nations generally did not exceed the double digits.

CEO pay growth often bears little resemblance to firms' performance. U.S. bosses' pay rose 313 percent from 1990 to 2003. By contrast, the Standard & Poor's 500 stock index rose 242 percent and corporate profits gained 128 percent.

During the same period, average worker pay rose 49 percent while inflation climbed 41 percent.

Often, the largest increases in pay have gone to CEOs whose companies have laid off the most workers or made the deepest cuts in workers' pensions, moves designed to boost financial statements and the price of stock, according to previous editions of the "Executive Excess" report, now in its 15th year.

These trends, and a series of corporate financial scandals dating back to around 2000, have motivated investors, regulators, and their political overseers to focus their attention on corporate pay.

Labour union-sponsored pension plans and other investors have launched scores of shareholder proposals seeking to moderate or regulate CEO pay. Dozens of these have won majority support. Although shareholder resolutions usually are non-binding, those that win majority backing have been virtually impossible for companies to disregard.

Even so, presidential and legislative candidates have sought to harness public discontent over CEO pay in the run up to November's general election. Both McCain and Obama have talked up measures that would increase shareholders' say over bosses' pay.

However, bills designed to close the loopholes identified in Monday's report have stalled in Congress. The report blamed this on pressure from corporate lobbies.

Excerpt:

Nguyen Van Minh has just delivered a consignment of apples from China in his modified Hyundai at Long Bien market where, each night, hundreds of trucks pull up laden with fruits and vegetables from distant provinces and neighbouring countries.

Xe Om (motorbike taxi) drivers await custom in Hanoi. Credit: Matt Bennett/IPS

“I spent VND 200,000 (12 US dollars) more than I used to, before last week’s fuel price hike, to get this load here,’’ he told IPS between drags on his cigarette. “Transport is so hard, and for so little profit. My truck is supposed to carry 3.5 tonnes, but I took 11. It’s illegal, but I have to do it.”

Unable to sustain subsidies on imported fuel, Vietnam’s communist government, on Jul. 22, suddenly raised domestic prices by 36 percent hitting ordinary people like Van Minh hard.

Only in March the government had frozen fuel prices along with nine other ‘essential’ commodities like cement, steel, school and hospital bills, water, electricity and coal. And early July there was an official promise that prices of petrol and diesel would not be disturbed until the end of the year.

Vietnam has now become the seventh Asian country, after China, India, Indonesia, Malaysia, Bangladesh and Sri Lanka, to cut fuel subsidies as response to rising fuel prices.

While long-term consequences are yet to be assessed, a report by the Asian Development Bank, coinciding with the fuel hike, cut growth estimation for 2008 to 6.5 percent, down from its April prediction of seven percent.

Inflation first hit double digits last November and as of July topped 27 percent, the highest it has been since the early 1990s, during a period of economic upheaval.

Not everything is negative though. In March, the international food crisis helped double the price of Vietnam’s rice exports, driving it up to 700 dollars per tonne. Prime Minister Nguyen Tan Dung had to cap exports to stabilise domestic supply, but prices stayed high and moved into non-food areas.

Although there have been no recent rises in food prices many believe that last week’s fuel prices will have a cascading effect on all goods in a matter of weeks, if not months.

It is estimated that the government may have to cover a loss of 3.2 billion dollars in subsidies this year, despite the fuel retail price hike, if world crude prices continue to stay around 145 dollars per barrel.

Vietnam, though a crude oil exporter, relies almost entirely on imports for its petroleum product needs as it lacks refining capacity. In the first half of this year the country spent nearly six billion dollars for imported fuel as crude oil prices soared to a record high of over 147 dollars per barrel on Jul. 11.

“When international oil prices are so high, the principle of community responsibility must be implemented to share the hardship between the government, organisations and consumers,” a finance ministry statement said, soon after the new retail prices were announced.

But that dictum is no consolation for truckers like Van Minh who must now cope with a 14.3 percent rise in diesel prices to VND 15,950 (97 cents) per litre.

With petrol prices up by 31 percent, and a litre of 92-octane selling at VND 19,000 (1.13 dollars) Hanoi’s taxi drivers are drinking, but not on the job. Many are sitting around in bia hois (local restaurants serving cheap Vietnamese beer) because they can no longer afford to go to work.

Several taxi companies have increased fares to offset the rapid rise in fuel costs, charging up to 30 percent more per km.

Self-employed cab drivers are not so lucky. “I really don’t want to work now,” cabbie Nguyen Thanh told IPS. Some drivers claim they were making up to VND 200,000 (12 dollars) a day before last Tuesday’s spike, after fuel and company car hire costs. Now they feel lucky to make even a third of that.

According to local media many people are opting for bus travel over motorbikes (the most common form of personal transport) since the fares have not gone up yet. The department of transport in Ho Chi Minh City reported a 20 percent increase in service use and subsidies have been approved to keep ticket prices stable.

Unlike bus companies and the luckier cab drivers, self employed delivery drivers and the country’s ubiquitous xe om drivers (motorcycle taxi drivers) enjoy no subsidies and little support.

Many are getting through with a grudging stoicism learned in leaner years. “We’ve suffered a lot through the war years and later. This is not as bad,’’ says Vu Cau Cuong, a xe om driver parked by Hoan Kiem lake in the city’s centre.

On Tuesday, car registration taxes were upped from five percent to 15 percent, as part of an effort to keep fuel consumption low. Though a motorcycle nation, cars are increasingly common in Vietnam, even if unaffordable for most.

There are reports of a widespread return to Vietnam’s traditional means of personal transport – the humble bicycle.

Hanoi’s bicycles were last in the news, earlier this year, when the trendy next generation were turning out on BMX-style bicycles embellished with flashing lights, tinny speakers playing techno, personalised number-plates and even giant toys tied to handlebars.

The trend finished some months ago and few expected a second, less colourful revival of the bicycle.