By Sonny Atumah

As we continue our discourse on subsidy from last week, let us examine the international geopolitics of subsidies. The greatest subsidisers of energy are the greatest consumers; the United States and China. They both spend about $3 trillion annually on subsidies for their people.

Global geopolitics of subsidy is now baited for international climate negotiations. Western nations now encourage us to abandon subsidies because of carbon dioxide and other greenhouse gases they emit that are linked to climate change. The discourse now is the reduction of fossil fuel which for a long time had been the world’s largest source of electricity for renewable energy.

The International Energy Agency (IEA) reports that by 2030, renewable energy could become the world’s largest source of electricity ahead of known conventional sources of coal, natural gas and nuclear power. Arguments are that energy source would reduce global greenhouse gas emissions which would soon peak with dangerous consequences.

The Conference of the Parties to the UN global treaty on climate change slated for December 2015 in Paris would give countries the opportunity to submit their Individual Nationally Determined Contributions (INDCs). The US plans to cut greenhouse emissions by 26 to 28 percent below the 2005 levels by 2030 while the EU plans to cut by 40 percent of its1990 levels. China plans to start bringing down its carbon dioxide emissions by 2030.

They advise us to jettison subsidies using economic theorems that are provable from axioms; that money saved from subsidy removal could be channelled into infrastructure as education and health for the good of the people. Call it logic; subsidy is also for the good of the people.

Their new technologies developed result in new products and energy sources including renewable energy that are rendering liquid fossil fuel useless. OPEC members’ (including Nigeria) survivals are being threatened. The whole essence is that our liquid fossil fuel would soon become a commodity like coal which for centuries was a priceless resource for energy would become a worthless energy resource at the end of the 21st century.

What has now become shale revolution has dealt a big blow on countries like Nigeria as a crude oil exporting nation. This new technology is a result of the 40-year old research of America in response to the Arab Oil embargo on America and its allies in the Arab – Israeli War of 1973. The United States is now taking full control the oil market supply and price, and with their strong currency for now we are out for a raw deal.

The same countries that discourage fossil fuel subsidies offer consumer subsidies to purchasers of hybrid and electric cars. Automobile companies like GM, Ford and Chrysler in the United States have been encouraged through subsidies to produce and sell E85 (Flexible fuel) vehicles that run on gasoline (85 percent) and ethanol (15 percent) blends.

Nearly 10 million flex fuel vehicles sold in the United States have government tax credit as subsidy for producers and users. Corn farmers in the Mid-west states are being encouraged to produce more for the ethanol content of Flex fuel/E85. Americans get up to $7500 credit for driving electric vehicles. In Canada, subsidy for the use of Electric vehicles attract 8600 dollars subsidy. In Europe, the need to reduce the use of liquid fossil fuels has made the various governments especially the Organisation for Economic Cooperation and Development (OECD) members to subsidise the use of Plug in electric vehicles. In the UK Drivers are to get 5000 pounds electric car subsidy from government if they buy electric cars.

In France subsidy for use of electric vehicles is up to 2000 euros and free parking; Germany-exemption from annual circulation tax for five years; Italy-75 percent reduction of tax rate; Spain-6000 euros tax incentive; Netherland-exemption from registration fee and road taxes amounting to 5324 euros over four years. In China, for use of Plug in electric vehicle, there is exemption from taxes up to 7634 dollars while in Japan, it is between 2000 and 9000 dollars

Former British Prime Minister, Mr. Tony Blair recently asked President Buhari to remove subsidy on petroleum products in Nigeria. The former British leader knows how the less privileged are adequately protected with all sorts of subsidies including council flats housing, mortgages, immigration laws to reduce the level of unemployment for British citizens. The United States is spending $148 billion in 2015 in subsidizing agriculture. Here in Nigerian there is no public good; security, electricity, water, mosquito spraying programme, agriculture, pollution control, transportation, adequate health care, education and other public infrastructure are almost nonexistent.

In Nigeria the revenue from crude which has come down as a result of the global oil glut has forced the country to devalue the Naira in quick succession. This no doubt is affecting the cost of importing refined petroleum products. With the government paying the difference in the cost of landing and the pump price which we call subsidy, it will continue to be a problem. Let us refine locally!

One is advising the Kachikwu-led NNPC not to stop import subsidy for now as it will pose a serious challenge to the Nigerian monetary authorities because of its inflationary tendencies in the short run. One believes that even with the fiscal authorities trying to rein in government spending occasioned by low revenues of crude exports, real fiscal retrenchment may only be realizable in the middle term.

What led to forged subsidy claims are corruption and inefficiency in the system. That we spent six billion dollars in one year (2012) on subsidy is scratching the surface. We must find out how we spent, why we spent and to who we spent, when we have four refineries that were not allowed to operate in two decades. We should know what exactly the country imports, and consumes daily of various products.

The President has promised to beam a searchlight on the NNPC to kill the monster. The germane issues that must be investigated killed and certified dead to allow the system work is how we got entangled in import subsidy. Have we invested in this racket that has left the perpetrators merely removed from office and given absolution to go with their loot and sin no more? Not for President Buhari.