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Table 6.1: Behavioural and political success factors. Success factor
Example(s)
Directly addressing distributional impacts
• LPG price increases in Brazil and Mexico were combined with existing social welfare mechanisms to mitigate the effects of higher prices (Adeoti et al., 2016; Toft et al., 2016).
• Kerosene subsidy reforms in Indonesia and Yemen were accompanied by measures promoting the use of liquefied petroleum gas (LPG) as a household cooking fuel (Clements et al., 2013).
• In Indonesia, social assistance programmes enabled the government to reform fossil fuel subsidies in the mid-2000s (Chelminski, 2018), while India and Iran provided some form of cash transfer to compensate households (Rentschler and Bazilian, 2017a; Jain et al., 2018).
• Switzerland, Alberta and British Columbia (see table 6.2) have used revenues from carbon pricing to compensate households and, to a degree, firms.
Establishing trust in governments
• Countries with relatively high levels of trust and low levels of perceived corruption, such as Finland, Norway, Sweden and Switzerland, tend to have higher carbon prices (Rafaty, 2018).
• Subsidy reform in Indonesia had previously been difficult due to public distrust in the government; however, more recently, reforms have been accompanied by measures tackling corruption in the oil and gas sector (Chelminski, 2018).
• Jordan’s 2008 subsidy reforms were introduced following consultations with a wide array of stakeholders (Whitley and van der Burg, 2015).
Avoiding solution aversion
• Proposed carbon pricing reforms for the USA as a whole, or for individual USA states, are often designed to accommodate less interventionist world views. This is accomplished by minimizing the State’s role in the carbon pricing reform, in part by returning a large portion of the revenue to its citizens (Nature Editorial, 2017). Further examples are the Massachusetts Bill H.1726—which also features a carbon dividend—that passed the state senate in June 2018 (DeMarco, 2018) or the reform of the Californian Cap and Trade system (CAB, 2017) and the ‘fee and rebate’ proposal in Washington DC, both of which are focused to some degree on revenue neutrality (Dysen, 2018).
Information and communication about the impacts
• The successful fossil fuel subsidy reform in Iran was carefully prepared by clear government communication through various channels, such as websites and hotlines to answer questions about the reform. The government also proactively consulted the private sector to discuss potential concerns about the policy reform (Atansah et al., 2017).
• The Government of Malaysia used multiple channels (including a public forum, YouTube and Twitter) to communicate fossil fuel subsidy reform in 2013 (Fay et al., 2015).
Getting the timing and
sequencing right
• Gradual fossil fuel subsidy reform in Iran helped with gaining public acceptance and reducing adverse effects (Rentschler and Bazilian, 2017b).
• Sudden and drastic price increases, by contrast, may spark public protests, as was the case for subsidy reforms in Bolivia and Nigeria (Beaton et al., 2013).
• Subsidy reform in Egypt in 2014 was possible during the ‘honeymoon period’ of the new el-Sisi Government (Moerenhout, 2018).
Considering wording and framing
Using revenues appropriately
• The Government of India successfully framed its Direct Benefit Transfer for LPG scheme as a means of addressing inefficient service delivery (Jain et al., 2018).
• In the carbon pricing schemes in Alberta and Switzerland, carbon prices are labelled as ‘levies’ (FOEN, 2017; Government of Alberta, 2018).
See details and examples in table 6.2.
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