Renewable Energy And Energy Subsidy In Ecuador

Renewable energy and energy subsidy in Ecuador

Introduction

During the de facto government (1972-1976) chaired by General Guillermo Rodríguez Lara, fuel subsidies are presented in the country from 1974 as a way of supporting vulnerable homes, logically this socio-economic strategy served him To strengthen their power, relying on the increase in international prices that provided higher income to the government. This subsidy policy is established through the Hydrocarbons Law, a copy of the other OPEC member countries.

Thus, Government after government has been "complying" with this law, and has even taken power to those who dared to reduce the subsidy or raise the value of fuels. However, the application of this law has failed to improve the vulnerability of households, but rather the social gap has increased, because as a consequence of fuel subsidies who have benefited are the middle class and the quintiles towards up; In addition to the smuggling of these towards Peru and Colombia whose prices are approximately twice of ours.

In what has to do with the subsidy to electricity, this is supported in article 59 of the Organic Law of the Public Electric Power Service, which grants subsidies in the consumption of electricity.

Energy subsidies have a prominence in the issue of public policy of developing countries and are applied with different purposes such as: generating economic growth and development by giving greater competitiveness to the local industry, reaching the equity of social justice, having a management of Macroeconomic indicators and protect the environment (Becerra & Creammer, 2016).

Of course, if the energy is produced by thermoelectric plants there are also subsidies to the production and application of the law.

Therefore, the interrogation fits: why or not to subsidize energy in Ecuador?

Developing

The fuel subsidy was initially created to meet the needs of the transport of the military, subsequently extended to public and private transport, this subsidy was also generated for liquefied oil gas in order to increase economic beneficial in the country favoring The most vulnerable economic sectors of Ecuador. Fuel prices have not suffered many modifications since 2000 although they are not the same but their value has no great increase.

The costs of oil derivatives in Ecuador are very low compared to neighboring countries such as Peru and Colombia, this causes fuel to be smuggled towards them and therefore generate great economic losses, also an important factor that was not considered for The generation of subsidy was population, industrial and transport growth since these sectors every year have a greater demand for fuels.

The main oil derivatives used are: liquefied oil, gasoline (eco-pais and super), jet fuel, diesel and fuel oil in the following graph shows the country’s requirement in barrels equivalent to oil (KBEP) of the Different fuels being gasoline, which has a higher growth rate with approximately 6% followed by diesel with 4.6%, LPG with 3.3% and Jet Fuel with 2.8% in the case of Fuel Oil a 0.6% decrease was recorded.

At the beginning the application of fuel subsidies through the Hydrocarbons Law did not represent large quantities, that is, it was considered to tolerable, since when the Esmeraldas refinery was built, the country was supplied with the refined fuel and the electric power produced it Thermoelectric plants.

The problem arises when Ecuador begins to consume more than it produces on the one hand and on the other when high oil prices of up to $ 100 were recorded. It is important to note that the subsidy to gasoline, diesel and liquefied gas not only benefits the user but also that I shoot the smuggling through the north and south borders, since these rose (2004-2005) to double and triple the price of the price of the comparative fuels n ours.

In what has to do with liquefied gas to the state it costs $ 700 million and has a subsidized price of $ 1.60 the 15kg cylinder while it has a value of $ 25.87 in Colombia and in Peru 19,68.

With regard to electrical energy, the subsidy is established by the application of the respective law “the dignity rate that benefits the limited sectors of scarce resources. Subsidy for the elderly to benefit people over 65 years old. In addition, the laws in favor of the residents of the area of ​​influence of the volcano and in favor of people with disabilities, grant a 50% decrease in the value of electricity consumption. It also gives subsidies to water heating and electric cooking (Coba, 2019). Thus, this subsidy ended up representing 7% of the annual budget in recent years, to the point that between 2005 and 2018 this subsidy has reached $ 54.269 ​​million that the country has spent, value that is the same the current external debt (Coba, 2019).

The question is what social class has benefited from energy subsidies?

As an example, for which a conventional vehicle has gasoline subsidy is approximately $ 1000 per year and for the poor citizen who does not have a car the indirect benefit is $ 60 per year.

And if the low social class does not have diesel truck, temperate water pool, restaurant, bakery, refrigerator, luxury cars, hotels, etc. Well, it seems that the answer is obvious.

If the application of energy subsidies benefits the vulnerable sectors, then what is the reason why the International Monetary Fund, the Inter -American Development Bank proposes its elimination?

The application of subsidies does not discriminate against anyone, that is, they are equal for both poor homes and rich households; As rich households consume more, they are logically the most benefited by subsidies. It is important to reiterate that at the international level and in the case of Ecuador, subsidies do not benefit the population of lower income, and do not necessarily stimulate the internal economy by decreasing production costs (Cidac, 2015). In Ecuador for 2015, 2.51% of national GDP was allocated to LPG, diesel and gasoline subsidies. On the other hand, considering the current structure that subsidies have in the country and their indirect character, they have favored the strata

Undoubtedly, the most affected is nature since governments have allowed large extensions of eastern jungles to be prevented in search of fossil fuels and that due to the irresponsible exploitation, the environmental pollution of earth, water and air has resulted in that the flora and Fauna of these sectors suffers or migrates for the destruction of their habitat, in the same way the permanence of the colonists and tribes not contacted is altered and as a result of the bad administrations, contracts rigged by corruption have not been forced to make Environmental remediation and compensation for people for having been exposed to this pollution and suffer from catastrophic or degenerative diseases.

Now let’s analyze the opposite of subsidies, that is, their elimination

It is not an easy task for Ecuador, as you must attend tax, social and environmental priorities at the same time.

The IDB indicates “the elimination of these subsidies would produce clear economic and environmental benefits, helping to meet the climatic objectives established in the Paris Agreement. However, possible adverse effects on vulnerable homes can politically difficult for reforms ”. And he explained that it was possible to reduce the impact with economic transfers to the most vulnerable, more than carefully replace energy subsidies with a better expense in social protection, it could be a way that the government progresses on the three fronts (Vogth & Soria, 2019).

The elimination of subsidies would help reduce the consumption of fossil fuels that undoubtedly contribute to air pollution, which represent a great source of greenhouse gases emission.

The idea of ​​the elimination of subsidies gives fuels is not now, put in 2000 and 2003 the governments of the day adjusted 5 times the price of fuel and gas, in addition to this year there were already adjustments in fuels. In addition, it would be saved by the elimination of subsidies could be used in reducing social debt or investing in health, education and infrastructure; that is, in the generation of employment and knowledge production (Vogth & Soria, 2019).

It is true that the political cost is large since it implies confrontations with social movements- workers, transporters and the indigenous community- that in October of this year paralyzed the country for several days and that I represent losses greater than what the subsidy is equivalent, to more that social and economic wounds will be complicated to overcome.

For the solution to conflicts related to the elimination of fuel subsidy, there must Accounts, interests of economic, social and political groups are left aside.

Establish strategies and mechanisms to achieve consensus and find solutions to the elimination or targeting of fuel subsidy, through studies and surveys, providing those who need a consumption card with a certain amount of gallons of gasoline or diesel; With regard to gas, this should be focused through the human development bonus so that the subsidy reaches those who need it most (Salas, 2019). I believe that the government should take advantage of a census that is approaching to establish how many vulnerable homes that need gas, electricity and fuels, at the same time verify whether or not to be beneficiary of the Human Development Bonus can be.

For this there are the different institutions of the State: SRI, Civil Registry, ANT, General Comptroller of the State, etc. in which you can place and establish the names of people who have luxury cars, real estate, shops, goods and services, etc. They have no right to be benefited by the subsidy to gasoline, diesel, gas and elective energy. Similarly, those who receive remuneration greater than two basic salaries must pay real prices (Salas, 2019).

Due to this situation, the National Government promoted the "Energy Sovereignty Plan", in order to generate policies and strategies that allow controlling the problems generated in the marketing chain, preventing the country’s resources from being misused (the gas figures In Ecuador 2008., 2017)

Analysis on the elimination of subsidies in the electric power service in Ecuador

In Ecuador, some groups that are called vulnerable by the Ecuadorian State and sectional governments are considered, this is due to the living conditions of this population; In the specific case of energy subsidies, they are regulated in four parameters that must be taken into account to provide such subsidies. It should be noted that the collection of the majority of the population is based on the analysis carried out by the Archon in practice during the course of the year (Arconel, 2016).

The elimination of said subsidy would hit the vulnerable groups of the country considering that the basic salary of a person with different or retired abilities often fails to supply with what is necessary to live.

The subsidy in fossil origin is greater than the one invested in the electric power service, however, the total elimination of fuels of fossil origin would cause an economic crisis affecting production in the entire country (Pablo & Santiago, 2014).

Compensatory measures should be differentiated by economic income level, to protect the increase in energy prices to the most vulnerable economic sectors and population; thus maintaining the subsidy to low -income families or to the economic sectors as mentioned above the most affected. In Ecuador this strategy would be mainly valid to the application of the LPG to which it is of greater importance.

Another alternative includes the implementation of monetary transfers particularly for the population of lower income, which would allow the beneficiaries to use this resource according to their specific needs, when acquiring the amount and source of energy that best meets their needs or opt for other goods and services. In turn, they eliminate the need for direct participation of the State in the distribution of subsidized energy to households, which based on experiences at regional and global level has a high cost and promotes both excessive consumption and improper use of energy (Grosh, Ninno, from Tesliuc, & Ouerghi, 2008).

conclusion

Undoubtedly, the problem of energy subsidies in Ecuador is complicated, it is to analyze it carefully, since there is a consensus among the members of the collective and for this they are in the national dialogue must be prepared people, not only academically but be involved in the social, economic and political development of the country.

The world must be shown and ourselves that we are able to analyze and find solutions to our problems, that eliminating the subsidy to the social classes that can and must pay energy, it would be possible to release capitals that can be invested in the payment of the debt Social such as employment generation, investment in basic services, education and security, in addition to vulnerable homes do not feel unprotected through the real focus of the aforementioned subsidies and the use of technology for its application.

Bibliography

• Arconel. (August 2016). Electricity Control Regulation Agency. Obtained from Regulation Agency Electricity Control: https: // www.regulation.Gob.EC/Subsidies-and-Compensations/#
• Becerra, r., & Creammer, B. (2016). Quantification of oil derivatives to hydrocarbons in Ecuador. Oil a day.
• Cidac. (2015). Petroleum Sector Report. Mexico.
• Coba, g. (October 5, 2019). First fruits. Obtained from firstfruits: https: // www.first fruits.EC/News/Economy/Subsidies-Busable-Diesel-Ecuador-Bid/
• Grosh, m., Ninno, c., of Tesliuc, and., & Ouerghi, to. (2008). For Protection and Promotion: The Design and Implementation Effective Safety Nets. Washington d. C.
• Gas figures in Ecuador 2008. (June 20, 2017). Perspective Magazine.
• Pablo, m., & Santiago, G. (April-June 2014). Scientedirect. Obtained from Scientedirect: https: // www.Scientedirect.com/science/article/pii/s030170361470865x?FBCLID = IWAR0E1D-GWDWOXHDSV3D2G6IRVX2ZOUK0ITNTKUMMMYOXOF03HDDJNZTVMM
• Salas, r. (October 10, 2019). Subsidize fossil energy. El Comercio, Page. two.
• VOGTH, a., & Soria, R. (2019). The reform of the energy subsidy in Ecuador could generate social, fiscal and climatic benefits. Quito: Bid improving lives.