WHY FUEL SUBSIDIES SHOULD GO
IT’S been just over two months since Pakatan Harapan came into power and in that time, the government has spent about RM1.4 billion on fuel subsidies, said PKR vicepresident Rafizi Ramli in a blog post.
Soon after winning the 14th General Election, Prime Minister Tun Dr Mahathir Mohamad announced that the weekly price float mechanisms for RON95 and diesel would be removed, fixing them at RM2.20 and RM2.18 per litre.
This fixed price will remain in place until the end of the year as the government studies ways to carry out its targeted fuel subsidy policy outlined in the PH manifesto.
Continued subsidies portray an artificially low cost of fuel, while encouraging private vehicle usage, leading to more road congestion and increased carbon emissions.
This leads the country down a dangerous path of normalising subsidies once again, at a time when it’s more important than ever to wean the nation off fossil fuel consumption.
As a signatory to the Paris Agreement, Malaysia has shown its commitment to reaching its global temperature increase target.
The reintroduction of fuel subsidies contradicts its contributions to solving the global climate crisis.
The government is paying money for motorists to continue emitting carbon, at a time when expenditure is scrutinised.
Moral reasons notwithstanding, the reintroduction of fuel subsidies may be popular and well received by Malaysians.
PH ran on a pro-rakyat, prowelfare platform, emphasising the need to reduce the high cost of living.
Throwing fuel subsidies into the bucket of tactics to reduce the cost of living is short-sighted and this is where we need to have a conversation about externalised costs.
While people may benefit from more affordable fuel at the point of sale, the true cost, or externalised cost, is not accounted for.
When motorists pay RM2.20 per litre at the petrol station, they are not considering the cost of health implications from pollution, the cost of loss of biodiversity, the cost of loss of agricultural productivity, along with hidden costs related to carbon emissions and climate change.
While even the market price of fuel would not adequately cover these additional externalised costs, motorists should not be paying any less than that.
When considering the welfare of the people, the government needs to have more future-oriented solutions revolving around sustainable development, good public transportation and renewable energy policies.
This will support the PH government’s manifesto vow of increasing renewable energy to 20 per cent by 2025.
In the era of fiscal responsibility, Malaysia could use the savings from the removal of subsidies.
While deterring the use of fossil fuels, the savings could be used to incentivise more renewable energy and energy efficiency projects.
As a point of reference, just before GE14, the Green Technology Financing Scheme was renewed for five years from this year to 2022, to the tune of up to RM5 billion.
To put that into perspective, at its current rate, the government will spend RM5 billion on fuel subsidies in under eight months.
A Malaysia that prioritises public transportation infrastructure and services, renewable energy and energy efficiency projects instead of fossil fuels is a Malaysia that is on the right track of developing in a sustainable manner.