全球智库信息集成服务系统(G2TT): Energy Pricing Policy Reform

G2TT

来源类型	Research papers
规范类型	报告
	Energy Pricing Policy Reform
	H. K. Jung; K. S. Park; D. Y. Choi; S. I. Kim
发表日期	2007-12-31
出版年	2007
语种	英语
摘要	In the energy sector, there is considerable externality involving consumption compared to other sectors; network energy industries such as electric power, gas, and district heating industries are characterized by natural monopoly. Moreover, there is always a high demand for the service and function characterized as public goods related to energy supply and demand. Thus, the government seeks ways of deciding the price level not only by effecting taxation on energy prices but by regulating the network energy industries characterized by natural monopoly as well. Once the policy for the optimal energy prices, that is the core of the energy and environmental policy, is implemented appropriately, the need for other types of government intervention can be minimized An optimal structure of energy prices is also required to maintain the consistency of the energy and environment policy as well as enhance the efficiency of policy enforcement. Many of the problems of the energy and environment policy as well as the corresponding measures and programs result mainly from a distorted policy on energy prices. Implementing a temporary measure to solve the problem of distorted energy prices can not only cause another distortion of the market but also result in a vicious circle of inefficient resource allocation. Therefore, as a key point of solving the fundamental problems in the energy and environment sectors, the improvement of the energy pricing policy and the regulating system for the normalization of the structure of energy prices. are urgent assignments. Tax imposed on energy, regardless of the name, is a typical environmental tax based on the concept of Pigouvian Tax to internalize the external diseconomy associated with energy consumption, which causes market failure. After the mid-1980s, OECD nations particularly the advanced countries in Europe started applying economic incentive instruments including environmental tax to solve the environment problem. Such economic incentive instruments are market-friendly and superior in terms of static and dynamic efficiency unlike the command and control system. Our country referred to this kind of example in advanced countries and realized a growing necessity to shift to the eco-friendly system dubbed environmental tax. As such, the first and second reforms of the energy tax system aimed at transportation fuels were executed. Still, there is a need to come up with a solution to the remaining problems in the system of energy taxation. The effect of tax reform on the energy market was assessed through consumer's choice in the vehicle market. The choice probability of vehicle by fuel type depending on the change of fuel price was estimated by various choice models based on utility maximization. In addition, simulation was implemented on several scenarios of relative prices of vehicle fuels. The analysis shows that the second tax reform has lead to a decrease in the share of vehicle fueled by diesel and an increase in the total fuel consumption. Since the change of relative price will inevitably affect the driving mileage and fuel efficiency in the long term, the fuel demand model internalized such factors would improve the accuracy of model assessment. In addition, other important attributes of choice such as interior space and horsepower of each vehicle need to be inspected and tested. The gas and electric power industries characterized by natural monopoly are managed by a monopolistic public enterprise, with the government directly involved in deciding the rates to balance the interests among investors and consumers. Deciding the efficient rates of network energy requires minimizing production costs and prices reflecting the supply costs. However, the practice of deciding the rates of network energy can be said to be inefficient in many ways. The core problem can be summarized as follows: the overall level of prices does not fully reflect the supply costs, and the cross subsidies among consumer groups resulted from a discrepancy between the prices and supply costs incurred by non-economic policy objectives, which is related to the problem of the regulating system for the prices. Therefore, an evaluation on the inefficiency of the regulated energy charges and an improvement of the regulating system for network energy charges are important policy assignments. For setting the public utility services rates in our country, the regulation of the rate of return on investment has been effected based on total costs including capital costs. This form of regulation has a demerit that the potential for efficiency gain from public utilities is limited. Thus, while easing the regulation on the prices of the network energy as in advanced western countries, achieving efficiency gain for the energy industry should be promoted by introducing the system of incentive regulation for the sector that requires price regulation due to its monopolistic character. Advancing the regulating system requires taking a step not only toward activating the function of the energy industrial market but also toward furthering specialization and independence of regulator. Optimal levels for the rates of all network energy services can be set through calculating the optimal return on capital, i.e., cost of capital as a reasonable cost. Compared to the past, a post ad-hoc revision instrument (revaluation of assets) for a relatively low rate of return on capital is currently not available. Therefore, a regulator should acknowledge that optimizing the rate of return on capital is more important than ever to set an appropriate level for network energy rates. Based on the result on problems related to the rate structure of electric power as the largest sector of network energy, solving the problem of cross subsidies arising from the discrepancies between supply costs and revenues should be a priority. A distortion in regulated rates and the subsequent burden of additional costs due to the cross subsidies can cause a decline in the ability of the energy industries and the economy to produce potential outcome from efficient production and investment. Accordingly, various efforts are required to reduce the multi-type cross subsidies to enhance consumer benefits and equity among consumers. More importantly, such efforts should focus on increasing the industrial rates, the midnight rates, and the agricultural rates that are below supplying costs and the moderation of the residential progressive rates as well as the adjustment of relative time-of-use rates through the increasing off-peak rates. the opportunity cost of night thermal-storage power was estimated. If gas or kerosene substituted night thermal-storage power, 1,924 to 2,304 thousand TOE would be saved. The amount of energy imports is estimated to be reduced by 570 to 680 million dollars in 2006. Considering such results of inefficiency of energy consumption due to a distortion of heating energy prices, Government should come up with a coherent policy on energy prices that energy prices are determined to reflect its full costs. Price distortions, especially distortions of relative price, caused by government interventions, are likely to lead to the inefficient structure of energy consumption. This inefficiency will bring about substantial expenses to the economy. The tax system of energy in our country is very complicated, fails to reflect the social costs properly and has a problem in terms of the social equity. Therefore, the taxation criteria for energy should be readjusted to reflect the overall environmental pollution, supply risks, social equity, international competitiveness of the industry, energy accessibility, etc. and a fundamental in-depth research for this purpose should be done as well. In case of the energy for transportation, there is a need to consider the costs of traffic congestion and energy security together with the environment cost of carbon dioxide and air pollution. For non-transportation energy, the environment costs and energy security costs should be reflected on the taxation system. In terms of universal services, the tax proportion of fuels for low-income earners should not be higher than those for high-income. In the heating energy market, promoting fair competition among energy sources as well as enabling the selection of an efficient energy source and deciding on its level of consumption require cutting the excessive taxes and additional public charges for kerosene and propane as sources of heating energy for the low-income. For the price of anthracite briquette, a direct subsidy for lower-income should be strengthened, if possible. At the same time, the price of anthracite briquette should be readjusted to a level of the supply cost. Furthermore, to enhance the efficiency and the equity among consumers, the rates of network energy (town gas, district heating) should reflect the cost structure of energy supply more precisely. In the long run, there is a need to come up with a adjustment plan integrating the carbon dioxide emission in the system of energy taxation. Taxation on the carbon dioxide emission should be done based on the revenue-neutral principle to avoid placing too much burden through additional taxation and to enhance the efficiency of the overall economy by minimizing other distorted taxes.
URL	http://www.keei.re.kr/web_keei/en_publish.nsf/by_report_year/52A213640878D04D492573E6002BE978?OpenDocument
来源智库	Korea Energy Economics Institute (Republic of Korea)
资源类型	智库出版物
条目标识符	http://119.78.100.153/handle/2XGU8XDN/322427
推荐引用方式 GB/T 7714	H. K. Jung,K. S. Park,D. Y. Choi,et al. Energy Pricing Policy Reform. 2007.