Ecuador's Fuel Protests Show The Risks Of Removing Fossil Fuel Subsidies Too Fast

Ecuador's Fuel Protests Show The Risks Of Removing Fossil Fuel Subsidies Too Fast Soldiers enforce a curfew in Quito, Ecuador during weeks of protests over higher fuel prices. (AP Photo/Fernando Vergara)

In early October, the city centre near the House of Ecuadorian Culture in Quito, Ecuador, hummed with the sounds of uniformed school children, foreign tourists, civil servants and commuters. Some stopped to relax or eat in the groomed parks nearby.

Within the week, the area was engulfed in violent chaos. Police fired tear gas into crowds of angry marchers that had taken over the culture museum. “It just keeps getting worse and worse,” said Maria Fernanda Sanchez, a Quito resident and bystander to the protests.

The protests started on Oct. 2 in response to the federal government’s “Decreto 883,” a packet of economic adjustments that eliminated a government fuel subsidy worth close to US$1.4 billion per year. The package was designed to help meet the US$4.2 billion loan requirements from the International Monetary Fund (IMF), but resulted in civil unrest as energy prices rose across the country.

This recent upheaval in Ecuador has important lessons for Canadian climate change policy. The mass protests shine a spotlight on the tension that can arise between policies that raise energy prices and day-to-day energy affordability.

The Ecuadorian experience

Ecuador’s removal of the 40-year-old fuel subsidy saw gas and diesel prices rise sharply. The price of gasoline rose to $0.80 per litre (US$2.30/gallon) from $0.64 per litre (US$1.85/gallon) and the cost of diesel more than doubled.

Ecuador's Fuel Protests Show The Risks Of Removing Fossil Fuel Subsidies Too Fast Demonstrators scale a residence in Quito, Ecuador on Oct. 11, 2019. (AP Photo/Dolores Ochoa)

A violent storm of protests followed, led by lower-income earners, including Indigenous, student and labour unions. After 11 days of unrest and hundreds of millions of dollars in economic damages, Ecuadorian President Lenín Moreno backed down and reversed the policy.

Moreno’s backtrack highlight the risks that come when fossil fuel subsidy reform (or broader fiscal climate policy) is implemented in a difficult political, social, and economic context. Fossil fuel subsidy reforms save governments money, but they are also a key ingredient to tackling climate change.

Fossil fuel subsidies and climate change

Fossil fuel subsidies artificially lower prices on oil, gasoline and other petroleum products for consumers and producers to below market levels, and encourage their use over climate-friendly alternatives.

The International Energy Agency (IEA) estimates that global subsidies to consumers alone were US$400 billion in 2018, and this does not include subsidies to oil and gas producers where poor transparency clouds estimates. Together, the G20 subsidizes the production and consumption of coal, oil and gas by at least US$150 billion annually.

The UN Secretary General António Guterres, the IEA and others emphasise that fossil fuel subsides are hindering efforts to reduce global greenhouse gas emissions. “The continued prevalence of [global fossil fuel] subsidies — more than double the estimated subsidies to renewables — greatly complicates the task,” the IEA reported in June.

Canada has already made significant strides in using fiscal policy such as carbon pricing to tackle climate change, but additional monetary and regulatory policies are needed to hit the 2030 Paris target and the 2050 net-zero pledge.

And Canada and the provinces continue to support fossil fuels with billions of dollars domestically. Canada, along with its G20 peers, has reaffirmed its commitment to remove any “inefficient” federal fossil fuel subsidies every year since 2009. Canada went one step further and committed to a 2025 deadline. As part of Canada’s commitment, the federal government is currently identifying inefficient programs with a view to reforms.

Lessons from Ecuador

Fossil fuel subsidy reform, carbon pricing and regulations, can all lead to a period of economic adjustment that sees prices rise — at least in the short-term — while technology and innovation catch up.

Ecuador’s response is not unique. France saw the escalation of the yellow vest movement in 2018 after President Emmanuel Macron and his government increased a carbon tax that raised fuel prices.

Moreno’s reforms were not directly linked to environmental policy — the IMF loan agreement and desire to stop smuggling of fuel to neighbouring countries were the principle motivations. Yet they offer sharp lessons in what could go wrong when subsidy reform and fiscal policy is poorly implemented.

Too fast, too furious

Ecuador raised its fuel prices too quickly. Gradual, predictable, incremental roll-out is nearly universally recommended by experts.

Government programs that support viable alternatives can also play a role. For example, governments could invest in improving public transport or making low-carbon vehicles more accessible. Innovation can be spurred by necessity, but governments need to act cautiously when causing change themselves.

Ecuador's Fuel Protests Show The Risks Of Removing Fossil Fuel Subsidies Too Fast A mural, inspired by Eugene Delacroix’s painting ‘La Liberté guidant le peuple’ by artist PBOY depicts France’s yellow vest protestors. (AP Photo/Christophe Ena)

Adverse impacts on the poor

At first glance, fuel subsidies keep energy affordable for vulnerable populations. However, Ecuador’s blanket approach means that its scarce government revenue is subsidizing the driving habits of the middle and upper classes instead of targeting the lower-income residents.

These policies can also exacerbate existing social tensions. “The Indigenous peoples of Ecuador have long been repressed, and what happened aggravated deep social divides,” said Grace Jaramillo, a postdoctoral researcher of Latin American Political Economy at the University of British Columbia. Existing inequalities in income distribution can inflame mistrust in this type of policy, she said.

To counter these concerns, environmental fiscal policies can be coupled with increased social programming, rebates, refunds and tax credits to maintain consumers’ overall spending power. The money saved on subsidies can also be used to fund climate-friendly programs that boost energy efficiency or renewable energy.

Even when people receive rebates or other benefits, they still have reasons to switch to cleaner alternatives when fossil fuel prices rise — maintaining the environmental effectiveness of the policy. At the same time, incentives help with equity issues and increase the popularity of the program. Without widespread buy-in, good public policy may be pushed into retreat. Slow but steady action is better than no action at all.

Poor explanations, no negotiations

With little explanation on the reasons behind the subsidy reform, and no prior consultation with affected communities or social groups, the Ecuadorian policy was poorly understood and had gained very little support.

Complex technical policy will fail if the costs are obvious but the benefits are not. In the case of climate change policy, governments must target their explanations about the policy, its rebates and its intended outcomes to muster support. The costs of inaction on climate change should be made clear but so should the multiple benefits that accompany climate policy, including cleaner air, energy efficiency, more liveable cities and so on.

As Canada ratchets up its ambition to decarbonize the economy by 2050, Ecuador’s experience shows that without careful policy implementation the local and immediate needs and fears of citizens could trump the global, long-term, critical concerns of fighting global warming.

About The Author

Katherine Monahan, Fellow in Global Journalism at the University of Toronto, and Senior Research Associate at the Smart Prosperity Institute, L’Université d’Ottawa/University of Ottawa

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Related Books

Drawdown: The Most Comprehensive Plan Ever Proposed to Reverse Global Warming

by Paul Hawken and Tom Steyer
9780143130444In the face of widespread fear and apathy, an international coalition of researchers, professionals, and scientists have come together to offer a set of realistic and bold solutions to climate change. One hundred techniques and practices are described here—some are well known; some you may have never heard of. They range from clean energy to educating girls in lower-income countries to land use practices that pull carbon out of the air. The solutions exist, are economically viable, and communities throughout the world are currently enacting them with skill and determination. Available On Amazon

Designing Climate Solutions: A Policy Guide for Low-Carbon Energy

by Hal Harvey, Robbie Orvis, Jeffrey Rissman
1610919564With the effects of climate change already upon us, the need to cut global greenhouse gas emissions is nothing less than urgent. It’s a daunting challenge, but the technologies and strategies to meet it exist today. A small set of energy policies, designed and implemented well, can put us on the path to a low carbon future. Energy systems are large and complex, so energy policy must be focused and cost-effective. One-size-fits-all approaches simply won’t get the job done. Policymakers need a clear, comprehensive resource that outlines the energy policies that will have the biggest impact on our climate future, and describes how to design these policies well. Available On Amazon

This Changes Everything: Capitalism vs. The Climate

by Naomi Klein
1451697392In This Changes Everything Naomi Klein argues that climate change isn’t just another issue to be neatly filed between taxes and health care. It’s an alarm that calls us to fix an economic system that is already failing us in many ways. Klein meticulously builds the case for how massively reducing our greenhouse emissions is our best chance to simultaneously reduce gaping inequalities, re-imagine our broken democracies, and rebuild our gutted local economies. She exposes the ideological desperation of the climate-change deniers, the messianic delusions of the would-be geoengineers, and the tragic defeatism of too many mainstream green initiatives. And she demonstrates precisely why the market has not—and cannot—fix the climate crisis but will instead make things worse, with ever more extreme and ecologically damaging extraction methods, accompanied by rampant disaster capitalism. Available On Amazon

From The Publisher:
Purchases on Amazon go to defray the cost of bringing you,, and at no cost and without advertisers that track your browsing habits. Even if you click on a link but don't buy these selected products, anything else you buy in that same visit on Amazon pays us a small commission. There is no additional cost to you, so please contribute to the effort. You can also use this link to use to Amazon at any time so you can help support our efforts.



follow InnerSelf on

facebook icontwitter iconyoutube iconinstagram iconpintrest iconrss icon

 Get The Latest By Email

Weekly Magazine Daily Inspiration


The Great Climate Migration Has Begun
The Great Climate Migration Has Begun
by Super User
The climate crisis is forcing thousands around the world to flee as their homes become increasingly uninhabitable.
The Last Ice Age Tells Us Why We Need To Care About A 2℃ Change In Temperature
The Last Ice Age Tells Us Why We Need To Care About A 2℃ Change In Temperature
by Alan N Williams, et al
The latest report from the Intergovernmental Panel on Climate Change (IPCC) states that without a substantial decrease…
Earth Has Stayed Habitable For Billions Of Years – Exactly How Lucky Did We Get?
Earth Has Stayed Habitable For Billions Of Years – Exactly How Lucky Did We Get?
by Toby Tyrrell
It took evolution 3 or 4 billion years to produce Homo sapiens. If the climate had completely failed just once in that…
How Mapping The Weather 12,000 Years Ago Can Help Predict Future Climate Change
How Mapping The Weather 12,000 Years Ago Can Help Predict Future Climate Change
by Brice Rea
The end of the last ice age, around 12,000 years ago, was characterised by a final cold phase called the Younger Dryas.…
The Caspian Sea Is Set To Fall By 9 Metres Or More This Century
The Caspian Sea Is Set To Fall By 9 Metres Or More This Century
by Frank Wesselingh and Matteo Lattuada
Imagine you are on the coast, looking out to sea. In front of you lies 100 metres of barren sand that looks like a…
Venus Was Once More Earth-like, But Climate Change Made It Uninhabitable
Venus Was Once More Earth-like, But Climate Change Made It Uninhabitable
by Richard Ernst
We can learn a lot about climate change from Venus, our sister planet. Venus currently has a surface temperature of…
Five Climate Disbeliefs: A Crash Course In Climate Misinformation
The Five Climate Disbeliefs: A Crash Course In Climate Misinformation
by John Cook
This video is a crash course in climate misinformation, summarizing the key arguments used to cast doubt on the reality…
The Arctic Hasn't Been This Warm For 3 Million Years and That Means Big Changes For The Planet
The Arctic Hasn't Been This Warm For 3 Million Years and That Means Big Changes For The Planet
by Julie Brigham-Grette and Steve Petsch
Every year, sea ice cover in the Arctic Ocean shrinks to a low point in mid-September. This year it measures just 1.44…


green energy2 3
Four Green Hydrogen Opportunities for the Midwest
by Christian Tae
To avert a climate crisis, the Midwest, like the rest of the country, will need to fully decarbonize its economy by…
Major Barrier to Demand Response Needs to End
by John Moore, On Earth
If federal regulators do the right thing, electricity customers across the Midwest may soon be able to earn money while…
trees to plant for climate2
Plant These Trees To Improve City Life
by Mike Williams-Rice
A new study establishes live oaks and American sycamores as champions among 17 “super trees” that will help make cities…
north sea sea bed
Why We Must Understand Seabed Geology To Harness The Winds
by Natasha Barlow, Associate Professor of Quaternary Environmental Change, University of Leeds
For any country blessed with easy access to the shallow and windy North Sea, offshore wind will be key to meeting net…
3 wildfire lessons for forest towns as Dixie Fire destroys historic Greenville, California
3 wildfire lessons for forest towns as Dixie Fire destroys historic Greenville, California
by Bart Johnson, Professor of Landscape Architecture, University of Oregon
A wildfire burning in hot, dry mountain forest swept through the Gold Rush town of Greenville, California, on Aug. 4,…
China Can Meet Energy and Climate Goals Capping Coal Power
China Can Meet Energy and Climate Goals Capping Coal Power
by Alvin Lin
At the Leader’s Climate Summit in April, Xi Jinping pledged that China will “strictly control coal-fired power…
Blue water surrounded by dead white grass
Map tracks 30 years of extreme snowmelt across US
by Mikayla Mace-Arizona
A new map of extreme snowmelt events over the last 30 years clarifies the processes that drive rapid melting.
A plane drops red fire retardant on to a forest fire as firefighters parked along a road look up into the orange sky
Model predicts 10-year burst of wildfire, then gradual decline
by Hannah Hickey-U. Washington
A look at the long-term future of wildfires predicts an initial roughly decade-long burst of wildfire activity,…

 Get The Latest By Email

Weekly Magazine Daily Inspiration

New Attitudes - New Possibilities | | | InnerSelf Market
Copyright ©1985 - 2021 InnerSelf Publications. All Rights Reserved.