Lower oil prices free up finance for environmental spending
Not only has the recent fall in oil prices meant more money in our pockets, there have been some interesting environmental consequences. According to a number of fund managers, emerging market governments have been able to reduce their spending on fuel subsidies and increase taxes on fossil fuels, enabling them to direct their finances towards longer term infrastructure projects. Impax Asset Management, for example, are seeing governments in India and China acting in favour of investing in resource efficiency and local environmental clean up. On 13th January 2015, China’s consumption tax on oil products was raised for the third time in three months. Proceeds from the higher taxes (estimated at £20bn) will mainly be allocated to counter-pollution initiatives and the new energy sector such as:
- Air pollution control, with focus in the key regions including Beijing-Tianjin-Hebei and surrounding regions, Yangtze River Delta, Pearl River Delta (industrial zones);
- Sewage pipeline construction in the key areas, improvement of waste water treatment capacity, underground water and other drinking water sources protection;
- Encourage new energy vehicles, accelerate renewable energy consumption and support environmental related industries and in India: Since winning power last May, the Modi Government has implemented an ambitious infrastructure development plan and now has more cash than it expected available to put to work:
- £227m for cleaning up The Ganges River, India’s largest river system which supports over 450m people but is highly polluted from industrial waste and municipal sewage;
- A ten year transport infrastructure plan which includes a high speed rail network, major refurbishment of trains and modernising ports;
- A solar target of $100bn over seven years. This equates to 10% of national energy share. This effort also aims to deliver solar power to rural regions which suffer a high cost of grid connection.