The World is getting more CO2 production each year. In 2012, the CO2 production was 33 billion of tons, so it means 4.7 tons per World inhabitant. Colombia produced 60 million of tons in 2012, so it means 1.5 tons per colombian. If we follow with this behavior, at the end we have to wear masks and live under black clouds!. Unfortunately, colombian central government is not aware of it; her public policies taken in the last months gave incentives to produce more CO2; for instance, they did an important reduction in gasoline price to get populism. This note shows the impact of this policy in environmental terms (increase of CO2 production in Colombia); it means as the gasoline price shows a decline in 1.0%, Colombia increases the CO2 production between 0.05% and 0.1% per year. This result takes the increase of the number of vehicles in Colombia as instrument to produce more CO2 in Colombia because of they depend on reduction in gasoline price. Therefore, it is important that government realizes that increasing gasoline price is a tool to reduce CO2 production, but this instrument has to be used along better public transport as trains and metros in main cities and between cities. Moreover, this better public transport will give more populism and contribute to better environment.
Author: Humberto Bernal,
Economist,
e-mail: zhumber@gmail.com
Twitter: Humberto_Bernal
The annual CO2 emissions around the World is close to 33 billions of tons in 2012; it means a per capita annual production of 4.7 tons. By 1971, this per-capita production was 3.7 tons as International Energy Agency says; it means a per-capita annual average growth rate of 0.6% between 1971 and 2012. Therefore, we are close to live under black clouds and wearing masks, what sad destiny!. Colombia is not far away of this data; the total annual production of CO2 in Colombia was 14 million of tons in 1960 and 68 million of tons in 2012; it means an annual production of 1.5 tons per capita in 2012. Although Colombia produces few volume of CO2, 0.2% of total World production, her volume has shown an important increase; figure 1 shows the colombian CO2 production per capita since 1960; there is an increase from 1960 to 2000, but from this year the volume started to decrease because Colombia improved her public transport in cities such as Bogotá, Cali, Medellín and Barranquilla. However, since 2009 the production of CO2 started to increase again because of price of vehicles has declined so much to pull up the Gross Domestic Product (GDP). Therefore, economic policies such as lower prices of vehicles and lower price of gasoline to improve the economic growth go in contradiction with environmental public policies. Punctually, this note shows that a lower gasoline price in Colombia will increase the volume of vehicles in the market, and it will increase the growth rate of CO2 production. Therefore, if Colombian central government tries to apply this popular policy to get votes for reelection, its cost will be a contribution to get a worse environment to live.
Figure 1. CO2 emission per capita in Colombia 1960-2012
(tons of CO2 per capita)
Source: World Bank data and International Energy Agency.
Colombia has increased the number of vehicles in her market because of better salaries, better technology and central government policies. The number of vehicles in Colombia went from 5 thousand in 1923 to 4.4 millions in 2012; it means 208 vehicles per 100 thousand of active people (people between 15 and 60 years old) in 1923, and 18.7 thousand of vehicles per 100 thousand of active people in 2012 as figure 2 shows. Although this increase can be explained by better real salaries, Colombia faces poor income distribution still; Therefore, the average annual growth rate of real salary in Colombia is 7.1% between 1923 and 2012; between 1970 and 1980 there was an important increase; after this year the real salary increased few points above inflation. Moreover, through econometric model one finds that an increase of real salary in 1.0% lets an increase of vehicles in 1.1% as Table 1 shows. It is important to highlight that the volume of vehicles showed an important increase after 1999 and again after 2009, and it is because central government took this sector as principal one to pull up the GDP after economic crisis; therefore, there were economic crisis in 1999 and 2009 in Colombia, and the volume of vehicles showed important increase. The public policy for vehicles is based on getting ways to give vehicles to people at lower prices through lower tariff rates for vehicles’ parts imported and few cases through subsides in Free Trade Zones.
Figure 2. Vehicles per hundred thousand of active people in Colombia 1923-2012*
(annual data)
*Active people: people between 15 and 60 years old.
Total vehicles=passenger cars plus commercial vehicles.
Source: International Historical Statistics, Fasecolda and ANDI.
Although there is an important increase in vehicles in Colombia in the last 90 years, the increase of gasoline price has blocked a higher growth of this volume of vehicles. The price of gasoline in Colombia shows a positive trend after 1999 as figure 3 shows. This price’s dynamic can be explained by crude oil price; before 1999, the crude oil price showed a negative trend; the crude oil barrel cost was US$17 at 2012 prices in 1998, but after this year the crude oil price has increased in huge until reaching US$111 in 2012. If one takes this information into an econometric model, the result is as gasoline price faces an increase of 1.0%, the volume of vehicles in Colombia shows a reduction of 0.2%; it means lower vehicles in the market because of higher gasoline prices as table 1 shows.
Figure 3. Gasoline price in Colombia 1980-2012
(US$ per gallon, chained prices of 2012)
Source: Ecopetrol and Mines Government Department Colombia.
The reduction in vehicles in Colombia because of higher gasoline prices has a deep impact in CO2 production. As we realized, there is an increase of CO2 production because of society has more vehicles, and there is more vehicles because of vehicles price and gasoline price show reductions. Therefore, it is not good idea or it is not a proper public policy to reduce vehicles price trough lower tariff or local subsides, and it is not a proper public policy to reduce gasoline price through government Law. In quantitative terms, as the volume of vehicles increases in Colombia in 1.0%, there is “negative” impact in CO2 production; it means an increase of CO2 production; therefore, the CO2 production shows a permanent increase between 0.018% and 0.024% per year as figure 4 shows. Moreover, If gasoline price decreases in 1.0%, the volume of vehicles increases between 0.01% and 0.02% per year, or the other way around is true also; it means, if gasoline price increases in 1.0%, the volume of vehicles in the market shows a decline between 0.01% and 0.02% per year and in the long run it can be 0.2% as figure 5 shows. Therefore, at the end a decline in gasoline price lets an increase of CO2 production between 0.05% and 0.1% per year, or an increase of gasoline price in 1.0% lets getting a decline in CO2 production between 0.05% and 0.1% per year.
Figure 4. Impact on CO2 due to increase in vehicles volume in 1.0%
(CO2 increases in %)
Source: Own calculation VEC model Stata 12.1.
Figure 5. Impact on Vehicles due to increase in gasoline price in 1.0%
(Vehicles increases in %)
Source: Own calculation VEC model Stata 12.1.
In conclusion, Colombia has to work in reduction of CO2 production to get a better World, and a way is increasing gasoline prices along better public transport for people. This public policy has two indirect positive impacts on society welfare; first, politicians get populism for their elections, and second people enjoy living in a better World. There is a media myth about the price of gasoline in Colombia; they said that Colombia has the highest prices of gasoline in the World, but it is not true; as one see these prices, one realizes that Colombia takes the place 34 out of 145 countries where the first one is Venezuela that has a gasolines price of US$0.1 per gallon in 2013 and the last one is Norway that has a price of US$10.5 per gallon as My Travel Cost says; Colombia shows a price of US$4.4 per gallon in 2013, so colombian government has huge room to increase the gasoline price to contribute to CO2 reduction.
Table 1. Impact in vehicles
(%, model of type GLS)
Variable
|
Impact on vehicles
|
Wage Index
|
1.1%
|
Gasoline price
|
-0.2%
|
R2
|
0.99
|
* Results are statistically significative at 0.05.
Source: Own calculation Stata 12.1.
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