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Which government supports are beneficial for the transportation subsectors

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  • Solaymani, Saeed

Abstract

Although Malaysia is an oil exporter and a fuel subsidizer, rising oil prices and the removal of energy subsidies have increased policymakers' concerns about the negative effects of these shocks on social well-being. One of the activities that are affected by such shocks is transport, which has a direct impact on social well-being. Therefore, this study first examines the impact of rising world oil prices and the complete elimination of energy subsidies on the four main transport subsectors in Malaysia. It then looks at the impacts of recycling of 10% of government revenues from these shocks on key economic and social variables across four transport subsectors. For this purpose, it uses a computable general equilibrium (CGE) model using the latest Malaysian input-output table for the year 2015. It also uses an econometric method to check the impacts of the removal of energy subsidies on energy consumption and CO2 emissions using time series data during 1987–2018. The simulation results suggest that oil price hikes and the removal of energy subsidies improve the economic and environmental performance of Malaysia. However, recycling 10% of government revenues from rising global oil prices increases the output of the land, water, air and other transport services by 6.27%, 8.43%, 2.96% and 2.80%, while the subsidy recycling policy increases them by 0.10%, 0.18%, 0.04% and 0.04%, respectively. Water transport followed by land transport gains more because of the increase in its output, exports and imports. Furthermore, both high oil prices and the removal of energy subsidies decrease energy consumption and CO2 emissions across all transport subsectors, which is supported by the econometric results. Both recycling policies also decrease energy consumption and CO2 emissions with a greater magnitude for the oil price recycling scheme. These findings can be used for future planning by decision-makers on energy demand and transport support in Malaysia.

Suggested Citation

  • Solaymani, Saeed, 2021. "Which government supports are beneficial for the transportation subsectors," Energy, Elsevier, vol. 235(C).
    • Handle: RePEc:eee:energy:v:235:y:2021:i:c:s0360544221015978
    DOI: 10.1016/j.energy.2021.121349
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    More about this item

    Keywords

    Oil price shock; Subsidy policy; Computable general equilibrium (CGE); Land transport; Air transport; Water transport;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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