• Energy Research

Malaysia is paying a high level of subsidies on the consumption of energy (about 5% of its GDP). Therefore, reforming the energy subsidies, as planned by the government, will have a significant impact on household welfare and energy-intensive sectors, such as the transport sector. This study employs a computable general equilibrium (CGE) model to highlight the transmission channels through which the removal of energy subsidies affects the domestic economy. The findings show that the shock increases real GDP and real investment, while decreasing Malaysian total exports and imports. The removal of energy subsidies also decreases the aggregate energy demand, and, consequently, decreases the level of carbon emissions in the Malaysian economy. In addition, households experience significant falls in their consumption and welfare. The transport sector is significantly influenced through an increase in production costs due to an increase in the prices of intermediate inputs. The total output and total exports of the whole transport sector decrease while its imports increase. In addition, the use of all kinds of transport by households decreases significantly. The Malaysian energy subsidy reform, leads to an initial decrease in CO2 emissions and demand for electricity, gas, and petroleum products in the entire transport sector.

Malaysia is paying a high level of subsidies on the consumption of energy (about 5% of its GDP). Therefore, reforming the energy subsidies, as planned by the government, will have a significant impact on household welfare and energy-intensive sectors, such as the transport sector. This study employs a computable general equilibrium (CGE) model to highlight the transmission channels through which the removal of energy subsidies affects the domestic economy. The findings show that the shock increases real GDP and real investment, while decreasing Malaysian total exports and imports. The removal of energy subsidies also decreases the aggregate energy demand, and, consequently, decreases the level of carbon emissions in the Malaysian economy. In addition, households experience significant falls in their consumption and welfare. The transport sector is significantly influenced through an increase in production costs due to an increase in the prices of intermediate inputs. The total output and total exports of the whole transport sector decrease while its imports increase. In addition, the use of all kinds of transport by households decreases significantly. The Malaysian energy subsidy reform, leads to an initial decrease in CO2 emissions and demand for electricity, gas, and petroleum products in the entire transport sector.

Using Malaysia as a case study in comparison with other studies that apply aggregate models, this study employs a multi-sector CGE model (computable general equilibrium) to derive the short-run and long-run effects of sustained increase in world petroleum prices on the transport sector. Since the transport sector is the main consumer of petroleum products, the study highlights the transmission channels through which the rising cost of petroleum products affects this sector in particular. The simulation results suggest that in the short-run, the effects of the shock are negative towards the economy and the transportation sector, but it will eventually encourage the reallocation of resources and, therefore, induces inequality in sectoral adjustments. However, in the long-run, the shock will be beneficial for the transportation sector because it will contribute to an increase in domestic output and stimulate investment. In the whole of the economy and all transportation sectors, the shock will lead to an increase in the emissions of all air pollutants in the short-run while it decreases them in the long-run.

Using Malaysia as a case study in comparison with other studies that apply aggregate models, this study employs a multi-sector CGE model (computable general equilibrium) to derive the short-run and long-run effects of sustained increase in world petroleum prices on the transport sector. Since the transport sector is the main consumer of petroleum products, the study highlights the transmission channels through which the rising cost of petroleum products affects this sector in particular. The simulation results suggest that in the short-run, the effects of the shock are negative towards the economy and the transportation sector, but it will eventually encourage the reallocation of resources and, therefore, induces inequality in sectoral adjustments. However, in the long-run, the shock will be beneficial for the transportation sector because it will contribute to an increase in domestic output and stimulate investment. In the whole of the economy and all transportation sectors, the shock will lead to an increase in the emissions of all air pollutants in the short-run while it decreases them in the long-run.

This study examines the impact of carbon tax and its alternative, energy tax, on both the Malaysian economy and the transport sector, using a CGE (Computable General Equilibrium) framework. In order to achieve government revenue neutrality, two schemes for revenue recycling, namely lump-sum transfer and labour tax recycling, are employed. The simulation's results show that the carbon tax policy is more effective than the energy tax policy in reducing carbon emissions; because it is less expensive. The negative impact of the carbon tax, on real GDP (Gross Domestic Product) and investment, is less than the energy tax in both recycling schemes. Through lump-sum transfer, both taxes lead to an increase in the consumption and welfare of households, because the tax interaction effect is less than the tax recycling effect; however, through labour tax recycling, they decrease the consumption and welfare of all household groups. These tax policies are not beneficial for the transportation sector, because they lead to decreases in domestic output, domestic demand, exports and imports of all transport sectors. The climate change policies would lead to mitigation of rebound effect in whole of the economy and the transport sector.

This study examines the impact of carbon tax and its alternative, energy tax, on both the Malaysian economy and the transport sector, using a CGE (Computable General Equilibrium) framework. In order to achieve government revenue neutrality, two schemes for revenue recycling, namely lump-sum transfer and labour tax recycling, are employed. The simulation's results show that the carbon tax policy is more effective than the energy tax policy in reducing carbon emissions; because it is less expensive. The negative impact of the carbon tax, on real GDP (Gross Domestic Product) and investment, is less than the energy tax in both recycling schemes. Through lump-sum transfer, both taxes lead to an increase in the consumption and welfare of households, because the tax interaction effect is less than the tax recycling effect; however, through labour tax recycling, they decrease the consumption and welfare of all household groups. These tax policies are not beneficial for the transportation sector, because they lead to decreases in domestic output, domestic demand, exports and imports of all transport sectors. The climate change policies would lead to mitigation of rebound effect in whole of the economy and the transport sector.

Malaysia, as one of the top energy subsidizing countries, has announced to remove energy subsidies necessarily, not only to reduce energy consumption and the government budget deficit but also to improve overall efficiency and air quality. Therefore, this study evaluates the impacts of rationalizing energy subsidy and its energy efficiency improvement during 2010–2030 using a dynamic recursive computable general equilibrium model. Results revealed that reducing energy subsidies decreases energy consumption and emissions of all air pollutants. While the economic performance of the country improves in the long run due to stimulation in capital demand and investment, it reduces in the short run. Energy efficiency also improves by 1.1% and 2.3%, in the short run, in response to a reduction of 10% and 100% in energy subsidies, respectively. Energy efficiency improvements decrease the negative effects of pure subsidy policies on real GDP, trade, investment, and household consumption. The efficiency improvement policies also are effective in reducing more level of the rebound effect and lead to more energy saving in the economy, particularly in the petroleum products sector. The impacts on the rebound effect also differ across economic sectors. The results of this study provide new insights for energy subsidy policy and energy efficiency and suggest that additional tools and policies are required for improving the energy efficiency caused by phasing out energy subsidies. Malaysia, as one of the top energy subsidized countries, attempts to reduce the level of energy subsidies over time and, consequently, decline the use of fossil fuels in the economy. Therefore, this study analyzes the impacts of different subsidy reform policy on energy efficiency and, consequently, on economic and environmental performance and rebound effect of Malaysia by a recursive dynamic computable general equilibrium model.

Malaysia, as one of the top energy subsidizing countries, has announced to remove energy subsidies necessarily, not only to reduce energy consumption and the government budget deficit but also to improve overall efficiency and air quality. Therefore, this study evaluates the impacts of rationalizing energy subsidy and its energy efficiency improvement during 2010–2030 using a dynamic recursive computable general equilibrium model. Results revealed that reducing energy subsidies decreases energy consumption and emissions of all air pollutants. While the economic performance of the country improves in the long run due to stimulation in capital demand and investment, it reduces in the short run. Energy efficiency also improves by 1.1% and 2.3%, in the short run, in response to a reduction of 10% and 100% in energy subsidies, respectively. Energy efficiency improvements decrease the negative effects of pure subsidy policies on real GDP, trade, investment, and household consumption. The efficiency improvement policies also are effective in reducing more level of the rebound effect and lead to more energy saving in the economy, particularly in the petroleum products sector. The impacts on the rebound effect also differ across economic sectors. The results of this study provide new insights for energy subsidy policy and energy efficiency and suggest that additional tools and policies are required for improving the energy efficiency caused by phasing out energy subsidies. Malaysia, as one of the top energy subsidized countries, attempts to reduce the level of energy subsidies over time and, consequently, decline the use of fossil fuels in the economy. Therefore, this study analyzes the impacts of different subsidy reform policy on energy efficiency and, consequently, on economic and environmental performance and rebound effect of Malaysia by a recursive dynamic computable general equilibrium model.

Purpose The global energy market has been facing lower prices of crude oil in recent years. Lower fuel price leads to lower transport cost and cheaper agricultural inputs (such as pesticides and chemical fertilizer), resulting in lower prices of agricultural commodities in the international markets. On the other hand, lower global oil price reduces the oil revenues of oil exporting countries, resulting in a decrease in government expenditures. Therefore, the purpose of this study is to examine the impacts of lower global oil and agricultural commodity prices and government expenditure on the entire economy and poverty level of Malaysia. Design/methodology/approach This study used a computable general equilibrium model (CGE) to investigate four simulation scenarios based on the latest Malaysia’s input-output table belonging to 2010. The first scenario is a 30 per cent fall in the export and import prices of agricultural commodity prices, while the second is a 50 per cent decline in the export and import prices of crude oil, and the third combines them. In the fourth scenario, government operating expenditure declines by 4 per cent because of the fall in government’s oil revenues as a result of the decline in global oil prices. Findings The simulation results suggest that lower international oil price decreases real gross domestic product (GDP) and investment in Malaysia and influences positively the output and employment of some agriculture sectors. However, lower agricultural commodity price increases real GDP and investment in the country and negatively influences the output, employment and exports of all agriculture sectors. The decline in government expenditures also increases the output and the employment in the economy, whereas it decreases household consumption. In conclusion, results show that the agriculture sector losses from the current decline in international agricultural commodity prices, while it benefits from lower oil and government expenditure. Originality/value The main contribution of this study is comparing the impacts of recent falls in global oil and agricultural prices on the entire economy and agriculture sector of Malaysia. Investigating the impacts of these issues on the poverty level of Malaysian households is another contribution to the study. Another contribution is analyzing the impact of a reduction in government expenditures because of the decline in global oil price on the economy and welfare of Malaysia. Therefore, this study makes a useful contribution to the small literature of the topic.

Purpose The global energy market has been facing lower prices of crude oil in recent years. Lower fuel price leads to lower transport cost and cheaper agricultural inputs (such as pesticides and chemical fertilizer), resulting in lower prices of agricultural commodities in the international markets. On the other hand, lower global oil price reduces the oil revenues of oil exporting countries, resulting in a decrease in government expenditures. Therefore, the purpose of this study is to examine the impacts of lower global oil and agricultural commodity prices and government expenditure on the entire economy and poverty level of Malaysia. Design/methodology/approach This study used a computable general equilibrium model (CGE) to investigate four simulation scenarios based on the latest Malaysia’s input-output table belonging to 2010. The first scenario is a 30 per cent fall in the export and import prices of agricultural commodity prices, while the second is a 50 per cent decline in the export and import prices of crude oil, and the third combines them. In the fourth scenario, government operating expenditure declines by 4 per cent because of the fall in government’s oil revenues as a result of the decline in global oil prices. Findings The simulation results suggest that lower international oil price decreases real gross domestic product (GDP) and investment in Malaysia and influences positively the output and employment of some agriculture sectors. However, lower agricultural commodity price increases real GDP and investment in the country and negatively influences the output, employment and exports of all agriculture sectors. The decline in government expenditures also increases the output and the employment in the economy, whereas it decreases household consumption. In conclusion, results show that the agriculture sector losses from the current decline in international agricultural commodity prices, while it benefits from lower oil and government expenditure. Originality/value The main contribution of this study is comparing the impacts of recent falls in global oil and agricultural prices on the entire economy and agriculture sector of Malaysia. Investigating the impacts of these issues on the poverty level of Malaysian households is another contribution to the study. Another contribution is analyzing the impact of a reduction in government expenditures because of the decline in global oil price on the economy and welfare of Malaysia. Therefore, this study makes a useful contribution to the small literature of the topic.