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ON THE RIGHT: Need to change legal framework

Aidan Rogers

ON THE RIGHT: Need to change legal framework

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High energy costs associated with electricity generation and transportation currently ranks highest amongst the structural weaknesses limiting economic growth in Barbados.
Imported fossil fuels constitute the largest line item amongst total imports and also accounts for the greatest annual expenditure of foreign exchange, with approximately US$30 million required monthly to satisfy our everyday needs.
The net effect of this near 100 per cent dependency on imported fossil fuels is continued high costs of living and doing business throughout the island.
Against this backdrop however, reliance by successive governments on steady revenue inflows from the sale of imported petroleum products to the major third party customers, Barbados Light & Power Company Limited (BL&P) and gas station operators, is neither a sustainable energy nor fiscal strategy.
Government, as the sole shareholder of the Barbados National Oil Company Limited (BNOCL), directly benefits from the sale of imported fuels (gasoline, diesel and heavy fuel oil) through its wholly owned subsidiary, the Barbados National Terminal Company Limited (BNTCL).  
With regards to gasoline and diesel sales, a 2010 Central Bank of Barbados study indicated that Barbadian consumption of fuel for transportation is inelastic – meaning whether the price increases or decreases consumption patterns remain unchanged.
This circumstance meant that subtle adjustments in the excise taxes charged for both commodities could be used, if required, to easily translate into the collection of predictable amounts of revenue.  
Revenue collection from the generation and sale of electricity can be seen in a similar vein, as government collects 17.5 cents out of every dollar paid by consumers, accounting for over 15 per cent of total annual Value Added Tax (VAT) receipts.
The prospect therefore, of aggressively lowering electricity costs via significant reductions in the Fuel Clause Adjustment (FCA) through structured investment in large scale renewable energy (RE) and energy efficiency (EE) projects would adversely affect VAT receipts from the sale of electricity due to lower electricity bills across the board.  
Persisting with fiscally driven approaches to energy pricing and sales warrants immediate re-examination in light of the decade-long spikes in global fossil fuel prices and its debilitating effects on key sectors within the economy.
Urgent national attention now needs to be directed towards a wider range of specific options available to government, BL&P and the private sector for turning around the impending fossil fuel death spiral.
This shift can be achieved by way of technically sound, strategic and transparent investments in RE, EE and energy conservation practices.   
Serious discussion of these issues however, must include the Simpson Oil Limited (SOL) group, whose recent purchase of Esso Barbados (Esso), effectively made that conglomerate the largest distributor of petroleum products on the island apart from BNOCL and BNTCL.  
No single individual or entity should be regarded as the sole repository of policy and technical knowledge on the way forward out of the current crisis.
The future growth of this economy must be founded on cheap and sustainable sources of energy for electricity generation and transportation.
Such a foundation would readily serve as a catalyst for creating cost effective and competitive sectors in tourism, manufacturing, high-tech agriculture, information and communication technology and financial services.