Sustainable Energy in Developing Countries: Policy Analysis and Case Studies.

Sustainable Energy in Developing Countries: Policy Analysis and Case Studies by peter Meier and Mohan Munasinghe, (Edward Elgar, 2005), 283 pages, ISBN 1-84376-753-8.

This book addresses the energy situation in Sri Lanka rather than what the title promises. More precisely, the book

is a collection of (World Bank and other) papers by the two authors and covers inter alia the following topics: a review of the present situation in Sri Lanka, health damages that are caused by energy use, the economics of imported fuels, fuel choice for power generation, traffic (congestion, price distortions between LPG, diesel, and gasoline, leaded versus unleaded gasoline, and public transport), greenhouse-gas-emission reductions, renewable energy and, as a digression, real options to cover uncertainty associated with carbon trading. Finally, the book includes a flattering foreword by Karu Jayasuriya, Minister of Power and Energy in Sri Lanka.

The topics are, by and large, addressed only as they arise in Sri Lanka. The book rarely reaches beyond this narrow focus, and when it does, e.g. by using boxes, it is confined to very elementary economics or international statistics. To get a flavor, consider Box 3.1 on p. 41 on the economically optimal level of renewable-energy supply: Renewable-energy supply is described by an upward sloping supply curve and the optimal volume is given where this curve cuts the social costs of fossil fuels (out of pocket plus external costs, or value in case of carbon trading). The background material on transport is slightly more advanced but borrows heavily from a nice, but not recent, paper of Newbery (1990).

The health recommendations, including the subsequent suggestion of phasing out leaded gasoline, are based on reviews of international studies and their major findings are tabulated (as well as the short time series on Sri Lanka). In the case of leaded gasoline, the authors debunk some myths and mention the absurdity that costs must occur to remove the catalytic converters from imported and used cars from Japan (about three quarters of imported cars are used cars and on average 2-3 years old) to allow utilization of Sri Lanka's leaded gasoline. Also, the prices distortions for LPG (a most expensive fuel just making it on a tax advantage) and diesel are criticized for leading to the absurdity that Sri Lanka has to re-export gasoline from the refinery yields. Moreover, not surprising (since price manipulations are always inferior to income policies, see e.g. Ng (1984)), but important to mention is that subsidizing fuels does not reach the poor despite all the lip services by politicians.