Abstract
Malaysia has recently implemented a subsidy reduction policy on domestic fuels such as motor petrol, diesel and liquefied petroleum gas (LPG). In addition, in its five-year national plan (2005-2010), Malaysia also proposed a 350 megawatts (MW) electricity generation capacity from renewable energy technologies. In this thesis, a Computable General Equilibrium model (CGE) is used to measure the economic, welfare and the environmental impacts of the above policies. A model for tax and trade analysis for Malaysia (M2-TMAS) was developed to investigate the effects of alternative policies of recycling savings, due to subsidy reduction, back to the economy. M2-TMAS is a static, small open economy model with a data set from the recent 2000 input-output table. Results show that the adverse impact of fuel subsidy reduction could be mitigated through an appropriate savings recycling policy. A model for energy, economy and the environment for Malaysia (M3-EMAS) extends the model to include detailed representation of electricity sector, incorporating CO2 emissions resulting from the consumption of energy products. The model is used to analyse the proposed renewable energy portfolio in power generation. Results from this analysis suggest that the existing regulated natural gas price to power producers does not pose a barrier to the penetration of renewable energy technologies, although transferring those subsidies to renewable energy producers could encourage its share. Thus, if the regulated price is to be maintained, the portfolio target could be met through direct subsidies to renewable energy producers.