Fuel Subsidy Reform in Colombia: Opportunities and Challenges to Establish a New Social Contract

The elimination of fossil fuel subsidies represents a pragmatic approach for countries in the Global South to reinforce climate mitigation efforts, enhance their social policies, and fund other government priorities. In an ideal scenario, this process paves the way towards a New Social Contract, which results from the renegotiation between societal groups and government, for instance, as part of the energy transition. Despite historically intending to support vulnerable households, fuel subsidies predominantly benefit high-income households or specific sectors with substantial fossil energy consumption. Previously, concerns have arisen regarding the governments' ability to fulfil its social contract when eliminating fuel subsidies, particularly if adequate replacements for impoverished and vulnerable households, as well as affected economic sectors, are not provided. Instances in Ecuador, France, Nigeria, and more recently Germany, underscore how the removal of subsidies can trigger widespread protests with broad societal support, revealing their significance within the social contract of these nations. In my research paper, I utilize the Colombian Case to examine the challenges and opportunities arising from subsidy reform processes and the potential pathways towards a New Social Contract. Since 2022, the Colombian government has incrementally adjusted gasoline prices to align with global market rates and a similar initiative for diesel prices is scheduled for implementation in 2024. The current president of Colombia, Gustavo Petro, campaigned on promises of significant social and environmental justice reforms, arguably positioning the country on the trajectory towards a New Social Contract. Employing a qualitative research approach, my study conducts a systems analysis of the adaptation of the social contract that the Colombian government is undertaking in the subsystem concerning fossil fuel subsidies. I conducted interviews with stakeholders from the public and private sectors, as well as civil society organizations involved in or impacted by the process, to gather diverse perspectives on the repercussions of subsidy removal on the social contract. Furthermore, I explore potential avenues for repurposing the fiscal space created by the reform to move in the direction of a New Social Contract. During the interviews, experts highlighted numerous challenges associated with the reform of fuel prices and the envisioned transition towards an eco-social contract between the Colombian government and societal actors. Particularly, concerns were raised about the current structure of the Colombian transport sector, doubts regarding the government’s efficacy, unclear communication from policymakers, and the concealed socioeconomic effects that threaten public acceptance of the ambitious plans of the Petro government. Nevertheless, a socially acceptable execution of the reform could bolster the involvement of societal actors in the transition process. However, failure could precipitate protests and unrest in Colombia, potentially derailing the reform agenda, like the energy transition and subsequently the move toward a New Social Contract.