23 through a raffle draw―who reduce consumption by 20 percent, and a 50-percent discount to 5,000 consumers who reduce consumption by 10 percent (Lanka News 2012). Effective July 2011, the government of República Boliviana de Venezuela imposed harsh penalties on those whose consumption was markedly higher than in 2010 (EIU 2011).

Restricting oil use is less prevalent. In Kenya, the budget for the fiscal year beginning in July 2009 restricted the engine size of ministerial cars to 1.8 liters, and warned that vehicles not in compliance would be confiscated by September 2009 (Kenya 2009). The Ministry of Finance and Planning of Sri Lanka in February 2012 issued a circular instructing all government institutions to limit fuel and power consumption as a priority (Sri Lanka News 2012b).

# **4.2 Diversification**

There are several paths to diversification away from oil:

- In the power sector, shift to natural gas, coal, and, above all, renewable forms of electricity such as hydropower, geothermal, solar, wind, and biomass. Fuel costs for hydropower, geothermal, solar, and wind are essentially zero, representing a break from oil prices. World prices of natural gas and coal have been correlated with oil prices, with the exception of U.S. natural gas prices. Between January 2004 and October 2012, correlation coefficients for the spot prices of benchmark crudes (Brent, West Texas Intermediate, and Dubai); FOB coal prices in Australia, South Africa, and Colombia; and natural gas border prices in Japan and Europe ranged from 0.66 (Colombian coal with gas in Japan) to 0.84 (Australian and South African coal with West Texas Intermediate). Coal and natural gas are traded much less than oil on the world market, and these price correlations can be much weaker on many domestic markets. The U.S. natural gas market is a case in point, for which the correlation coefficients with all other fuels are negative.

- For heating water, switch to solar water heaters.

- Substitute gasoline with bioethanol and petroleum diesel with biodiesel.

- Switch from road transport to rail, and from gasoline and diesel to compressed natural gas (CNG). Switching from gasoline to automotive LPG would be less attractive because of strong correlations between oil and LPG prices on the world market. Nevertheless, switching to automotive LPG has been made financially attractive in some markets on account of much lower taxes on LPG, or diversion of subsidized LPG for household use to the automotive market.

More than three-quarters of the study countries have set specific targets for renewable energy, mostly to do with power generation (Table A2.1 in Appendix 2). Of the top ten largest CNG vehicle markets in the world, eight are among the study countries. The top two (the Islamic Republic of Iran and Pakistan) account for more than one-third of the world’s total CNG vehicle population, and the top five (top two and Argentina, Brazil, and India) for more than two-thirds. Between 2002 and 2012, the global CNG vehicle population grew at an annual rate of 23 percent (IANGV). Not all markets, however, are enjoying robust growth. Argentina and Pakistan in particular are experiencing serious gas shortages, and the number of CNG vehicles in Argentina has been declining. The governments of Bolivia and the Islamic Republic of Iran have promoted CNG to reduce the consumption of petroleum products, which are heavily subsidized. In contrast, the CNG program in India was launched largely in response to concerns about urban air pollution.