Tag: Finance

Fossil Subsidies: Hiding in Plain View

Looking to fill gaps?  Eliminate fossil-fuel subsidies!

On the way to Durban, ECO was rereading some of the past articles that have graced its pages. One that is particularly striking and poignant is from Bonn in June 2011. Title: “Developed country UNFCCC climate finance commitments in 2013”.  Article text: “0”. 

It is also striking just how many articles there have been on the need to close the gigatonne gap and stay as far below 2° C as possible.  If only there was a way to kill two birds (figuratively, of course, as we would not want to upset the CBD) with one stone – oh wait,there it is – eliminate fossil-fuel subsidies!

The OECD recently estimated that USD $45 to $75 billion a year has been spent on fossil fuel subsidies in its member countries in recent years.  And the IEA in its 2011 World Energy Outlook finds another USD $400 billion globally in consumption subsidies. 

Imagine if much of that money was used to support renewable energy, energy efficiency, adaptation and other climate-related measures so sorely needed?  Capitalization of the Green Fund would be a cinch! 

As for the gigatonne gap, a joint report by IEA, OECD, the World Bank and OPEC (yes you read that right) showed that phasing out subsidies to fossil-fuel consumption alone could reduce greenhouse gas emissions by 6.9% in 2020. That’s “more than Kyoto” right there and is only a portion of the subsidies that need to go.  (Of course, to assuage concerns over energy access, any phasing out of consumption subsidies in developing countries needs to be supported by climate finance to support safe renewable forms of energy – though we also know that consumption subsidies are socially regressive with only 8% of that $400 billion reaching the poorest 20%, according to the IEA).

So it is thrilling to see that “Removing fossil fuel subsidies and/or reporting thereof” is listed as a means to increase the level of ambition of Parties in the “matters relating to paras. 36-38” text.  As ECO has stressed many times before, the current targets and actions pledged by Parties are insufficient to keep warming below 2° C, let alone 1.5° C. 

Unfortunately, it doesn’t seem likely the gap will be completely closed in Durban.  So it is essential that the process next year further clarifying targets and actions and closing that gap include the consideration of phasing out fossil fuel subsidies. 

Phasing out fossil fuel subsidies can also contribute to efforts by developing countries to achieve a significant deviation from business as usual emissions by 2020, again with the proviso of climate finance to ensure energy access for all.  ECO expects to see this linkage made explicit in COP decision text adopted at here in Durban. MRV negotiators (hint, hint!) may also wish to draw inspiration from the OECD’s inventory on fossil fuel subsidies and how this could be incorporated and improved upon by reporting under the UNFCCC.

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