ECO is pleased to report that after years of searching, long term funding for climate finance has been found! But first we must pry it out of the hands of big oil and coal companies. G20 nations in Pittsburgh, at the urging of the US, pledged to phase out fossil fuel subsidies. This could create a huge new source of funds that can and should be shifted to helping, rather than harming the climate. Leaders have already agreed that we must phase these subsidies out. They simply need to commit to do this urgently and decide where the money goes.
How much money will be freed up by eliminating developed country fossil fuel subsidies? While no definitive study exists, ECO notes that Jonathan Pershing, Head of the US delegation, authored a 2004 study that cited $57 billion annually in OECD subsidies. The same paper notes that per-capita subsidies in the OECD are more than twice as high as those in the developing world. Other studies put the figure as high as $150 billion in developed countries’ fossil fuel subsidies. However you count it, it’s a huge dent in the need for long term climate finance.
G20 leaders agreed to phase out fossil fuel subsidies over the “medium term.” One way to advance both financing and emission reduction goals would be to set a firm date for Annex I subsidy phaseout.
Shifting fossil fuel subsidies to investments in a global clean energy economy is an elegant and urgently needed solution. It provides a simple and compelling argument for politicians to explain long term finance to its citizens: Stop funding the problem, start funding the solution. Long term finance has to come from somewhere. Instead of giving US$3 billion to Exxon as the Obama Administration did just last week, shouldn’t part of the solution be to use the money for cleaner energy and adaptation?
If developed countries simply took advantage of the range of innovative finance sources out there, ECO’s math suggests that the 2020 finance gap would quickly disappear. Annex I leaders should be emboldened by the solutions at their fingertips and propose bold actions that could add up to meaningful long term finance.