Is Phasing Out Fossil Fuel Subsidies Even on the Agenda in Warsaw?

A sunny day in Beijing
A sunny day in Beijing

For all their potential promise, apparent earnestness and gravity – not to mention their possible effects and potential ramifications – it's hard at times not to be cynical about high-level political negotiations. Such might be felt of the United Nations (UN) climate treaty negotiations which got under way this week in Warsaw, Poland.

People have good reason to be skeptical of the climate treaty process, not because global warming and climate change are based on faulty science or because viable options aren't in hand, but because governments and societies around the world are so invested in fossil fuels that the thought that political leaders would collectively take aggressive action to phase out carbon and greenhouse gas emissions is nigh unthinkable.

Take, for example, that even as representatives from the 195 UN member nations party to the UN Framework on Convention on Climate Change (UNFCCC) meet to establish the framework of an agreement to reduce global carbon and greenhouse gas emissions, the International Energy Agency (IEA) estimated that G20 governments doled out $523 billion in subsidies to fossil fuel producers in 2011, the latest year such figures are available. What's more, fossil fuel subsidies are rising, even as the UN World Meteorological Organization (WMO) just last week reported that global greenhouse gas emissions reached a record high in 2012.

To say such subsidies are counterproductive would be gross understatement. Perverse would be a better modifier. Eliminating fossil fuel subsidies would remove a perverse incentive that stands in the way of leveling the energy markets “playing field,” putting a true cost on carbon in an attempt to address global warming and climate change.

Releasing a report entitled Time to change the game: Fossil fuel subsidies and climate, the Overseas Development Institute (ODI) documents “the scale of fossil fuel subsidies and sets out a practical agenda for their elimination in the context of the global goal of tackling climate change.”

Climate treaty negotiators convene in Warsaw

Against the backdrop of devastation in the Philippines caused by Typhoon Haiyan – reportedly one of, if not the largest and strongest, typhoon ever recorded – the 19th Conference of Parties (COP 19) to the UNFCCC is convening November 11-22 in (ironically enough) Warsaw, Poland, a nation with a government that has steadfastly resisted efforts to shift off coal and fossil fuels toward a more diversified energy mix centered on cleaner, renewable alternatives.

Convening at COP 19 in Warsaw over the next 11 days, representatives from the 195 UN member nations that are parties to the international climate treaty (the U.S. included) and the 192 that have signed and ratified the Kyoto Protocol (the U.S. excluded) will attempt to hammer out the framework of a successor to the Kyoto Protocol. Full details of a new accord to reduce global carbon and greenhouse gas emissions are to be ready for signing by 2015 to go into effect in 2020.

Trying to make the negotiations as inclusive as possible, the UN Framework Convention on Climate Change (UNFCCC) Conference of Parties (COP) has become a major public event. At COP 19 in Warsaw, representatives of 195 UN member nations will be joined by a host of NGOs, civic groups, other public and private sector organizations, the press, and, more than likely, large numbers of demonstrators.

Enhancing the efficacy and credibility of global climate change action

The UNFCCC's public credibility – not to mention its efficacy – would be greatly enhanced if the national governments party to the international treaty were to take one expedient, cost-effective step: eliminate fossil fuel subsidies, ODI asserts, and they are by no means the first to advocate taking such a step.

Source: "Time to change the game," ODI, 11/2013
Source: "Time to change the game," ODI, 11/2013

Straight from the executive summary of “Time to change the game: Fossil fuel subsidies and climate,” here are ODI's key points:

  • Fossil fuel subsidies are expensive. They were at over $500 billion globally in 2011, and up to $90 billion in the OECD alone.
  • These subsidies are increasing and are a major obstacle to green investment, and seriously undermine attempts to put a price on carbon.
  • In developing countries the majority of benefits from fossil fuel subsidies go to the richest 20 percent of households.
  • Domestic and international support for fossil fuels dwarfs spending on health and education in a number of countries, and outstrips climate finance and aid.
  • Phasing out fossil fuel subsidies in G20 countries by 2020 (and globally by 2025), with proper safeguards for the poor, would enable the triple win of inclusive green growth.

Perverse incentives indeed, and the above is only a short list. According to ODI's study, “international financial institutions (IFIs) also support carbon-intensive energy systems.

“Over 75 percent of energy-project support from IFIs to 12 of the top developing-country emitters went to fossil fuel projects. There has been no significant shift in this trend: in the last financial year alone (2012-13), the World Bank Group increased its lending for fossil fuel projects to $2.7 billion, including continued lending for oil and gas exploration (Oil Change International, 2013).”

As ODI goes on to state:

“If their aim is to avoid dangerous climate change, governments are shooting themselves in both feet. They are subsidizing the very activities that are pushing the world towards dangerous climate change, and creating barriers to investment in low-carbon development and subsidy incentives that encourage investment in carbon-intensive energy.

“Coal, the most carbon-intensive fuel of all, is taxed less than any other source of energy and is, in some countries, actively subsidized (OECD, 2013a). For every $1 spent to support renewable energy, another $6 are spent on fossil fuel subsidies (IEA, 2013).”

Following, in summary form, are the key actions ODI is urging G20 UNFCCC climate treaty delegates take in Warsaw:

  •  G20 countries use the Warsaw CoP meeting to agree a broad timeline for action
  • G20 governments call on technical agencies to agree a common definition of fossil fuel subsidies
  • G20 governments commit to phasing out all fossil fuel subsidies by 2020, with early action by rich-country members on subsidies to coal and to oil and gas exploration by 2015
  • that governments and donors work together to ensure that measures are put in place to protect vulnerable groups from the impact of subsidy removal.

Eliminating fossil fuel subsidies would be one of the most straightforward, cost-effective and effective steps world governments could take to address the profound threats and rising costs of addressing global warming and climate change. Will they muster the will and toughness to do so? Not likely, but one can at least hope for the best.

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Thomas Schueneman
EditorThomas Schueneman
Thomas Schueneman
EditorThomas Schueneman
Thomas Schueneman
EditorThomas Schueneman
Gina-Marie Cheeseman
EditorGina-Marie Cheeseman