BERLIN - Every day, governments give away an estimated US$2 billion of taxpayer
money to the fossil fuel industry. This largesse to a highly profitable sector
by countries verging on bankruptcy or unable to feed large numbers of their own
people is "complete madness", according to many experts.
In Toronto on Sunday, at the conclusion of the Group of 20 summit, countries
agreed the madness must be constrained if not stopped.
"I was impressed. I think the commitment to phase out fossil fuel subsidies has
finally arrived," said Mark Halle, director of trade and investment at the
International Institute for Sustainable
Development (IISD) European office in Geneva.
"With countries committed to cutting their deficits, it is hard to ignore
giving billions of real money away to the fossil fuel industry or to keep fuel
prices low," Halle said in an interview.
The $2 billion-a-day public subsidy for carbon-based fuels is a very
conservative estimate based on extensive research conducted by the IISD's
Global Subsidies Initiative, said Halle. Not only do such huge subsidies
undermine policies on energy efficiency, they make it impossible for
alternative energy sources to compete, he said.
"We can't make the transition to low-carbon economies nor can the energy
playing field be leveled without the elimination of fossil fuels. And time for
that has finally come," he said.
Others are less optimistic given the Group of Eight and G-20 track record for
broken promises.
"It [the G20 commitment] fell short of vision and courage that is expected from
global leaders in the light of the disastrous oil spill," in the Gulf of
Mexico, said Darek Urbaniak of Friends of the Earth Europe. Urbaniak noted that
BP, the company responsible for the spill, receives British and EU public
subsidies.
Countries such as Canada and Australia sought to weaken the G-20 commitment by
making commitments voluntary, he said, but the US pushed for a stronger
agreement. However, do-nothing clauses remain part of the agreement. It says
that countries agree to phase out "inefficient fossil fuel subsidies" but each
country decides what those are. Some countries like Japan, Australia, Italy and
others have already said they don't have any.
"Australia wants to protect its coal mining sector ... Canada wants to keep on
going with its own subsidies to the tar sands - an environmental and climate
disaster in the league of the BP oil spill only in slow motion," Urbaniak told
IPS.
Albert Koehl of Ecojustice, a Canadian environmental NGO, said, "Our research
shows that in the last two years Canada was spending as much on oil and gas
subsidies as on climate programs. Taxpayers won't be amused to find out that
government spending on climate change is being nullified by spending on oil and
gas subsidies.''
Koehl said Canada is now investing new billions of dollars into developing
carbon capture and storage (CCS) technology for the fossil fuel sector and
primarily the enormous Alberta tar sands operations. "CCS is a new way of
massively subsidizing the oil and gas industry, especially the tar sands," he
said.
Most industrialized countries subsidize oil, coal and natural gas production to
reduce the cost to oil companies of finding and producing oil. Countries in the
developing world subsidize the cost to the public of buying fuel. Experts agree
that both forms of subsidies encourage consumption of fossil fuels and thus
increase the price of oil.
US President Barack Obama put these subsidies on the chopping block at the
previous G-20 summit in Pittsburgh last September. The Obama administration is
looking for ways to cut its ballooning deficit and thinks taking $3 billion to
$4 billion away from fossil fuel companies is achievable, said Halle.
Many other countries are now paying attention to their subsidies, seeing it as
money they could put to much better use without increasing their deficits.
India, China, Malaysia and others have cut their consumption subsidies, he
said. However, this has to be done carefully and over time. While the poor are
used to justify keeping fuel prices low, that only applies to heating and
lighting fuels. The bulk of subsidies go to transportation fuels, which
benefits the middle class.
"Subsidy reduction is a new area for everyone and countries have to go
carefully," Halle said.
Since subsidies are deeply entrenched and difficult to get rid of, the G-20
commitment provides an excuse and leverage needed in many countries to enact
reforms, said Halle. "We've spoken to half of the G-20 countries and they
hadn't really thought the issue through. Now they are seeing some
opportunities."
In addition to the G-20, six or seven non-member countries have formed a
"Friends of Fossil Fuel Subsidy Reform" group to follow the same commitments.
And the G-20 did agree to have some plans for action in place for their next
meeting in November.
There are a lot things that could be done with that annual expenditure of $700
billion to $800 billion in fossil fuel subsidies and countries are really
beginning to think about that, Halle said. "The momentum for change is
building, but it still needs to grow."
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