rss
10

G20 baulks at ending fossil fuel subsidies, “dumbest” policy of all

Print Friendly

The G20 meeting in China may have been notable for the decision by both China and the US – the two biggest carbon emitters on the planet – to ratify the Paris climate treaty, an initiative that will almost certainly see the deal come into force by 2017, three years earlier than anticipated.

But the grouping of the world’s most powerful nations is still taking little action on ending fossil fuel subsidies, despite agreeing to the move in 2009 to end what has been described as the “dumbest policy” in the world.

636084042094112621-AP-China-G20

The International Energy Agency estimates that countries spent $US493 billion on consumption subsidies for fossil fuels in 2014, while the UK’s Overseas Development Institute suggests G20 countries alone devoted an additional $US450 billion to producer supports that year.

Throw in the unpaid environmental and climate impacts, and the International Monetary Fund puts total annual subsidies for fossil fuels at more than $5 trillion.

Last week, the Bloomberg Editorial Board said fossil fuel subsidies were the dumbest policy they could find in the world, saying that the “ridiculous” outlays would be economically wasteful even if they didn’t also harm the environment.

“They fuel corruption, discourage efficient use of energy and promote needlessly capital-intensive industries,” the Bloomberg team wrote. “They sustain unviable fossil-fuel producers, hold back innovation, and encourage countries to build uneconomic pipelines and coal-fired power plants.

“Last and most important, if governments are to have any hope of meeting their ambitious climate targets, they need to stop paying people to use and produce fossil fuels.”

The Bloomberg team said the G20’s pledge in 2009 is “no use” and “too vague”, and called on the governments to first agree on a standard measure to report various subsidies (Australia, for instance, rejects the claims by NGOs and others that it has $7 billion a year in fossil fuel subsidies) and to set strict timelines for eliminating them.

They didn’t; despite the call being echoed by 200 civil society groups, and multi-national insurers with $1.2 trillion in assets, led by Aviva, who called on the G20 leaders to “kick away the carbon crutches” and end fossil fuel subsidies by 2020.

“Climate change in particular represents the mother of all risks – to business and to society as a whole,” said Aviva CEO Mark Wilson. “And that risk is magnified by the way in which fossil fuel subsidies distort the energy market.  These subsidies are simply unsustainable.”

But the G20 only went so far as to “reaffirm our commitment to rationalise and phase-out inefficient fossil fuel subsidies  …  recognising the need to support the poor, even though most analysis says such subsidies mostly support the well off.  We … look forward to further progress in the future,” the G20 said.

NGOs are now hoping that Germany, which will take over the chairmanship of the G20 for the next year, will deliver a tight deadline by the time the next summit. Some say it will be the “last chance” to agree on an end date.

One significant step was the progress towards “green finance” and China’s initiatives, in particular, to create a “green financing system” drew attention and applause.

“This will be the most capital intensive transition in human history,” said Ben Caldicott, from the University of Cambridge.

China’s initiatives comprise 35 action points and present a roadmap to developing various green financial instruments and a range of “green” incentives such as central bank re-lending, guarantees, interest subsidies as well as the launch of a national-level green development fund.

China is already the world’s biggest green bond market, accounting for one-third of the green bonds issued in the first half of the year. That was worth 75 billion yuan, but the task to meet the Paris goals is expected to cost more than 3 trillion yuan (around $US450 billion) annually.

Of course, this comes at a time when the Australian government is trying to strip $1 billion in funding from the country’s primary supporter of new renewable energy technologies, the Australian Renewable Energy Agency.

As for the Paris deal, HSBC says it expects the treaty to be ratified by the end of this year. One of the major concerns is that the deal needs to be “Trump-proof”, meaning that it needs to be brought into effect before Donald Trump wins the US presidency, which latest opinion polls suggest is still a live option.

HSBC says it would not be surprised if EU countries started to break ranks with historical diplomatic norms and started to ratify the treaty individually, to make sure that the numbers are delivered in time.

“For instance, we think it is unlikely that France, the host of COP 21, can wait too long for other EU countries before formally joining the Paris Agreement.”

hsbc paris deal ratify

“The working assumption from the UNFCCC was that the agreement would come into force in 2020,” HSBC notes, although an official start date was left out of the final text.

“In fact, countries are moving at a pace that signals entry into force well ahead of 2020. Given the country support on timeframes and continued climate diplomacy, we think the threshold will be reached in 2016 or early 2017.”

Australia is expected to ratify later this year, although it has yet to specify. At least 55 parties representing at least 55 per cent of global green house emissions are required to ratify the agreement for it to enter into force.

  

Share this:

  • john

    How do you know FF subsidy works?
    The most profitable company in the world is a FF company.
    Mind a problem the western world is built on FF as a basic driver of the economy.
    How to equitably move from making everyone pay less to enjoy the benefits of the type of society they live is a question, because no person will agree to pay more.
    Removing the subsidy to FF will result in the companies having to charge more for the supply of the fuels that drive the western world.
    This would be a hard sell to the electors in every country.
    However there are some areas where the effect is beneficial for instance, transport where the alternative is both cheaper to use and very cheaper in the long run with ancillary health outcomes that save society a multiple multiplier outcome.
    Energy supply to the individual in some countries the alternative is both cheaper in the long term and immediate.
    What is the reason that society can not move to a more technological solution that is facing us?
    Possibly several reasons.
    1 Knowledge.
    2 No ability to understand the situation.
    3 Ideological belief systems.
    4 No understanding as in point 1.

    • Carl Raymond S

      There’s no magic pudding. We already pay the subsidies through taxes. Give us back that money so we can choose if we want to pay it to the less competitive FF companies, or to something more sustainable.

  • howardpatr

    Seems clear that the AUSTRALIAN CONSERVATIVES PARTY, led it seems by Bernardi and Abbott, dictate the climate change policy of Turnbull Coalition Government. A coalition of the Liberals, the National and the ACP.

  • Don McMillan

    I work in the Natural gas industry – What subsidies are they referring to?

    • Neo Lib Yes

      They don’t exist in Australia. Giles and co are referring to the Fuel Tax Credit, which is a tax paid and is rebated if you don’t drive on the road. So lots of mining companies have fleets not driving on the road so they get a rebate.

    • RobSa

      According to the Minerals Council of Australia during 2013 to 2014 1% of electricity produced by gas in Australia was subsidised. For all fossil fuels the rate was 5% of total subsidies paid.

      http://www.minerals.org.au/file_upload/files/media_releases/Electricity_production_subsidies_in_Australia_FINAL.pdf

      What about regional Victoria and the spending on natural gas infrastructure? It was covered by RenewEconomy in 2014.

      http://reneweconomy.com.au/2014/the-massive-subsidies-in-victorias-gas-expansion-plans-93988

      • Don McMillan

        That is not at the wellhead – their downstream companies.

      • Neo Lib Yes

        That is not what they are referring to in the article. Though it is an interesting analysis from the Minerals Council, indicating that 95% of fuel subsidies are paid by consumers to the renewable sector. A total of $2.788 billion paid through the RET and FIT, in the 13/14 year which would have increased strongly by now. Interesting.

  • RobSa

    Quickly now. Get rid of these, then coal-fired power plants, then get rid of the sale of new fossil-fueled cars, do something about motorsports and emissions from agriculture, apply travel restrictions and in general make the polluter pay more, much more. There is a lot of work to be done before we can call Australia a great country.

  • windship

    Considering Paris was all about not going over 1.5 degrees and we’re already pushing 1.2 degrees, it is a criminal enterprise for any government official to assist in any more FF subsidies. Obviously the wrong people are being put in jail.