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November 12 2013

20:19

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:

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.

The post Is Phasing Out Fossil Fuel Subsidies Even on the Agenda in Warsaw? appeared first on Global Warming is Real.

February 03 2011

22:42

Oil Industry Spins Subsidies Discussion In Wake of President Obama's State of the Union Address

In his State of the Union address, President Obama urged Congress to stop subsidizing oil companies and set a goal for 80% of electricity generated by 2035 to come from "clean" energy sources. While there is much dispute over some of the technologies included in the "clean" category, the President is proposing some wise investments in genuine cleantech. To pay for low-carbon energy alternatives, the President proposed $302 million for solar energy research and development (up 22 percent); $123 million for wind energy (a 53 percent increase); and $55 million for geothermal energy (up 25 percent).

But fossil fuels subsidies are holding back growth in burgeoning clean energy industries, which face a momumental challenge to compete with entrenched industries that receive far greater government subsidies.

And when it comes to oil subsidies, the President says enough is enough:

"...I’m asking Congress to eliminate the billions in taxpayer dollars we currently give to oil companies. I don’t know if you’ve noticed, but they’re doing just fine on their own. So instead of subsidizing yesterday’s energy, let’s invest in tomorrow’s."<!--break-->

Building on that speech, in about two weeks, President Obama will release his 2011 budget (which covers the 2012 fiscal year beginning October 1st, 2011), which is expected to include the end to some $4 billion a year in oil and possibly gas subsidies. A fossil fuel subsidy, according to the NY Times, colloquially refers to incentives, tax credits, preferences and loan guarantees. Over a 10-year period, if the President succeeds in eliminating both oil and gas subsidies, the US will save approximately $36.5 billion.

That's a great move to cut truly wasteful spending on a mature industry that is collecting massive profits on its own.  But this figure only scratches the surface of dirty energy subsidies. In September 2009, the Environmental Law Institute released a study [PDF] stating that from 2002-2008, federal subsidies for fossil fuels and 'renewable' energies with high global warming pollution content totaled some $72 billion.

Assuming the President follows through with his suggested oil subsidy cuts, this will build on his earlier efforts to do the same thing in last year’s budget, as well as international momentum sustained at the G20 Summits in Pittsburgh (2009) and Toronto (2010). In Pittsburgh, Obama and other world leaders noted that:

"Inefficient fossil fuel subsidies encourage wasteful consumption, distort markets, impede investment in clean energy sources and undermine efforts to deal with climate change. The Organization for Economic Cooperation and Development (OECD) and the IEA have found that eliminating fossil fuel subsidies by 2020 would reduce global greenhouse gas emissions in 2050 by ten percent."

At that meeting, they committed to:

"Rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption."

The US submission to the G20 in Toronto also included a phasing out process of fossil fuel subsidies.

According to Reuters, removing the subsidies will not have significant financial impact on energy companies, with $36.5 billion accounting for a mere 1% of expected domestic oil and gas revenues in the 10-year period.

Not surprisingly, in spite of the negligible implications for energy companies, the fossil fuel industry and their lobbyists came out against the President’s proposal.

Devon Energy Corporation spokesman Bill Whitsitt said that repealing the tax breaks would "slow down a real revolution" in natural gas exploration – not such a bad thing according to EPA figures.

Charles Drevna, President of the Oil Refiners Trade Group said:

"We applauded the president last week during his State of the Union address for stating his desire to increase domestic energy production." 

"The additional taxes on our businesses run counter to those stated objectives, however, and will do nothing to stimulate increased investment.”

Jack Gerard, President of the American Petroleum Institute, also opposed the end of subsidies to his industry. He, however, offered some spectacular spin on the subject:

“This is a tired old argument we’ve been hearing for two years now…”

“The federal government by no stretch of the imagination subsidizes the oil industry. The oil industry subsidizes the federal government at a rate of $95 million a day.”

Despite the oil industry's rhetorical gymnastics, nothing could be further from the truth.  The oil industry has received immense support from taxpayers, all while polluting our air and water as we saw with the Exxon Valdez disaster and the BP blowout, to name just a few examples.

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November 17 2010

15:48

G20 Business Summit: Sustainable Growth and Green Jobs


World business leaders lay out a 20-point plan for a green economic recoveryFor the first time at a G-20 meeting, more than 100 CEOs met at a business summit and reviewed strategies for advancing a greener global economy. Although not widely reported, business leaders came together on November 10 and 11, as a prelude to the G20 Seoul Summit.

The business summit brought together the heads of 120 of the world’s leading companies from 34 developed and developing countries. With combined total sales of over 4 trillion US dollars annually, these companies are in a position to make a difference.

A 20-point statement issued at the end of the business summit urged G20 countries to take action on a range of issues including facilitating green growth, improving energy efficiency and creating green jobs. “We have engaged in robust debates and deliberations in 12 working groups, each led by a convener… Our goal over the past four months was to produce reports with concrete proposals for action on global economic priorities,” said the final statement.

The statement indicated that corporate leaders see improving energy efficiency as an important way of increasing energy security, limiting greenhouse gas emissions, and insulating the world’s economies from the volatility of energy prices. The statement also referenced the need to finance innovation. “We also believe larger capital investments are needed to push towards breakthrough technologies,” it said.

Business leaders at the summit recognized the importance of employment and they suggested governments, business, and civil society do more to create jobs. To generate green growth and jobs, G20 countries need to adopt policies that strike a new balance between incentives and disincentives to create a business environment that favors green investment.

A green jobs report was prepared by the green jobs working group. The group told the G20 leaders to commit to a robust price on carbon, scale up research and development, eliminate fossil fuel subsidies and allow free trade in environmental goods and services.

World leaders attending the G20 summit in Seoul were also given the opportunity to learn how their countries can benefit from a greener economy.

Ditlev Engel is President and CEO of Vestas Wind Systems A/S and convener of the working group for creating green jobs. In a recent press release, Engel said:

“Give us the policy frameworks, and we’ll give you the results. We’ll make the investments, we’ll take the risks, and we’ll create the jobs. But this requires a policy framework that re-balances the incentives indisputably in favour of green investment.”

Engel goes on to explain:

“It’s not a one-size fits all approach. Our offer to each of the G20 leaders is simple: give us an hour of your time and we’ll come to you. Give us a date in your calendar and we’ll help you create a tailor-made policy framework to meet your country’s specific needs. Instead of a 1 x 20 solution, we suggest a 20 x 1 solution, finding what works best for each country.”

The release also noted that those nations who have invested in the green economy have already created economic growth and green jobs.

With countries around the world suffering from slow growth and high unemployment, green is a much needed economic engine that creates jobs.

_________________________________________________________

Richard Matthews is a consultant, eco-entrepreneur, sustainable investor and writer. He is the owner of THE GREEN MARKET, one of the Web’s most comprehensive resources on the business of the environment. He is also the author of numerous articles on sustainable positioning, green investing, enviro-politics and eco-economics.

June 23 2010

18:38

G20 Leaders to Meet and Discuss Global Warming…but only a little bit


Visit NRDCs Switchboard BlogOn June 26-27, Leaders from the 20 largest economies will meet in Toronto, Canada as a part of the Group of 20 Summit.  These countries represent 85% of the world’s global warming pollution and 83% of the world’s economic output.   So with the Heads of Government of these powerhouse countries meeting, will climate change be on the agenda and will they make any strides in dealing with this challenge? The answers are: just barely and maybe.

Climate change just barely on the agenda as Canada really doesn’t want to talk about it. The host country gets to largely set the agenda for the G20 Summits.  Canada really, really didn’t want to put climate change on the agenda of this month’s Summit and only agreed to put it on the agenda at the last minute (thanks to a bunch of world leader’s essentially lobbying Canada).  After all, the current Canadian government isn’t really thrilled to talk about climate change as it essentially has a no climate (or even an anti-climate) policy agenda.

Canada has an international legal commitment to reduce its global warming pollution by 6% below 1990 levels for the period 2008-2012.  According to the Government of Canada’s own projections they will be 29% above their current target even with its current action.  One of the main reasons is that their energy policy is encouraging the massive expansion of tar sands (as my colleagues have discussed here and here).  And their current emissions target for 2020 is essentially to wait and see what the US does (as this guest post highlights), while doing very little to proactively implement policies to change the trajectory of its pollution.

So climate change is just barely on the agenda at this G20 Summit and likely won’t be the main focus of this month’s Summit, but could they still move the international effort forward?

Maybe some positive strides on climate change. So climate change isn’t front and center at this G20 summit, but there are three opportunities to move the global effort forward—phase-out of fossil fuel subsidies, prompt-start finance, and “green growth”.

1.  Moving forward on the phase-out of fossil fuel subsidies. The G20 leader’s agreed at last year’s summit to: “Rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption…” Phasing out these subsidies is a win-win-win.  A recent draft report by the IEA found that fossil fuel subsidies are worth about $557 billion in emerging and developing countries (as Reuters reported).  This didn’t include subsidies in the developed world because they are generally more indirect (e.g., reduced tax rates, faster capital depreciation rates, etc.), but previous studies have estimated that these are significant.  So phasing out these subsidies will free up some much needed cash for strapped economies.  And it will free up some incentives which could be redirected to creating the future clean energy economy instead of supporting the dirty energy past.  They are also estimated to have a sizeable impact on global warming pollution –up to an estimated 10% cut in emissions.

While it isn’t expected that this G20 Summit will finalize how that commitment will be met, they will need to make enough progress so that firm decisions can be made at the G20 Summit this November (this paper has some good suggestions on specifics that need to be agreed in Toronto).  And just as I was about to post this a leaked draft of the G20 statement (available here) shows that the G20 may weaken this commitment by making it "voluntary" and "member specific" (ClimateWire, sub req.).  This is a significant weakening of the only concrete step the G20 committed to take on climate change last year and hopefully will be eliminated before it is finalized this weekend.

2.  Outlining the prompt-start funding from key countries. In the Copenhagen Accord, developed countries made a commitment to deliver around $30 billion over the next three years to assist developing countries in deploying clean energy, reducing deforestation emissions, and adapting to the impacts of climate change (as I’ve discussed here).  According to data compiled by WRI, total pledges are around $31 billion so meeting that objective is easily within reach.  But not all of that money is actually committed as countries are in various stages of their budget cycle.  For example, the Obama Administration outlined $1.4 billion in this year’s budget (as my colleague detailed), but Congress has yet to approve the expected number (and there are troubling signs that it may be cut a bit).  And countries are slowly moving the money out the door to assist developing countries in these efforts.  Some coordination is already beginning to occur around deforestation, but the other avenues of funding (adaptation and clean energy) have very little coordination.

The G20 could play a key role in accountability of that prompt-start funding.  These leaders could look each other in the eye and ask: “you committed to X amount, where are you in delivering on that amount?”

3.  Begin the drumbeat on the creation of low carbon economies (or “green growth”). These major economies of the world could jump start a real race for the clean energy future – a market that will be valued at $17 trillion over the next two decades (as I’ve discussed).  The current G20 Summit is grappling largely with economic issues.  While the current state of the global economy will be front and center, these key countries need to also begin to focus on the future drivers of economic prosperity.  As many economists, labor unions, policymakers, and columnists have pointed out: clean energy will be one of the main drivers of this century.

The G20 could begin a serious focus on what steps each country is taking to create their own “race for the clean energy future” and how the G20 countries could collectively spur low carbon (or “green growth”) throughout the world. While Canada isn’t really the best country to lead a conversation on the development of low carbon growth (as I’ve pointed out above), the hosts of the next G20 –South Korea—are a leading country pursuing and advocating for low carbon growth.  In fact, they are the only country that has a Presidential commission on green growth and recently launched a “Global Green Growth Institute”.  The Toronto G20 Summit could launch a shift in the G20 to a much more focused effort on creating low carbon economies throughout the world.  This shift could lead to a concerted focus on this issue at the Rio+20 Summit to be held in 2012 (as my colleague discussed), with tangible outcomes in the meantime.     

Looking to Seoul, Korea to firm up some of these details. I don’t expect that this month’s G20 Summit will resolve the issues around the phase-out of fossil fuel subsidies, prompt start finance, or how to spur “green growth”.  But this Summit will have to make enough progress that real decisions can be agreed at the next G20 summit in Seoul, Korea (Nov. 11-12).

These key countries are too dominant in global warming pollution and economic output to not be critical in leading the world to a clean energy future which addresses global warming.  Let’s hope they use their time wisely to really spur the necessary action.

Cross-posted from the Natural Resources Defense Council Switchboard.

—————————–

Jake Schmidt is the International Climate Policy Director at the Natural Resources Defense Council where he helps to develop the post-2012 international response to climate change (for more information see his blog or follow him on twitter). And help track countries actions to reduce their global warming pollution.

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