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Countries Start to Outline their Plans to Phase-out Fossil Fuel Subsidies at the G20--a mixed bag

Jake Schmidt

Posted June 28, 2010 in Solving Global Warming

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The G20 has just wrapped up and the outcome on the phase-out of fossil fuel subsidies is a mixed bag.  The G20 didn’t include weakening language which would have signaled that the countries commitments were “voluntary” (as it appeared last week in a leaked draft).  A couple of countries brought forward specific commitments, plans, and timelines to phase-out some of their domestic incentives.  Other countries didn’t outline their plans and the actual language in the Toronto G20 communiqué is unspecific on details for the phase-out.  So here are the details.

G20 fossil-fuel subsidy phase-out isn’t voluntary.  Early leaked drafts of the G20 language included a signal that this phase-out was “voluntary”.  This would have been an unfortunate weakening of their commitments as it wouldn’t have signaled the same political weight.  But this weakening language was stripped from the final communiqué, which says:

“We welcome the work of Finance and Energy Ministers in delivering implementation strategies and timeframes, based on national circumstances, for the rationalization and phase out over the medium term of inefficient fossil fuel subsidies that encourage wasteful consumption, taking into account vulnerable groups and their development needs. We also encourage continued and full implementation of country-specific strategies and will continue to review progress towards this commitment at upcoming summits.”

Unfortunately this new language is pretty vague on specifics – lots of “welcoming” and “encouraged”, but not a lot of “committing to” by a specific date.  This needs to be strengthened if this commitment is to be effective.

Some countries outlined their plans and timelines for phasing out their subsidies.  Following from the G20 commitment in Pittsburgh last year, the key yardstick of progress is whether or not countries make positive steps to actually phase-out their subsidies.  And on that front some countries showed signs of their phase-out plans. 

India announced its decision to deregulate retail gasoline prices and to raise the prices for diesel, kerosene, and liquid petroleum gases.  They also made a further commitment to phase out the diesel subsidy over time (as outlined in this New York Times article). 

Mexico has begun phasing out motor fuel subsidies and is conducting a census of fuel consumption which will allow the government to target its support programs at low-income households (as noted by White House in its press statement). 

US: President Obama's 2011 budget called for the elimination of 12 tax breaks for oil, gas, and coal companies, which is expected to raise $39 billion in the next 10 years. Sen. Bob Menendez (D-NJ) and several other senators have drafted a bill that would follow through on that proposal.

More countries need to come forward with their phase-out plans.  Leaked documents in a couple of countries showed signs that they might come forward with specific plans before this G20 Summit, but these countries didn’t release specific plans in Toronto. 

The host country Canada flirted with a detailed commitment (as this post from the Pembina Institute details), but unfortunately didn’t heed the advice of the leaked memo to “lead by example”.  Instead Canada chose to lead by taking no action – not exactly the definition of leadership.  I guess in the case of Canada the time for tax breaks to the fossil fuel sector to be over is…sometime in the future. 

Leaked documents from the European Commission showed plans to retain subsidies for coal through 2023 (as this Euractiv story highlights).  As the story points this is an apparent contradiction with a letter sent to other G20 leaders where the EU President van Rompuy and European Commission President Barroso reiterated the EU's support for "the process to rationalise inefficient fossil fuel subsidies".  I’m not sure that is the timeframe intended in the Pittsburgh G20 commitment—for the EU “medium-term” means way out in the future.

Argentina, Australia, Brazil, China, Indonesia, Japan, Russia, Saudi Arabia, South Africa, Republic of Korea, and Turkey were all missing in action.  No signs of further details emerged from these countries in advance of the Toronto Summit.  I guess that is because some of these countries weren’t quite clear what they signed-up to in Pittsburgh.  Australia, France, Japan, Saudi Arabia, South Africa and the United Kingdom claimed in a leaked report that they have no fossil fuel subsidies to phase-out (ClimateWire subs req.).  A claim that sounds a bit dubious to me in a couple of these countries which are heavily dependent on fossil fuels.

Countries can’t miss any more deadlines to phase-out fossil-fuel subsidies.  Those countries that came forward with details on their phase-out plans will now need to take the necessary domestic steps to ensure that those plans turn to reality.  And for those countries that didn’t make specific commitments, they have their homework to do (don’t miss another deadline or you might get a failing grade).

We have no time to wait on the phasing out of fossil-fuel subsidies as these subsidies are taking us in the wrong direction on global warming.  They are subsidizing activities which are causing global warming instead of channeling limited resources to solutions that drive clean energy.  Now is the time for the phase-out to begin.

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