Groups urge G20 countries to drop fossil fuel subsidies

By Kris Bevill | October 05, 2011

The International Energy Agency and the Organization for Economic Cooperation and Development again came out in favor of eliminating fossil fuel subsidies worldwide on Oct. 4 with the release of the first Inventory of Estimated Budgetary Support and Tax Expenditures for Fossil Fuels. Phasing out fossil fuel subsidies will speed investment and growth of renewable energy industries, but policymakers often do not have clear information on the policies currently enacted, according to the groups. With this in mind, the inventory was created to assist governments’ understanding of fossil fuel policies. The inventory currently covers 24 countries and 250 mechanisms and will be expanded in the future to include more.

“As they look for policy responses to the worst economic crisis of our lifetimes, phasing out subsidies is an obvious way to help governments meet their economic, environmental and social goals,” Angel Gurria, secretary-general of the OECD, said at a press conference to announce the inventory. IEA Executive Director Maria van der Hoeven added that fossil fuel subsidies represent significant economic liability and said IEA data shows that subsidies to artificially reduce the price of fossil fuels totaled $409 billion in 2010, $300 billion more than the year prior.

The IEA was formed in the 1970s to assist countries in coordinating a collective response to the global oil crisis. It currently is comprised of 28 member countries and focuses on global energy issues, although it remains heavily focused on global oil stocks. The OECD’s mission is to promote policies that will improve the economic and social well-being of people worldwide. The group is currently comprised of 34 countries and, among its many goals, provides the G20 countries with analysis, data and policy recommendations. Data from the fossil fuel inventory can be used to support the 2009 G20 goal of phasing out subsidies that encourage wasteful consumption, reduce energy security, impede investment of clean energy sources and undermine efforts to deal with the threat of climate change, the groups stated.

Bliss Baker, spokesperson for the Global Renewable Fuels Alliance, said G20 countries have made little real progress in eliminating those types of subsidies since 2009. “As we strive to develop alternatives to oil we must recognize that alternative fuels are not competing on a level playing field,” he said in a statement. “These massive multi-billion dollar crude oil subsidies completely outweigh current biofuel incentives and are a serious obstacle to the development of cleaner, greener alternatives. Oil has a huge competitive advantage financed by global taxpayers. It is time for the G20 to show leadership and reverse this practice of never-ending subsidies to Big Oil. They must put their money where their mouth is and invest in renewable alternatives.”

The American Jobs Act, introduced by President Barack Obama to the U.S. Congress in September, would eliminate petroleum subsidies. However, it is unclear how likely those cuts are of being approved. Van der Hoeven said IEA data to be released in November as part of the 2011 World Energy Outlook will show that many countries have taken steps to in the past year to “rationalize” energy prices. “While this is an encouraging start, much work remains to be done in order to realize the full extent of benefits,” she stated. “It is crucial that countries follow through on their commitments by implementing reforms that are well-designed and durable.”