Ending Fossil Fuel Subsidies Would Get Us Halfway to Preventing Dangerous Climate Change

Jim Sneddon/CC BY 2.0

The International Energy Agency has again weighed in on how to combat climate change through better energy policy.

IEA chief economist Fatih Birol has told The Guardian that if the $409 billion spent globally by just 37 nations on reducing the price of fossil fuels was phased out it would cut enough carbon emissions to get us halfway to the amount needed to avoid the worst of climate change and keep global average temperature rise below 2°C.

Phasing out these fossil fuel subsidies it would save 750 million tonnes of CO2 every year by 2015, up to 2.6 gigatonnes by 2035, Birol said.

By way of contrast, renewable energy receives just about $66 billion in government support, globally.

Subsidies Not Going To Those That Need It Most
As for the concern that in many developing nations keeping energy prices artificially low is needed to help raise people out of poverty, Birol noted that just 8% of fossil fuel subsidies in 2010 went to the poorest 20% of people. "It's clear that other direct forms of welfare support would cost much less," Birol added. As for recent rioting in Nigeria resulting from attempts to cut fossil fuel subsidies, Birol said that these really, "highlight that reforms need to be implement gradually and included targeted assistance."

Furthermore, an estimated 11-18% of global fossil fuel subsidies don't go towards directly lowering the prices that consumers pay, instead occurring in the form of tax breaks for fossil fuel companies and other forms of indirect support for industry.

Phasing Out Subsidies Considered For A While
Addressing the market-distorting and environmentally detrimental effect of fossil fuel subsidies has been on the table for some time. In 2009 the G20 agreed to phase them out in the "medium term", and a leaked draft document from the upcoming Rio+20 conference, to take place in June in Brazil, also has a section about eliminating fossil fuel subsidies. The World Bank has also urged an end to fossil fuel subsidies, as a way to help poor nations adapt to climate change (though the World Bank figure on how much is spent on subsidies is markedly lower than the IEA's; I'd trust the latter's).

Tags: Developing Nations | Economics | Global Warming Solutions | Natural Gas | Oil

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