Parties Urge G20 Leaders To Address Fossil Fuel Subsidies

 Subscribers & Readers Note: WIMS will not be publishing tomorrow,
November 11, 2010, in observance of the Federal Veterans Day holiday

 

Nov 9: As world leaders gather in the Republic of Korea for the latest meeting of the Group of 20 (G20) major economies, the head of the United Nations Environment Programme (UNEP) Achim Steiner is calling on them to build on their previous pledge to move towards a green and more sustainable recovery from the financial crisis with more concrete action. The G-20 consists of the finance ministers and central bank governors of 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom and the United States of America, and also the European Union who is represented by the rotating Council presidency and the European Central Bank. The G-20 represents more than 85 percent of the global economy [See WIMS 3/31/09].

   Steiner said in an opinion piece published in the Korean JoongAng Daily newspaper,  "A year ago in London, G20 leaders articulated this vision as building an 'inclusive, sustainable and green recovery.'" Steiner asks the question, "Could this week in Seoul be a watershed in international financial and economic affairs, where the pledge, made at the G-20 in London, toward a green and more sustainable recovery moves from communique to concrete commitment?"

    He said, "An increasing number of banks and pension funds see rising risks to their investments from the loss of ecosystems, such as forests and wetlands, and the multitrillion dollar services they produce. And a rising number now see the disruption to food supplies, supply chains and other challenges linked with natural resource losses as a bigger threat than that from international terrorism. This dramatic shift is in part linked with the findings of the Economics of Ecosystems and Biodiversity (TEEB), an assessment requested by the G-8 and developing country environment ministers."

    Steiner continued saying, "In terms of combating climate change and restoring fish stocks, canceling or phasing-down global subsidies totaling up to US$700 billion and over US$27 billion a year respectively would be a good start. . . In Seoul, this vision needs to be evolved toward not only a green recovery, but to inclusive, sustainable green growth underpinned by clean technologies and the economic importance of maintaining nature's multitrillion dollar services."

    On the subject of fossil fuel subsidies, two NGOs -- Oil Change International and Earth Track -- have released the first independent evaluation of the success of the G20 Pledge to phase out fossil fuel subsidies. The report, G20 Fossil-Fuel Subsidy Phase Out: A review of current gaps and needed changes to achieve success, reveals large gaps in the reporting of subsidies, and that "no new actions have been taken by G20 nations as a result of their commitment in Pittsburgh to phase out fossil fuel subsidies." In Pittsburgh in September 2009, G20 leaders pledged to "rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption."

    Last September, for example, President Obama said, "I am proud to say that the United States has done more to promote clean energy and reduce carbon pollution in the last eight months than at any other time in our history. We are making our government's largest ever investment in renewable energy -- an investment aimed at doubling the generating capacity from wind and other renewable resources in three years. . . Later this week, I will work with my colleagues at the G20 to phase out fossil fuel subsidies so that we can better address our climate challenge. . ." [See WIMS 9/22/09].

    Steve Kretzmann of Oil Change International said, "Each G20 country has defined 'inefficient fossil fuel subsidy' as they like, reported on what they want, and then listed either no subsidies, or things that they had already said they were doing. There is no accountability, no oversight and review, no actual mechanism to hold these leaders to their words. Some of the analysis coming out of the OECD and IEA is quite helpful, but so far, in the process itself, there's just no action behind the words of the G20."

    At the launch of the latest edition of the International Energy Agency's (IEA's) annual World Energy Outlook (WEO-2010) in London, Executive Director Nobuo Tanaka said, "The Copenhagen Accord and the agreement among G20 countries to phase out subsidies are important steps forward. But, these moves still fall a very long way short of what is required to set us on the path to a truly sustainable energy system. The energy world is facing unprecedented uncertainty. The strength of the economic recovery holds the key to how energy markets will evolve over the next few years. But WEO-2010 demonstrates that it is what governments do, and how that action affects technology, the price of energy services and end-user behavior, that will shape the future of energy in the longer term. We need to use energy more efficiently and we need to wean ourselves off fossil fuels by adopting technologies that leave a much smaller carbon footprint."

    WEO-2010 indicates that the oil price is set to rise, reflecting the growing insensitivity of both demand and supply to price. In the New Policies Scenario, the average IEA crude oil price rises from just over $60 in 2009 to $113 per barrel (in year-2009 dollars) in 2035. Oil demand continues to grow steadily, reaching about 99 million barrels per day (mb/d) by 2035 — 15 mb/d higher than in 2009. All of the net growth comes from non-OECD [Organization for Economic Cooperation & Development] countries, almost half from China alone; demand in the OECD actually falls, by over 6 mb/d. Crude oil output reaches an undulating plateau of just under 69 mb/d by 2020 while production of natural gas liquids (NGLs) and unconventional oil – notably Canadian oil sands – grows strongly. OPEC countries account for a growing share of global production, with the biggest increases coming from Saudi Arabia and Iraq. Production in and exports of oil (and gas) from the Caspian region also grow substantially.

 

    The WEO-2010 report analyzes various alternatives and paints a bleak picture regarding advancement to greener energy and achieving necessary reductions in greenhouse gases [GHG] to avoid dangerous climate change. The report indicates, "The energy trends envisioned in the New Policies Scenario imply that national commitments to reduce greenhouse-gas emissions, while expected to have some impact, are collectively inadequate to meet the Copenhagen Accord's overall goal of holding the global temperature increase to below 2°C. Rising demand for fossil fuels would continue to drive up energy-related carbon-dioxide (CO2) emissions through to 2035, making it all but impossible to achieve the 2°C goal, as the required reductions in emissions after 2020 would be too steep. The New Policy Scenario trends are in line with stabilizing the concentration of greenhouse gases at over 650 parts per million (ppm) of CO2-equivalent (eq), resulting in a likely temperature rise of more than 3.5°C in the long term.

 

    "In order to have a reasonable chance of achieving the goal, the concentration of greenhouse gases would probably need to be stabilized at a level no higher than 450 ppm CO2-eq. The 450 Scenario describes how the energy sector could evolve were this objective to be achieved. It assumes implementation of measures to realize the more ambitious end of target ranges announced under the Copenhagen Accord and more rapid implementation of the removal of fossil-fuel subsidies agreed by the G-20 than assumed in the New Policies Scenario. This action brings about a much faster transformation of the global energy system and a correspondingly faster slowdown in global CO2 emissions. For example, oil demand peaks just before 2020 at 88 mb/d, only 4 mb/d above current levels, and declines to 81 mb/d in 2035. Coal demand peaks before 2020. Demand for gas also reaches a peak before the end of the 2020s. Renewables and nuclear double their current combined share to 38% in 2035. A lack of ambition in the Copenhagen Accord pledges has increased our estimated cost of reaching the 2°C goal by $1 trillion and undoubtedly made it less likely that the goal will actually be achieved. Doing so would require a phenomenal policy push by governments around the world."

 

    In analysis that builds on the IEA's ongoing work for the G-20, WEO-2010 reveals that fossil-fuel subsidies amounted to $312 billion in 2009. Tanaka said, "Getting the prices right, by eliminating fossil-fuel subsidies, is the single most effective measure to cut energy demand in countries where they persist, while bringing other immediate economic benefits." According to the IEA these consumption subsidies were down from US $558 billion in 2008 largely because oil prices declined in 2009. Conversely, these oil subsidies are set to climb in 2010 with increasing oil prices.

 

    Bliss Baker, spokesperson for the Global Renewable Fuels Alliance (GRFA) said, "As we strive to develop alternatives to oil we must recognize that we are not competing on a level playing field. Massive multi-billion dollar oil subsides are a serious obstacle to the development of cleaner greener alternatives. Oil has a huge competitive advantage financed by global taxpayers. Despite the IEA's optimism that there is momentum for reducing subsidies, not one country has eliminated an oil subsidy program since signing on to the pledge in 2009."

 

    Baker cited the Earth Track report indicating that many countries continue to provide direct producer subsidies to oil companies including: Canada provides over US $2 billion per year to oil companies; U.S. producer subsidies reached US  $52 billion in 2009; and European Union provided US $8 billion in subsidies to oil companies in 2009. Baker said, "It is time for the G20 to show leadership and reverse this practice of never ending subsidies to big oil. It is time to move beyond oil to a world with sustainable alternatives to crude oil such as biofuels and other renewable forms of energy."

    Access a release from the UN (click here). Access the complete opinion piece from UNEP's Steiner (click here). Access a release from the NGOs and link to their complete report (click here). Access extensive information and the complete WEO-2010 (click here). Access a release from GRFA (click here). Access the G20 website for more information on the meeting (click here).