Reforming harmful fossil fuel subsidies

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Jo Tyndall, New Zealand’s Climate Change Ambassador, argues that the time has come for fossil fuel subsidies to be removed.

This year offers a significant opportunity to take a step towards the elimination of fossil fuel subsidies, as part of global efforts against climate change. With the world’s attention focused on Paris later this month, a broad and growing coalition of governments, businesses and international organisations will deliver a Communiqué that calls on the international community to increase efforts to phase out these subsidies, given the considerable climate change mitigation potential and clear economic, social and environmental co-benefits.

Why cut fossil fuel subsidies?

Removing subsidies of fossil fuels would deliver 12 percent of the required reduction in GHG emissions by 2020 (according to IEA and OECD research), and has been described as the missing piece of the climate change puzzle. As the Fossil Fuel Subsidy Reform Communiqué says: “By keeping prices artificially low, fossil-fuel subsidies encourage wasteful consumption, disadvantage renewable energy, and depress investment in energy efficiency”.

The world collectively spent US$510 billion subsidising fossil fuels in 2014. Removing these subsidies frees up money to invest in low-carbon energy pathways, health, education, or more effective support to the most vulnerable in society. It also removes market distortion, thereby providing business certainty for investment and operational decisions.

A global movement

The Communiqué was launched in April by the Friends of Fossil Fuel Subsidy Reform, together with the United States and France. Spearheaded by New Zealand, the Friends have partnered with The Prince of Wales’s Corporate Leaders Group to invite governments, corporate leaders and organisations to endorse the Communiqué. Others are welcome to endorse the Communiqué and join us.

It contains three principles:

  1. Policy transparency – which means open engagement and communication with the general public, so that they can see the merit of reforming subsidies.
  2. Ambitious reform – which relates to the scope and timeframe for implementing reform.
  3. Targeted support for the poorest – which means making sure that the welfare of the poorest parts of a society is safeguarded.

The Communiqué’s power is in demonstrating joint leadership from the public, private and non-government sector behind a clearly articulated goal. In addition to the eight Friends, so far some 25 countries have endorsed the Communiqué, including Colombia, France, The Gambia, Germany, Italy, The Marshall Islands, Mexico, Moldova, Morocco, the UK, the US and Uruguay. It has also been endorsed by organisations such as the International Energy Agency, and major corporates represented by The Prince of Wales’s Corporate Leaders’ Group, the We Mean Business Coalition and Richard Branson’s The B Team. As we approach Paris and momentum continues to build, this list will grow further.

Time for action

The Communiqué will be delivered to UN leadership by supporters at a high-profile event at COP 21 in Paris to deliver a message to the world that the time for global action on fossil fuel subsidy reform is now.

Phasing out fossil fuel subsidies has become a hot topic as business and government leaders increasingly recognise it will deliver a significant decrease in emissions. The timing is right because oil prices are low and the impact of removing subsidies will be felt less.

The Friends’ have been advocating towards this end for five years. The group was formed in June 2010 to support G20 and APEC leaders’ commitments to phase out inefficient fossil fuel subsidies. The Friends, who comprise Costa Rica, Denmark, Ethiopia, Finland, New Zealand, Norway, Sweden and Switzerland, have the stated goal of encouraging the G20 and APEC to implement their initiative as soon as possible, with maximum ambition and transparency.

The Friends’ efforts won’t stop with the Communiqué in Paris. We will continue to call for accelerated action to phase out fossil-fuel subsidies and work with partners to support pathways to reform.

We invite all governments, businesses and international organisations to endorse the Communiqué and join us in this important campaign.





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