This article is part of our special report Energising Tomorrow’s World.
SPECIAL REPORT / UN plans to double the world’s renewable energy capacity within two decades are under threat from fossil-fuel handouts, which have almost doubled in three years, campaigners say.
More than 60 nations have committed to the UN’s ambitious Sustainable Energy For All (SE4ALL) targets on renewables, energy efficiency and universal energy access.
But the world currently spends twelve times more on fossil fuels subsidies than renewable ones, according to Bloomberg New Energy Finance, and campaigners say this could threaten the SE4ALL project.
“There is a problem there,” David Turnbull the campaigns director for Oil Change International told EURACTIV, on the phone from the UNFCCC Climate Summit in Qatar.
“One of first things you need to do when you’re in a hole is to stop digging and if we want to move towards a truly sustainable future, we need to end those subsidies.”
In 2009, world leaders pledged to phase out fossil fuel subsidies by 2020 at a G20 summit in Pittsburgh. But in the three years that followed, carbon handouts for consumers almost doubled from €232 billion to €405 billion, mostly in the developing world, the International Energy Agency (IEA) says.
“Whether it is hypocrisy or speaking out of both sides of their mouths is not absolutely clear but we want to see them live up to their commitments,” Turnbull said.
What is a fossil fuel subsidy?
For fossil fuel consumers, subsidies can reduce the price of petrol, public transport and heating bills, although the IEA’s World Energy Outlook last year found that only 8% of such payouts went to the poorest 20% of the population.
Where fossil fuel production is concerned, a lack of transparency has traditionally occluded assessment of a wider range of financial instruments in play, including:
- Tax incentives, breaks and loopholes
- Exemptions from environmental regulations
- The offloading of costs for ‘externalities’ such as accidents and public health impacts.
Around €77 billion was spent on subsidies to fossil fuel producers in 2009, according to data collated by the Global Subsidies Initiative.
Several participating nations in the SE4ALL initiative dispense largesse to producers and consumers of their coal, oil and gas industries. Some have tried to the turn off the money tap.
Protests in Indonesia and Nigeria
Earlier this year, the Indonesian president, Bambang Yudhoyono, proposed a 33% cut in Jakarta’s annual €3.8 billion fossil fuel subsidies, only for the country’s parliament to veto the legislation, and replace it with a further € 19 billion of high carbon energy aid.
“Scrapping fossil fuel subsidies to make millions of already poor people even poorer is not the way to go,” said Yvo de Boer, the ex-secretary of the UNFCCC and current climate advisor for the KPMG group.
“The way to go is to price energy properly in terms of the pollution that it causes, and to provide poor people with affordable alternatives,” he told EURACTIV.
This is a consensus view in UNFCCC circles, although Indonesian media report that more than half of their country’s total fuel subsidy benefit was enjoyed by the richest 20% of the population, who were more likely to own cars and use them frequently.
Money for carbon in the EU
It is not just developing world aid recipients of SE4ALL initiative that dish out money for carbon. Net SE4ALL donors such as the EU are also subsiding their coal industries until 2018 – Germany to the tune of €2 billion a year, Spain with €1 billion.
With EU development banks coughing up similarly large sums for loans to build coal plants in Eastern Europe, discussion on subsidy removal may need to start closer to European homes.
“The developed world needs to tackle its own subsidies first,” Turnbull said. “That will not only impact industry and way that the EU and US incentivise clean technologies but also free up tens of billions of dollars.”
In this context, how much money developed nations should give emerging economies to help level their energy playing fields was “a very sensitive question,” Carlos Fernandez, a senior analyst at the International Energy Agency told EURACTIV.
“Unfortunately it won’t be a happy figure,” he added.