OECD: ‘Ample scope’ for more cuts in fossil fuel subsidies

Fossil fuel subsidies could be cut further, the OECD has said. [Martin/Flickr]

Major nations seem to be reducing fossil fuel subsidies but still have “ample scope” for deeper cuts in recent support of up to $200 billion (about €178 billion) a year, the Organisation for Economic Cooperation and Development (OECD) said on Monday.

Reductions in damaging subsidies for oil, coal and natural gas would reduce air pollution, save cash and help a shift to greener energies before a 30 November to 11 December UN summit in Paris on limiting climate change, it said.

The OECD, updating an inventory of subsidies, estimated the annual value for 2010-14 at between $160 billion and $200 billion, mostly for petroleum products, in the 34 OECD nations and China, India, Brazil, Russia, Indonesia and South Africa.

21 of the EU’s 28 member states are OECD nations. Bulgaria, Croatia, Cyprus, Latvia, Lithuania, Malta, and Romania, are not OECD members.

“Support now seems to follow a downward trend after having peaked twice in 2008 and 2011-12,” the OECD said, without giving exact annual figures. The Group of 20 agreed as long ago as 2009 to phase out inefficient subsidies for fossil fuels.

Among recent reforms, the OECD pointed to cuts in support by India and Mexico for diesel and gasoline. A fall in oil prices has made it easier to phase out support.

>>Read: Decarbonising Europe: Fossil fuel subsidies must go

“There is clearly ample scope to save scarce budgetary resources and improve the environment in both advanced and emerging economies” with deeper cuts, OECD Secretary-General Angel Gurria said in a statement.

The OECD said its numbers do not cover all factors causing artificially lower prices in emerging nations. And not all the subsidies were “unambiguously inefficient”.

The OECD said its data is not directly comparable with that of the International Energy Agency, which reckons fossil-fuel consumption subsidies worldwide amounted to $548 billion in 2013.

The OECD has been trying for more than a year to reach agreement on phasing out a form of coal subsidy that helps rich nations export technology for coal generation. Talks in Paris last week again failed to get a deal.

>>Read: Climate finance eclipsed by fossil fuel subsidies

The negotiations will resume on 16 November, EU diplomats said.

Separately, environmental group Greenpeace said on Monday that the world could shift to 100% renewable energy by 2050.

Investments of $1 trillion a year would be offset by savings of $1.07 trillion, partly because wind and solar power are free of fuel costs once set up, unlike fossil fuels, it said in a report.

  • 30 November: UN Climate Change Conference begins in Paris

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