Fossil fuel subsidies are calamitous for the planet, and poor economics, too

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Idle oil rigs. Scotland, June 2015. [Michael Elleray/Flickr]

Some governments have been acting to rein in highly-subsidised fossil fuel production, but much more has to be done by leading economies, write a group of scholars led by US economist Jeffrey Sachs.

The following letter, co-signed by a number of prestigious scholars in economics, ask G20 leaders to urgently cut fuel subsidies.

Sir,

At next week’s G20 summit in Antalya, Turkey, just ahead of the critical UN climate summit in Paris, world leaders must take urgent action to cut fossil fuel subsidies.

Despite pledging in 2009 to phase out these subsidies, new research by the Overseas Development Institute and Oil Change International, shows that G20 governments are pumping $452 billion annually into the exploration for and production of fossil fuels.

>>Read: Fossil fuel subsidies reach $452bn a year, study says

As three-quarters of known reserves of oil, gas and coal have to stay in the ground if harmful climate change is to be avoided, this use of public funds is not only calamitous for the planet but poor economics too.    

Governments can no longer afford to ignore the rising health costs of air pollution, the falling returns on fossil fuel exploration, and the rapid emergence of alternatives from low cost solar to electric vehicles, which make low-carbon energy systems the smart investment choice. Some governments have been acting to rein-in highly-subsidised fossil fuel production, but much more has to be done by leading economies. 

Ahead of the Paris summit, a declaration of a robust time-table for action on subsidies would restore the credibility of the G20’s pledge. It would also send a clear message that the largest economies in the world are willing to take the tough decisions necessary to meet the challenge of climate change.

Yours sincerely,

Professor Jeffrey Sachs, Director of the Earth Institute at Columbia University and Director of the UN Millennium Project, United States of America.

Professor Fan Gang, Peking University and National Economic Research Institute, Beijing, China.

Dr. Shenggen Fan, Director General, International Food Policy Research Institute.

Professor Alejandro Nadal, Professor of Economics, Centre for Economic Studies, El Colegio de Mexico.

Dr. Richard Dennis, Chief Economist, the Australia Institute, Australia. 

Professor Simon Wren-Lewis, Professor of Economic Policy, Oxford University, United Kingdom.

Professor Simon Dietz, Director, ESRC Centre for Climate Change Economics and Policy, United Kingdom.

Dr. Evsey Gurvich, Economist, Russia.

Dr. Liberty Mncube, Chief Economist, Competition Commission, South Africa.

Dr. Ha-Joon Chang, Faculty of Economics, University of Cambridge, South Korea.

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