Big Positive Climate Impact by Cutting Fossil Fuel Subsidies

03.06.15 | News
Several countries allocate large sums of public funds to fossil fuel subsidies. Removing these subsidies could be redirected into renewable energies, as well as into sustainable development to achieve climate neutrality as soon as possible, a Nordic Council of Ministers' side event at the climate negations in Bonn pointed out on June 3.

At the UN climate change conference in Bonn (1-12 June), governments are looking at ways to increase ambition to tackle climate change before 2020, when the new Paris 2015 climate agreement is to enter into effect. 

No seats were left empty when the Nordic Council of Ministers (NCM) hosted a side event on fossil fuel subsidies at the Bonn conference. At the event new studies were presented that have found that between 1980 and 2010, the presence of fossil-fuel subsidies drove 36% of the world’s carbon emissions. The presenters stressed that a removal of these subsidies would likely lead to a decrease in greenhouse gas emissions of between 6 and 13% by 2050.

Moreover, they said that these decreases were likely to represent an underestimate as they were based on consumer subsidies only and excluded producer subsidies. Removing these subsidies therefore represents a key step towards achieving global climate neutrality as soon as possible.

The event was co-organized with the Global Subsidies Initiative and the International Institute for Sustainable Development and picked up on recent critical momentum to further push for the reform of fossil fuel subsidies and to present the climate benefits that would be derived.

Clear Distorting Effect of Fossil Fuel Subsidies

In April 2015, the Friends of Fossil Fuel Subsidy Reform launched a communique that calls for countries to prioritize the phase-out of fossil-fuel subsidies ahead of the UN Paris Climate Change Conference in December. 

The Friends - Costa Rica, Denmark, Ethiopia, Finland, New Zealand, Norway, Sweden and Switzerland – noted that the International Energy Agency (IEA) estimates that a partial phase-out of fossil-fuel subsidies would generate 12% of the total abatement needed by 2020 to maintain the 2°C target as a possibility. 

At the end of May 2015, the International Monetary Fund (IMF) came to a similar conclusion. It released a working paper entitled “How large are global energy subsidies?”  It found that subsidies in 2015 would total $5.3 trillion, representing 6.5% of total global output. The study also found that removing subsidies would help reduce greenhouse gas emissions by 20%.

Building Subsidy Removal into Climate Action Plans

Presenters at the NCM side event during the UN Climate Change Conference in Bonn said that resources freed up as a result of removing these subsidies could be redirected into renewable energies, as well as into sustainable development more broadly to achieve climate neutrality as soon as possible.

They stressed that emission reductions from fossil fuel subsidies could be estimated and included in national climate action of countries both before and after 2020, when a new and universal climate change agreement is due to come into effect. The Nordic Council of Minister has written an options paper showing how this can be done.

The presenters at the event also said that fossil fuel subsidies are a form of negative carbon pricing and that climate negotiators could consider explicitly adding wording on the reform of these subsidies in the new agreement in Paris at the end of this year. They also called on the technical examination process to explicitly discuss the phase-out of fossil fuel subsidies.


Fossil Fuel Subsidies

Speaker Radek Stefanski, University of St. Andrews, 
Foto: Johannes Magnus