Rhein on Energy and Climate

During the last years international organisations from IMF to IEA have called for the abolition of subsidies on oil and gas consumption. At its meeting in September 2009, the G20 has also agreed to phase them out in the medium term.

Without much avail; most governments concerned continue to ignore these calls, whatever the negative impact of their subsidies on budgets, urban traffic, trade balance, pollution, human health and, of course, the global climate.

The amount of the subsidies does not show signs of decline. It continues to range about half a trillion USD, 0.7 per cent of global GDP!

Most of the subsidies are being granted by low and medium-income countries, which can least afford to squander huge amounts of money for giving wrong incentives.

The other category of sinners are rich oil- and gas- producing countries that seem to consider their oil and gas reserves big enough to indulge in the highest C02 per capita emissions on earth, topping the USA, Canada and Australia.

Fossil-fuel subsidies counter-act the efforts undertaken to reduce greenhouse gas emissions and help humanity survive in sustainable conditions. By keeping fossil-fuel prices even below low world market levels they push up consumption.

The 2015 Paris Climate Conference must therefore call for rising fossil energy prices in all countries, something that has never been done before.

The first step must be a rapid phasing out of fossil-fuel subsidies to be followed by a progressive introduction of fossil energy taxation, whatever its form.

Subsidies and taxes are easy to check: governments simply have to lay open their budget expenditures and revenues.

The Paris Conference needs to fix a deadline, say 2025, when the phasing out of subsidies should be completed and fossil fuel taxation should start. IMF or IEA should be tasked with monitoring and reporting on progress.

In view of achieving a consensus in Paris on this approach, the French government should dispatch several high-level emissaries to the major subsidising countries with the mission to convince the governments of the advantages from abolishing fossil fuel subsidies and introducing fossil fuel energy taxation.

It will be anything like an easy mission. But after five years of inaction the international community must finally take the courage to be tough with the “sinners”.

Eberhard Rhein, Brussels, 10/10/2014

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