It is estimated that fossil fuel subsidies contributed up to 36% of global emissions between 1980 and 2010, while also exacerbating health problems, air and water local pollution. Limiting their use is a key step towards reducing inequality and achieving inclusive growth, since fossil fuel subsidies disproportionately benefit the middle and upper classes. Fossil fuel subsidies constitute an inefficient use of scarce public funds, and inhibit the market penetration of price-competitive renewables. While subsidies more broadly can be used as an effective tool to support the poor and promote a particular industry for the benefit of larger good, an industry that is well-established should not be the beneficiary of limited public resources, especially when cost-effective and healthier alternatives are available.
Tag: Fossil Fuel Subsidies
Yesterday not just one, or two, but three Fossil of the Day awards!
The first went to the European Commission for its mean-spirited “winter package”. Leaked copies of proposed renewable energy legislation reveal a real lack of ambition. The proposed target is to increase renewable energy a mere 27% of total energy by 2030… only 7% more than its 20% by 2020 target. The Commission is failing to send the strong signal to investors necessary to boost clean energy investment, in line with the Paris Agreement. Moreover, if European Commission President Juncker is serious about fulfilling his promise to make the EU “number one in renewable energy” then the proposals in the package need to be substantially improved before they are approved.
Indonesia won second prize for making really, really bad plans to boost power generation 35GW by 2019 (which is good), but 60% of this is to come from coal (very, very bad!). Coming just days after new UNICEF research showed that more than 300 million children worldwide, particularly in South-East Asia, are exposed to air pollution with detrimental health impacts. Indonesia included ‘clean coal’ in its NDC, but this is no solution to premature deaths from choking smog or global warming.
And the third Fossil of the Day award went to New Zealand for talking big on reducing fossil fuel subsidies at COP22, but failing to live up to its own (good) advice at home. Yesterday, New Zealand’s Climate Change Ambassador, Mark Sinclair, stressed the need to cut fossil fuel subsidies—hooray! However, back at home New Zealand isn’t walking the walk. Instead, it supports the oil and gas industry through tax breaks and funding scientific research for these industries—boo! All of which amounted to NZ$46 million in 2012/2013. In fact, despite the general understanding that 80% of fossil fuels need to remain unburned if we are to achieve the goals of the Paris Agreement, the New Zealand government “aims to increase the value of New Zealand petroleum exports ten-fold, from $3 billion to $30 billion a year by 2025.” Oh dear. Well done New Zealand, a Fossil well earned.
Now that the Paris Agreement has been signed by 193 parties and ratified by over 100, one message is very clear: the era of fossil fuels is over. But it seems that not everyone has gotten the message. In many countries, the coal lobby stubbornly believes it can delay the inevitable.
Let’s take Brazil as an example. Brazil likes to boast about being a climate champion. But its Congress just approved a billion-dollar subsidy to the coal industry. Equally problematic, this comes at a time when coal represents less than 5% of electricity generation in Brazil, but over 20% of emissions. Has anyone in the Brazilian Congress done the maths?
The coal industry spends a fortune on lobbying. But President Temer now has the chance to veto this subsidy, as tens of thousands of Brazilians have urged him to do. The world is watching closely, and expects meaningful action from a country that could otherwise be one of the first to reach 100% renewables.
But it’s not only Brazil where coal still dreams of a future. Forbes Magazine recently described Japan as having a “renewed love affair with coal”, with over 40 new plants being built, planned or proposed before 2020. If implemented, this would be a nightmare for the climate.
Perhaps even worse, Tokyo’s renewed love for coal isn’t confined to home. As the world’s biggest contributor of public financing for coal projects, Japan invested over $22 billion overseas from 2007 to 2015, including funding for several proposed coal projects in–wait for it–Brazil. It’s high time for Japan to stop sleepwalking, catch up with the times and stop funding the dirty fossils of the past, both at home and abroad.
Turkey’s situation is nearly as sickening. The country won COP22’s inaugural Fossil of the Day award yesterday, in part for its absurd plans to build 70 new coal power plants that would add over 70 GW of dirty energy capacity. Just writing that sentence makes ECO nauseous. No matter how you cut it, this blatant denial of physics is bad, bad medicine for an ailing climate. If Turkey wants to be taken seriously, it needs to take some remedial lessons and get back on track for renewables. The coal financiers investing there and in the Balkan region are big players: largely Chinese money channelled through different development banks.
All around the world, the coal industry is desperately attempting to defy the laws of physics. It wants us to believe that when you’re in a hole, if you keep digging you just might get out. Thankfully, ECO had an excellent physics professor and has sounder advice: when you’re in a hole, stop digging. One thing is certain–if we are to deliver on the promise of the Paris Agreement, every country must show more ambition when it comes to emission reductions. Getting rid of dirty coal would be a great place to start.
In December 2015, the G20, as part of the 196 Parties to the UNFCCC, committed to a historic global agreement to address climate change and pursue efforts to limit the global temperature increase to 1.5°C above preindustrial levels, so as to mitigate the harmful effects on the world’s people, biodiversity and the global environment.
According to the IPCC, the global carbon budget consistent with a 66% chance of limiting the temperature rise to 1.5ºC will be used up by 2021 if we carry on under current projections. For any fair likelihood of meeting the Paris temperature targets, our collective mitigation efforts need to be multiplied as soon as possible. Otherwise, our countries and economies will face severe impacts of unstoppable climate change, including social, environmental and economic instability. In recent years, we have seen the G20 countries take more serious notice of the role that climate change plays on its overall objectives, in particular its objective to promote financial stability. G20 leadership on climate change is extremely important since the greenhouse gas emissions of the G20 member countries account for approximately 81% of total global emissions. It is therefore imperative that the G20 countries start collaborating immediately on the implementation of the Paris Agreement, using their influence, to develop a consensus-building approach and focus on financial stability to drive stronger action on climate change.
Climate Action Network has eight key demands for the G20:
- Ratify the Paris Agreement as soon as possible;
- Develop and communicate interim National Long-term Strategies for Sustainable Development and Decarbonization by 2018;
- Achieve an ambitious outcome on HFC phase-down this year;
- Introduce mandatory climate-risk disclosure for investments;
- Remove fossil-fuel subsidies;
- Accelerate renewable energy initiatives towards 100% RE;
- Ensure that new infrastructure is pro-poor and climate compatible;
- Support effective ambition for international aviation and shipping.
Parties in the Workstream 2 Technical Expert Process yesterday coined a new acronym: MFN, “More, Faster, Now.” ECO is not a fan of acronyms for acronyms sake but this one could prove useful, particularly for those parties with a dirty coal habit.
It emerged that a number of OECD parties—Japan, South Korea, and Germany among them—have spent nearly US$15 billion over the past 10 years on exports of coal technologies abroad. This has made these fossil fuel projects cheaper than clean and renewable energy solutions.
Renewable energy solutions have innumerable benefits: the MFN mantra is more action on climate change at a faster pace, starting now. Spending billions on technology exports to advance the use of the world’s dirtiest fossil fuel does exactly the opposite.
ECO hopes this misunderstanding can be cleared up, ASAP, starting at the OECD Export Credit Group deliberations later this year.
As we get into the nitty-gritty of ADP negotiations here in Geneva, it is always important to keep in mind the events and discussions happening outside of the UNFCCC process. For those unaware, finance ministers from the G20 are gathering today and tomorrow in Turkey to discuss G20 priorities, two of which are climate change and climate finance this year.
From Geneva to Istanbul, we’d like to remind our finance ministers of a commitment their leaders made over 5 years ago: to phase out fossil fuel subsidies. It’s a pity that governments have to be reminded over and over again of their commitments, but we’ll keep doing so until they are fulfilled.
Last Friday, 40 NGOs from countries all over the world sent a letter to the Turkish G20 President and all G20 finance ministers, calling on the phase-out of fossil fuel subsidies. The letter called for the immediate elimination of production and exploration subsidies because, let’s face it, that money could be much better spent on climate action at home and abroad.
If the G20 really wants to prioritise climate change and climate finance, then ministers should tighten those purse strings and stop support for fossil fuels.
As delegates prepare to leave these halls, many may be feeling that there’s only been a lot of talk. ECO turns its eyes back to the real world—and sees actions that offer a glimmer of hope. China’s “war against pollution” may be one of those, with Chinese President Xi urging an“Energy Revolution”. It’s signs that China’s transition away from dirty coal is gaining momentum. For the first three quarters in 2014, both production and consumption of coal in China have decreased by over 1% compared to last year, pushing down the price of coal to its lowest level in many years (due to a lack of demand). As a result, the coal industry, often referred to as “King Coal”, is suffering from huge profit loss and ominous future prospects.
China’s coal use was booming until 2012. Now, a potential coal peak is seen as possible in the coming years. Cement, iron and steel production could also peak by 2020. ECO hardly needs to point out how significant such a shift would be to the global effort to limit carbon emissions.
The main driver of these developments is China’s economic restructuring efforts. However, there have also been recent environmental and low-carbon policies that may lead to a sustained transition and enable a more appropriate and strong price signal to the market. Such policies include resource taxation reform, a renewed tariff on coal imports, and efforts to address air pollution. If such efforts are maintained with strong political support, they could hedge against potential market fluctuation and renewed coal growth in the future, and stimulate faster growth in renewable energy and energy efficiency solutions to climate change.
If this continues, these recent developments could put China below previously assumed emission trajectories. Perhaps on the road to Paris, we might hear ambitious statements relating to regional emission peaks from Chinese delegates?
ECO sat through 4 long days and one very long night in Barbados last week, but it was worth it. The Green Climate Fund Board finally agreed upon arrangements to receive contributions this year, and further prepared the governance system to start disbursing funds next year.
Not all negotiators will know that the issue of whether contributors could include specific “targets” within their contributions was the one issue that kept board members up until 3:30 AM on Saturday. Developing countries firmly rejected this idea, despite the imminent threat that developed country treasuries were sure to contribute less if this extra grip on the GCF’s purse strings was relinquished.
ECO sees hope and feels that this step highlights the GCF as an entity that could herald a new era in international cooperation, where country ownership and direct access to funding replaces the old model of institutions and decisions dominated by developed countries. Developing countries could have an equal say in fund governance.
Some fights have yet to be fought, though, like whether the GCF will fully steer clear of fossil fuels. ECO has learnt that the idea to tie voting to contributions may rise again, but for now, things seem to be moving in the right direction, albeit slowly and unevenly.
The next milestone is the Pledging Session in Berlin in November. Developing countries are calling for $15 billion in pledges, which ECO considers to be an adequate sum, though modest compared to the scale of the climate challenge and the benefits of preventing dangerous climate change.
Developed countries, led by Germany and France, have pledged around $2.3 billion so far. Some smaller and typically more responsible countries are likely to once again make their citizens proud by shouldering more than their fair share. There are still big question marks around the USA, Japan and the UK and whether they will step up to the mark.
ECO notes that Canada and Australia are two worrying question marks too. Whilst they have been conspicuously silent about their responsibility for making substantial contributions, ECO is confident that good sense will prevail. Perhaps it will be triggered by forthcoming serious contributions, even from developing countries – though it is developed countries that have the legal and moral obligation to pledge.
Contributions in the “double digit billions” scale will certainly improve the prospects of a positive outcome in both Lima and Paris. However, a finance package demonstrating developed countries’ willingness to make progress on the $100 billion a year promise by 2020, must include robust provisions on climate finance. For the post-2020 agreement, the overall challenge to shift the trillions in public and private finance away from fossil fuels towards renewable energies and solutions compatible with equitable and sustainable development must also be a part.