Calling Time on Fossil Fuel Subsidies

The momentum to reform fossil fuel subsidies has grown in recent years, as countries discover not only the necessities, but also the benefits of subsidy removal. For example, in June 2018, Argentina and Canada committed to peer reviews of their fossil fuel subsidies under the G20 process. China, Germany, Indonesia, Italy, Mexico and the USA had done this earlier.

Sustainable Development Goal 12 (Ensure sustainable consumption and production) also includes a target to rationalize inefficient fossil fuel subsidies that encourage wasteful consumption.

The importance of monitoring fossil fuel subsidies is recognized in the framework of the Sustainable Development Goals with a dedicated indicator to assess country progress.

In the context of the Sustainable Development Goals, UN Environment is responsible for collecting national data on this indicator from 193 UN member countries. Data collection will start in 2020 and continue until 2030, feeding into the Sustainable Development Goal global database maintained by the UN Statistics Division.

“If sufficient guidance and support are provided to countries to facilitate their reporting, this process could improve transparency on fossil fuel subsidies, and provide an impetus for reform by informing decision-making, increasing awareness and building support among stakeholders,” says Kim.

The damage caused by fossil fuel subsidies

The burning of fossil fuels is a significant contributor to air pollution, which kills seven million people a year and is linked to “huge” reductions in intelligence.

By artificially lowering prices, subsidies drive wasteful energy consumption which increases local air pollution and congestion, while crowding out investment in renewables and energy efficiency. They lock us into a high-carbon energy world.

Coal, oil and gas not only produce health-damaging pollutants when they burn: the extraction process also produces significant quantities of carbon dioxide and methane.

The sheer size of the subsidies is a significant drain on national budgets, diverting resources from other areas like health and education.

The International Monetary Fund estimates that removing fossil fuel subsidies and then taxing fossil fuels correctly (based on the cost borne to society through air pollution, carbon emissions and accidents) could lead to a decline in fossil-fuel related carbon emissions by over 20 per cent globally.

Removing the subsidies would also reduce premature air pollution-related deaths by over 50 per cent and raise government revenue by US$2.9 trillion (3.6 per cent of global gross domestic product), it says. (IMF, 2015).

Although advocated as a measure to fight poverty, fossil fuel subsidies often do not reach the poorest households and instead tend to benefit wealthier segments of society more.

On 27 November UN Environment launched its Emissions Gap report 2018 [hyperlink to report], which underscores the need for further action by all countries to reduce emissions of greenhouse gases.

*SOURCE: UN Environment. Go to ORIGINAL.