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Agreement in Rio, but fossil-fuel subsidies debate gets dirty

The text of the Rio+20 declaration is finalised. After a marathon negotiating session that extended into the early hours of this morning, countries finally reached agreement on a 53-page document entitled The Future We Want.

With all the work done, all that’s left for world leaders to do during the three “official” days of the conference is to sign on the dotted line and hold a series of bilateral meetings. But environment and development groups have responded to the final negotiated text with concern.

Rio+20 has turned into an epic failure. This is not a foundation on which to grow economies or pull people out of poverty, it’s the last will and testament of a destructive 20th century development model,” said the executive director of Greenpeace International Kumi Naidoo. ”From the G20 to Rio+20 this is not a good week for people and the planet. While billions are being spent bailing out banks and billions more on subsidising the fossil fuel industry, it’s clear whose agenda our leaders are following, that of business as usual of polluting corporations.”

The issue of fossil-fuel subsidies is likely to crop up in some of the bilateral meetings over the next two days. Although mentioned in only one of the declaration’s 283 paragraphs, ending these subsidies has been one of the catch cries uniting civil society here in Rio.

Fossil fuel subsidy reform has been gaining political momentum in the past five or so years. In total, 53 countries have made international commitments to reform and phase out their fossil-fuel subsidies including many of the world’s largest economies (eg: in the G20 and APEC).

A small group of countries is working to ensure that commitments are made inside the walls of the conference centre. New Zealand has formed a “Friends of Fossil Fuel Subsidy Reform” group, which includes Costa Rica, Ethiopia, Finland, Norway, Sweden and Switzerland.

As Helen Clark, the former prime minister of New Zealand, said in Rio: “The reality is that fossil-fuel subsidies should go. I need to immediately qualify that by saying that for the poor, it needs to be replaced with an effective social protection or social security scheme. But overall, most fossil-fuel subsidies aren’t going to the poor — they’re going to industry, they’re going to richer people.

Fossil-fuel subsidies are not affordable [for governments]. I go to some countries where fuel subsidies are a significant part of the national budgets. Imagine if they had that money to invest in renewable energy and other constructive things.”

Australia is not a member, and was responsible for inserting some language into the final text, which weakened the proposed paragraph.

Estimates of the exact value of direct subsidies vary depending on what definition is used and whether production and consumption subsidies are included — but by anyone’s standard it’s a lot of money.

Oil Change International estimates the figure to be between $775 billion and $1 trillion each year. The Australian government estimates that our own our fossil fuel subsidies are between $A6-9 billion, although a report from the UTS Institute of Sustainable Futures a few years ago put the figure as high as $11 billion.

There’s no doubt from the experts that subsidising fossil fuels doesn’t make sense in a climate-changed world. In its World Energy Outlook 2011, the International Energy Agency condemned subsidies as “state aid” and “a significant economic liability”. According to the IEA, cutting these subsidies would cut global energy demand by 4% and considerably reduce carbon emissions growth.

The campaign to remove and redirect fossil-fuel subsidies is particularly relevant given the rapid cost reductions in renewable energy globally.

Last week the International Energy Agency released a new 685-page report that examined the viability of renewable energy. After reading the report, energy expert Giles Parkinson concluded in The Australian that “renewable energy sources can do the job, and whichever way you cut the cake for a carbon-free grid by 2050 or 2070, with more or less nuclear power or carbon capture and storage, renewable energy sources will be providing at least 50% of those electrons”.

And the good news is that it’s not half as expensive as most people imagine. Parkinson points out that the world is already locked in to upgrading its energy systems at a cost of more than $100 trillion over the next few decades. “Spending an extra $36 trillion to ensure that clean options are adopted would deliver savings of about $100 trillion by 2050,” he points out.

Julia Gillard arrives in Rio tonight. Expect the fossil-fuel subsidy debate to heat up in the coming days, although it seems unlikely Gillard will be working to reform them.

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Categories: ENVIRONMENT, Federal, The World

One Response

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  1. The Australian government estimates that our own our fossil fuel subsidies are between $A6-9 billion, although a report from the UTS Institute of Sustainable Futures a few years ago put the figure as high as $11 billion.”

    I understand that at least the latter figure counts the various fuel tax rebates as subsidies, but doesn’t take into account the revenue from the fuel taxes themselves. Insofar as this is true, the estimate of $11 billion for Australian fossil fuel subsidies is highly exaggerated.

    by Mark Duffett on Jun 21, 2012 at 11:13 pm

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