COP 21 Event—Fossil Fuel Subsidies and Climate Change: National action and international phase out

Some 300 participants gathered for a side event on December 7, 2015, organized by the IISD Global Subsidies Initiative and the Friends of Fossil Fuel Subsidy Reform on the sidelines of COP 21.

The event put the spotlight on need to reform fossil fuel subsidies for environmental, social and economic reasons, but also the challenges that governments face in advancing reforms. The discussion covered the scale and nature of subsidies to fossil fuels; country efforts to reform subsidies; the inclusion of subsidy reform within country INDCs and implications for emissions reductions; and the growing momentum behind the international Communiqué to phase out fossil fuel subsidies.

Moderator Tim Groser, Minister of Trade and Climate Change Issues, New Zealand, introduced the session which focused on progress towards phasing out fossil fuel subsidies (FFS). He referred to the positive momentum to implement a carbon price into the global market in the next two decades, lamenting that the continued subsidising of fossil fuels was the “height of policy incoherence.”

Doris Leuthard, Head, Federal Department of Environment, Transport, Energy and Communications, Switzerland, Switzerland, said that FFS are delaying the economic need to switch to renewable energy (RE), reporting on International Energy Agency (IEA) estimates that a partial phase out of FFS would generate 12 percent of the global abatement needed by 2020 to achieve a 2ºC pathway.

Fatih Birol, Executive Director, IEA, referred to the “absurd situation” of the opposite forces at work in the global energy economy, in which the carbon price in Europe is approximately US$10, yet incentives for fossil fuel use, in the form of FFS, equate to a global average of US$110 per tonne of carbon.

Børge Brende, Minister of Foreign Affairs, Norway, described FFS as “negative climate finance” that contradicts the common objective of cutting emissions as well as weakens efforts to promote RE alternatives. He lamented the “paradox” that FFS amount to five times the global annual climate finance commitment of US$100 billion.

Ibrahim Aylan, Minister for Energy, explained that while Sweden’s domestic greenhouse gas (GHG) emissions have declined 24 percent since 1990, emissions from consumption of goods and international transport have increased. He suggested carbon pricing as an effective method to tackle this international dimension of climate change.

Scott Vaughan, President, IISD, reported that each hour, US$8 million is spent on FFS, describing this as “unacceptable.” He underscored three key points: the removal of FFS will be instrumental in mitigating climate change; the urgent need for further work on subsidies to producers; and subsidy reform as an enabler of fiscal savings that can address sustainable development.

Risto Piipponen, Ambassador to France, Finland, underscored Finland’s participation in the FFFSR, which aims to create a level playing field for renewable energy and to remove inefficient FFS to free up resources for sustainable development and climate change action. He observed that, while Finland does not have direct FFS, work must be done to address indirect FFS.

Felipe Calderón, Chair, Global Commission on Economy and Climate, pointed to studies revealing that only 3% of FFS reaches the poorest 20% of households, underscoring that supporting poor families and improving energy access are not substantiated reasons for FFS. He called for addressing the difficult political reasons that perpetuate FFS, such as pressure from the electorate to not increase the prices of electricity and fuel. 

“A price on carbon and fossil fuel subsidies are two opposing forces.” Fatih Birol, Executive Director, International Energy Agency

“Fossil fuel subsidy reform needs to handled with care and foresight. But the challenges are not a reason for inaction.” Doris Leuthard, Federal Councilor and Head of Federal Department of Environment, Transport, Energy and Communications, Switzerland

"Governments spend more than US$ 500 billion a year on fossil fuel subsidies. Reform is an opportunity to invest in people and the environment.” Scott Vaughan, President, International Institute for Sustainable Development

“There is a clear correlation between fossil fuel subsidies and votes. We need to address that frankly and honestly, and provide governments with pragmatic solutions to that challenge.” Felipe Calderón, former President of México and Chair of the Global Commission on the Economy and Climate, New Climate Economy

Information: Lasse Toft Christensen ltchristensen@iisd.org and Laura Merrill lmerrill@iisd.org. Click here for the event flyer.