End Fossil Fuel Subsidies

End Fossil Fuel Subsidies by Richard Matthews

US President Barack Obama is calling on the world to end massive government subsidies that encourage the use of fossil fuels blamed for global warming.

The G20 has been discussing plans to phase out inefficient fossil fuel subsidies for a while now. According to estimates the fossil fuel industry currently receives subsidies of between $300-$500 billion a year. Fossil fuels are not only destructive sources of pollution, subsidies make cleaner sources of energy less competitive.

In 2009 G20 leaders issued a statement recognizing that fossil-fuel subsidies “encourage wasteful consumption, distort markets, impede investment in clean energy sources and undermine efforts to deal with climate change.”

According to a Greenpeace, a leaked copy of the Toronto 2010 draft G20 declaration calls for for “voluntary, member-specific approaches,” to ending fossil-fuel subsidies, a major softening of last year’s commitment “to phase out and rationalize over the medium term inefficient fossil-fuel subsidies while providing targeted support for the poorest.”

The International Institute for Sustainable Development (IISD) hopes that as chair of the G20 summit, Canada will make a solid commitment on fossil fuel subsidy reform as a critical next step.

According to IISD CEO and president Franz Tattenbach. “Canada’s promotion of fossil fuel subsidy reform at the G20 level can greatly assist the international movement towards cleaner energy and make a significant reduction in global greenhouse gas emissions.”
Canada’s deputy minister of Finance Michael Horgan indicated that phasing out federal tax preferences to the fossil-fuel industry would have significant benefits for Canada, notably maintaining the nation’s image as a clean energy superpower and improving its reputation with respect to oil sands.

“Fossil fuel subsidies have encouraged wasteful spending and harmful greenhouse gas emissions,” said Mark Halle, Geneva-based director of IISD’s investment and trade program. “The removal of fossil fuel subsidies will level the playing field for the development of clean energy alternatives.”

The IISD’s Global Subsidies Initiative’s initial findings show that the Canadian oil industry currently benefits from more than 40 different subsidy programs, mostly in the form of preferential tax treatment and investment incentives for exploration and drilling.

Frank O’Donnell, president of Clean Air Watch, a Washington environmental group, said there is “no greater cause of climate change than fossil fuels. There’s no greater cause of that than artificial subsidies. It’s a great idea to eliminate those subsidies and let the marketplace work.”

If the G20 is serious about a green recovery and sustainable global growth, ending fossil fuel subsidies is an important initial step.

Richard Matthews is a Marketing Consultant and author of The Green Market, a blog dedicated to green investing and the economy. Richard hails from Quebec Canada. He enjoys hiking, canoeing, and rock-climbing.