Decarbonising Europe: Fossil fuel subsidies must go

Financing the transition

The Commission is organising a huge conference on decarbonising European transport this week, but remains unwilling to discuss government support for fossil fuels, writes Wendel Trio. 

This Op-Ed was published on on 17.6.2015

By Wendel Trio, Director of Climate Action Network Europe

In the wake of the G7s commitment to phase out fossil fuels from our energy systems, the European Commission is bringing together a whole range of transport experts in Brussels on June 18, to discuss how to drive road decarbonisation forward. It is very good that the Commission wants to push governments and other stakeholders to increase efforts to make transport vehicles more efficient. Also praiseworthy is the promotion of shifting our mobility to greener means of transport (such as walking, cycling and collective transport).

However, it seems the Commission will continue its efforts to hide one of the main drivers of an increase of the use of cars, vans and trucks: fossil fuel subsidies. Last April, the EU institute decided to neglect the suggestions from its experts to call upon 11 Member States to tackle their fossil fuel subsidies in the transport sector. As a result, both technological solutions and lifestyle changes are on the conference agenda, but subsidies are not.

This is a huge missed opportunity because fossil fuel subsidies are still vast, and they are a real blockade to changing transport. A recent report from the IMF estimates global fossil fuel subsidies to reach €4.7 trillion in 2015. The EU is estimated to only have a small share in this enormous amount, but Europe’s transport sector will still benefit from approximately €18 billion in subsidies in 2015. During the 8.5 hours that the Commission’s conference will last, EU Member States will spend about €17 million on supporting fossil fuel use in the European transport sector.

Mind the gap

According to the IMF, phasing out fossil fuel subsidies could reduce global greenhouse gas emissions by a staggering 20%. Such reductions would be very welcome. In the run up to the Paris Climate Summit (taking place in December), a number of problems have emerged that may prevent the summit from being a success.

One of those is to bridge the gap between the level of action that countries are undertaking to reduce emissions in the next five years, and the reductions needed to keep the world on a pathway to prevent dangerous climate change. The UN Environment Programme has been publishing emission gap reports every year since 2010. The latest report estimates the gap to be around 20% to 25% of global emissions. A global phase out of fossil fuel subsidies would thus tackle the gap. For the world to do that, a strong example from the EU would be very welcome.

Benefits of a fossil-free world

A rapid phase out of costly fossil fuel subsidies would also bring many other benefits. The IMF report states that the resources freed by ending fossil fuel subsidies could be an economic “game changer” by driving economic growth and poverty reduction through greater investment in infrastructure, health and education, and slash the number of premature deaths from outdoor air pollution by 50%, and thus save the lives of 1.6 million people a year.

recent working paper from the Commission’s DG for Economic and Financial Affairs stated that fossil fuel subsidies are costly to tax payers. They crowd out high-priority government expenditure and are economically inefficient, distorting market price signals and leading to the inefficient allocation of resources. This reduces economic growth and increases the volatility of world energy prices.

It is clear that a first step towards the decarbonisation of our transport system would be for the Commission to tackle fossil fuel subsidies, such as the continuation of tax exemptions for company cars in Belgium, tax rebates for trucks, taxis and diesel in France, and subsidies for oil extraction in the UK.

Such a “big” announcement is what we are expecting from the opening statements of a Commission that wants to be big on big things at their own conference.

Climate Action Network Europe hopes the European Commission will recognise the need to tackle fossil fuel subsidies and start making this a priority. For the benefit of the climate and Europe’s credibility in Paris, as well as for the benefit of Europe’s economy and its citizens.