EU should pave the way for G20 fossil fuel subsidy phase-out

Financing the transition| Global transition

The EU must step up and lead the push for the world’s big economies to end fossil fuel subsidies, writes Maeve McLynn.

Maeve McLynn is finance and subsidies policy coordinator at Climate Action Network Europe.

This op-ed was first published on Euractiv on 19 April 2017

On 20-21 April, finance ministers from the world’s 20 most powerful economies will gather in Washington for their annual meeting, to discuss our international financial system, including key aspects to ensure global financial stability.

G20 countries have woken up to the importance of broadening the scope of the discussions to include issues related to climate change. Topics such as green finance and investment, fossil fuel subsidies and climate risk are regular agenda items at G20 meetings. While such an evolution looks encouraging, action remains inadequate.

Counter to economic logic and climate urgency, money is still being pumped into fossil fuels

Massive amounts of money are still being pumped into activities that completely run against efforts to tackle climate change. The most troubling example is the unbalanced financial support for fossil fuels provided by national governments, better known as fossil fuel subsidies.

Fossil fuel subsidies remain huge and pose enormous costs to wider society and tax-payers, particularly in times of budget austerity: the reported figure for financial support to fossil fuels in G20 countries in 2015 was $452 billion. This does not even take into account the much bigger external costs of burning fossil fuels in terms of human health, water and environmental pollution, and climate change impacts.

Recently, some key actors in the G20 have shown interest in tackling fossil fuel subsidies, including plans to identify and phase out the various measures through which fossil fuels are funded. The process of peer reviewing subsidies has garnered support: this year Germany, Mexico and Indonesia plan to publish their reviews of fossil fuel subsidies, following last year’s efforts by China and the US. Additionally, countries such as India and Argentina are warming to fossil fuel subsidy reform through taxation measures.

The EU needs to be a more fearless leader in addressing fossil fuel subsidies

The EU has begun to speak out more about fossil fuel subsidies, and although progress has been slow, it could finally be putting its words into action. In November 2016, the European Commission presented its long-awaited ‘Clean energy for all Europeans’ package, which featured a number of proposals on how EU financing should support the clean energy transition and secure a safer future for Europe’s societies: phasing out fossil fuel subsidies was identified as a key measure.

Proposals include green taxation reform and effective governance of national efforts to eliminate subsidies to fossil fuels. This indicates a willingness to better align European finance and investments with objectives to have a cleaner, safer and more efficient energy system. Now all EU leaders need to match this willingness with both a concrete plan and explicit endorsement to phase out fossil fuel subsidies as soon as possible.

EU ambition must be demonstrated and carried through to the international stage

The G20 platform is an obvious way for EU leaders and ministers to showcase their efforts and actions to eliminate polluting subsidies. Not only will EU action build on the G20 commitment from 2009 to phase out fossil fuel subsidies, it will also show that ministers have been paying attention to the countless calls from civil society, investors and insurers to phase out subsidies by 2020.

The conspicuous leadership void left by the US indicates just how important it is for the EU to be more vocal, active and demonstrative on climate action in the G20. With a European country at the helm of the G20 presidency, bolstered by the commitment of large economies like China and Canada, the EU should pave the way in ending the benefits to polluters and lead a transition that benefits people.