Axe cheap petrol to cut emissions, emerging economies told

Fossil fuel subsidy reform in countries like Egypt, India and Indonesia could contribute to a global climate deal, says IISD

Egypt has hiked fuel prices for motorists in an effort to cut its budget deficit (Pic: Flickr/Tinou Bao)

Egypt has hiked fuel prices for motorists in an effort to cut its budget deficit
(Pic: Flickr/Tinou Bao)

By Megan Darby

Egypt, Indonesia and India are among almost 30 countries to have cut consumer fossil fuel subsidies in 2014.

Ending artificially cheap petrol and other such market interventions could cut greenhouse gas emissions an estimated 6-13% worldwide by 2050. It would also free up some US$500 billion of public money.

Countries should include fossil fuel subsidy reforms in their draft contributions to a global climate deal, the International Institute for Sustainable Development has recommended.

“The evidence is clear—subsidising the consumption of fossil fuels is hugely detrimental to the climate,” said Scott Vaughan, president and CEO of IISD.

“And they come at a large opportunity cost. The billions of dollars spent on these subsidies means less money is available for clean energy, health, education and infrastructure.”

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Developing countries, which account for the bulk of such subsidies, are being encouraged to submit national climate plans to the UN this year.

It is the first time poorer parts of the world will formally shoulder some responsibility for limiting emissions, with financial and technology support.

These, alongside commitments from the developed world, will form the building blocks of a global agreement due to be struck in Paris this December.

While rich countries are still expected to make the bulk of emissions cuts, emerging economies are seeking to shift their growth onto a greener path.

“Fossil fuel subsidy reform is a feasible and cost-effective commitment that countries are implementing, or seriously considering, and which could support an agreement in Paris,” said Laura Merrill, a senior researcher at IISD’s Global Subsidies Initiative.

Report: Oil price slump boosts Egypt fuel subsidy phase-out

The IISD report comes amid mounting calls to take advantage of a low oil price – which at around US$55 a barrel, has halved since last June – to scrap subsidies.

A key obstacle to removing subsidies is resistance from consumers who do not want to pay more for their fuel.

Top officials at the International Energy Agency and the World Bank have argued now is a good time to make the shift with minimal impact on pump prices.

The move would also help to address rising social inequality, added Paul Polman, chief executive of consumer goods giant Unilever, in a Guardian article yesterday.

Fossil fuel subsidies “often disproportionately benefit the rich who use more energy”, he wrote, calling for the money to go into renewables and innovation.

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