The next six months offer a crucial window to phase out dirty energy subsidies as the world moves towards an agreement at the UN climate talks in Paris this December. Outcomes of three meetings in June – the G7 Leaders’ Summit, the meetings of the Organization for Economic Cooperation and Development (OECD), and the UN climate meetings in Bonn – underscore major battles on international fossil fuel finance through the remainder of 2015.
Rich Countries Need to Step Up Action on Fossil Fuel Subsidies
At its June leader’s summit, the G7 reiterated a commitment to eliminate “inefficient” fossil fuel subsidies, and to continued progress on aligning OECD export credits with climate objectives.
While the statement is almost identical to those from years past, new language encourages “all countries to follow” the G7 example. Other countries will have a hard time following if nobody’s leading: According to data from a recent report from OCI, NRDC, and WWF, G7 countries have been responsible for more than $34 billion in overseas coal financing between 2007 and 2014 (See Figure 1.)
Figure 1. G7 Countries’ Overseas Coal Finance, 2007-2014 (billions USD)
The G7 declaration makes reference to “progress” in OECD discussions on export credits. Unfortunately, shortly after the release of the G7 Leaders’ Declaration, the June 9-12 meeting of the OECD Working Party on Export Credits and Credit Guarantees resulted in just the opposite. Instead of making progress on tightening coal finance rules, the discussions slid back, as positions of EU countries weakened in the face of Japanese objections. Ultimately, the OECD group couldn’t come to an agreement, and set another meeting on the same issue for September.
The proposal serving as the basis for negotiation is strictly business-as-usual: according to a leaked document, proposed restrictions would only apply to subcritical coal power plants, while OECD manufacturers of coal-fired power plant technologies no longer build them, so these rules wouldn’t dent OECD Export Credit Agencies’ huge coal portfolios.
Rich countries will need to show more progress on ending subsidies and public finance for fossil fuels ahead of the G20 Summit in November and the UN climate talks in Paris in December if they expect other countries to get on board.
UN Climate Discussions: Keeping Fossil Fuel Subsidies on the Table
June’s UN climate change meetings in Bonn saw the first country-level pledge to reduce fossil fuel subsidies as part of a new climate deal. Morocco included subsidy reform in its Intended Nationally Determined Contribution (INDC). This momentum on reform of consumer subsidies is encouraging, but a big question remains: will the G20 countries’ pledge to end inefficient fossil fuel subsidies – first promised in 2009 – translate to action toward a climate agreement in Paris?
Public support from G20 countries for fossil fuel exploration alone totals nearly $88 billion each year – producer support to all fossil fuels is much higher. This public spending on fossil fuels undermines climate goals, and dwarfs climate finance contributions. In contrast, pledges to the Green Climate Fund total only $10 billion for the next several years.
There still remains a window of opportunity to keep references to elimination of fossil fuel subsidies in the text of the agreement – but at 85 pages long, a lot of elements will be stripped out of that text between now and December. Wins in the arenas described above – on OECD Export Credit and in the G20 – could also help build more pressure and momentum toward Paris, and open more political space for language on fossil fuel subsidies in the text.
It’s time to ratchet up the pressure and use the Paris moment to translate continued promises into more than just words on the page.