US pushes G20 to cut fuel subsidies

The United States is pushing key developing and developed nations to agree on a plan to phase out subsidies for fossil fuel industries blamed for global warming, the White House said.

The plan is part of efforts to combat climate change, enhance energy security, improve public health and the environment, promote faster economic growth and support more effective targeting of government resources for the poor, officials said.

“I would simply say that we put on the table the desirability of reaching an agreement to phase out fossil fuel subsidies,” Mike Froman, the national security advisor for international economic affairs, told reporters on Tuesday.

“We are working with the rest in the G20 to see if we can forge an agreement that would make significant contributions in that direction,” he said ahead of the two-day meeting of leaders of the Group of 20 developing and developed economies in Pittsburgh, Philadelphia, beginning Thursday.

President Barack Obama briefly told leaders of some 100 nations huddled at the largest-ever climate summit in the United Nations on Tuesday that he “will work with my colleagues at the G20 to phase out fossil fuel subsidies so that we can better address our climate challenge.”

It is not clear whether the United States would move unilaterally to erase its fossil fuel subsidies if there was no G20 agreement.

“I think the main value or impact of this would be to multilateralize it, so right now our focus is on seeing if we can forge a common position,” Froman said.

A study by the Washington-based Environmental Law Institute, a non governmental group, revealed that “the lion?s share” of US energy subsidies supported “sources that emit high levels of greenhouse gases.”

The combination of government spending and tax breaks amounted to 72 billion dollars for fossil fuels and only 29 billion dollars for renewable sources of energy over a six year period up to 2008, it said in a report.

Froman declined to provide details of the G20 plan, saying negotiations were still ongoing but cited various studies showing mainly governments of developing nations pouring hundreds of billions of dollars on such subsidies.

Key G20 nations China, India, Russia and Brazil reportedly are among the top spenders of fossil fuel subsidies and are unlikely to easily agree to any plans to slash them.

The United States was not against subsidies targeted at mostly the poor and in need of basic energy needs, Froman said.

“The G20 is not trying to do anything that would keep people in the dark but instead trying to encourage countries to move off blanket subsidies which are regressive,” he said. “This is not us pointing fingers at anybody.”

Twenty of the largest non-OECD governments spend more than 300 billion dollars a year in energy subsidies and that displaces other important public investments, he said.

The subsidies drain government resources, worsen balance of payments leading to under-investment and can contribute to energy shortages, he said.

In fact, these countries, spend more than one percent of their gross domestic product — a broad measure of economic growth — on fossil fuel subsidies last year, he said.

“So eliminating fossil fuel subsidies will promote more efficient investment climate, increase real income by as much as two percent in some developing countries and at the same time lead to better allocation of resources,” Froman said.

Studies by the Paris-based International Energy Agency (IEA), which advises oil-consuming countries, have shown that most such subsidies were “regressive” and benefited mainly the middle and higher income groups, he said.

Both the OECD and IEA estimate that eliminating fossil fuel subsidies will reduce global green house gases by up to 12 percent by 2050.

“Just put that in context: From our various climate change negotiations and positions, our objective is to reduce green house gases by 50 percent globally by 2050 so this would be a significant down payment on the effort to meet the global goal towards 2050,” Froman said.

“Thus, energy subsidies highly favored energy sources that emit high levels of greenhouse gases over sources that would decrease our climate footprint.”

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