According to the IEA this figure is up $110 billion over 2009 and could reach $660 billion by 2020 despite the G20 countries committing over two years ago to eliminating these subsidies.
At the 2009 Pittsburgh G20 summit chaired by President Obama, leaders committed to eliminating both consumption and production subsidies that topped $300 billion that year. The GRFA has tracked activity on this promise and despite progress being made in several countries there appears to be little real progress in reducing these market-distorting subsidies. According to today’s IEA report these consumption subsidies reached $409 billion in 2010 and could top $660 billion by 2020.
“As we strive to develop alternatives to oil we must recognize that alternative fuels are not competing on a level playing field,” said Bliss Baker, spokesperson for the Global Renewable Fuels Alliance. “These massive multi-billion dollar crude oil subsidies completely outweigh current biofuel incentives and are a serious obstacle to the development of cleaner greener alternatives. Oil has a huge competitive advantage financed by global taxpayers,” added Mr. Baker.
Next month the G20 will meet in France and the issue of oil subsidies is on the agenda; however the issue is likely to be overshadowed by agricultural issues according to the background information being prepared for these meetings.
“Despite the IEA’s optimism that there is some momentum in reducing subsidies, progress remains very slow and sporadic,” said Mr. Baker. “It is time for the G20 to show leadership and reverse this practice of never-ending subsidies to big oil. It is time to move beyond crude oil and into a world with sustainable alternatives such as biofuels and other renewable forms of energy. They must put their money where their mouth is and invest in renewable alternatives,” he concluded.
The GRFA's calls were echoed by both the IAE and the OECD yesterday. “Both developing and developed countries need to phase out inefficient fossil fuel subsidies. As they look for policy responses to the worst economic crisis of our lifetimes, phasing out subsidies is an obvious way to help governments meet their economic, environmental and social goals,” said OECD Secretary-General Angel Gurria, “For this to succeed, we need well-targeted, transparent and timebound programmes to assist poor households and energy workers who might be adversely affected in the short-term. OECD and IEA data and analysis can help guide the process.”
The OECD Secretary-General and IEA Executive Director Maria van der Hoeven emphasised that subsidies to fossil-fuel consumers often fail to meet their intended objectives: alleviating energy poverty or promoting economic development, and instead create wasteful use of energy, contribute to price volatility by blurring market signals, encourage fuel smuggling and lower competitiveness of renewables and energy efficient technologies.
“In a period of persistently high energy prices, subsidies represent a significant economic liability,” said IEA Executive Director Maria van der Hoeven in a joint IAE-OECD press release, which added: "phasing out fossil-fuel subsidies will also provide an impetus for investment, growth and jobs in renewable energy and energy efficiency".
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