Governments around the world spent around half a trillion dollars last year supporting the production and consumption of fossil fuels, the International Energy Agency reports today.
In inspecting the extent to which fossil fuels are supported by taxpayers, despite their massive environmental impact, the Agency, supported by the Organisation for Economic Co-operation and Development (OECD), found that subsidies increased by around 33 per cent between 2009 to 2010- an increase of US $110 billion – bringing total subsidies to an estimated total value of US $409 billion last year.
Back in 2009, G-20 Leaders agreed to phase out subsidies that ‘encourage wasteful consumption, reduce our energy security, impede investment in clean energy sources and undermine efforts to deal with the threat of climate change’. Now the international agencies are calling on governments to honour that.
“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 both emphasised to reporters that subsidies to fossil-fuel consumers often fail to meet their intended objectives: in 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.
According to analysis carried out by the IEA, to be published in the World Energy Outlook 2011 on November 9, the phasing out fossil-fuel subsidies will provide an impetus for investment, growth and jobs in renewable energy and energy efficiency.
