Following lengthy and difficult discussions at this past weekend’s G-20 Summit, there is now a laundry list of promises from leading world countries on everything from creating a diverse energy landscape to improving nuclear security. However, one essential policy commitment is noticeably absent: addressing costly fossil fuel subsidies. Fossil fuel subsidies are, according to a recent Bloomberg View editorial, “the world’s dumbest policy.”
These subsidies, which cost governments around the world about $500 billion in 2014, encourage people to buy polluting fossil fuels and divert resources from basic investments in infrastructure, health care, education and cash transfers to the poor. The world would be a better place without them.
The G-20 can and should in the future look to support national action with three concrete measures that strike the right balance between ambition and realism. These measures are based on the idea that subsidy reform is a national decision. It cannot be forced by outsiders, but the international community can support national effort.
The first measure is that member governments announce a firm commitment to eliminate fossil fuel subsidies by a target year, such as 2025. Much like steps to ratify the Paris Agreement and curb climate change, the target year for fuel subsidy termination must be ambitious but realistic: not too soon, not too far into the future.
The next step is to agree on rigorous, public peer review of progress in eliminating fuel subsidies on a regular basis. For example, G-20 members could agree to review each other’s subsidies every three years. This peer review means that if a G-20 member fails to make progress, its international reputation suffers. The bilateral peer review that China and the United States have announced is a good start but not enough. All G-20 members should agree to participate in the peer review.
Finally, G-20 members should cooperate to support each other’s national strategies. Government officials can share lessons, propose innovative policies, and develop ways to engage domestic and international stakeholders in the reform process. Such peer support increases the likelihood of success in national subsidy reform, as government officials can learn from others’ successes and failures.
Eliminating fossil fuel subsidies is possible and should be a continued focus for G-20 leaders. These three measures encourage governments to act as well as increase the cost of reneging on promises of reform. They also, importantly, respect national sovereignty and recognize the difficult domestic politics of subsidy reform which cannot be taken for granted in order to end this long-held practice and put G-20 members in a position to reap reputational, financial, and environmental gains from removing fossil fuel subsidies.
Johannes Urpelainen, Faculty Affiliate at Columbia’s Center on Global Energy Policy
The views expressed by authors are their own and not the views of The Hill.