Nairobi, 28 April 2014
- Fossil fuel subsidies are contributing
to fiscal instability and undermining governments'
efforts to combat serious economic and environmental
challenges, such as climate change, and
the transition to an inclusive green economy,
according to experts.
FURTHER RESOURCES
UNEP Green Economy Initiative
Germany Society for International Cooperation
(GIZ)
International Monetary Fund
Global Subsidies Initiative/IISD
"Reforming Fossil Fuel Subsidies for
an Inclusive Green Economy" is the
theme of the two-day event co-organized
by UNEP, IMF, GIZ and the Global Subsidies
Initiative of IISD. Sessions will focus
on how fiscal policies can address the perverse
effects of fossil fuel subsidies and strengthen
government spending for sustainable development.
The Intergovernmental Panel on Climate Change
recently reported that CO2 emissions from
fossil fuel combustion and industrial processes
were responsible for approximately 78 per
cent of the total increase in greenhouse
gas emissions between 1970 and 2010.
Experts say reducing or eliminating harmful
fossil fuel subsidies - and properly pricing
energy to account for environmental impacts
- is one of the most promising ways governments
can promote a transition to a greener economy,
and even the playing field for investments
in energy efficiency and renewable energy.
Subsidies to producers
often support inefficient state-owned energy
companies and stifle incentives for greater
efficiencies and innovation, while subsidies
to consumers often encourage excessive consumption,
which has knock-on effects for pollution,
human health and greenhouse gas emissions.
Globally, fossil fuel
subsidies are estimated to be in the range
of US$500 billion. When taking into account
implicit subsidies from the failure to charge
for pollution, climate change and other
externalities, the IMF estimates the post-tax
subsidy figure is closer to $2 trillion
worldwide - equivalent to about 2.9 per
cent of global GDP, or 8.5 per cent of government
revenues. Furthermore, it finds the removal
of such subsidies could lead to a 13 per
cent decline in CO2 emissions.
In comparison, according
to the International Energy Agency, global
subsidies to the renewable energy industry
were $88 billion in 2011.
"Fiscal policies
are of particular importance in a green
economy transition. Confronted by a fiscally
constrained world, government reforms might
appear to be a daunting challenge,"
said UN Under-Secretary-General and UNEP
Executive Director Achim Steiner.
"However, it is
important to note that fossil fuel subsidies
cost countries precious funds. For example,
they divert government resources from pro-poor
spending in Africa, where governments spend
an estimated 3 per cent of GDP - equivalent
to their total health care allocation -
on fossil fuel subsidies," he added.
Several countries, including
Ghana, Namibia, the Philippines and Turkey,
have all shown that it is possible to reform
energy subsidies and prices. UNEP is currently
undertaking green economy fiscal policy
studies in several countries, including
Ghana, Kenya and Mauritius, which will inform
the respective governments as they advance
their fiscal policy reforms.
Experts are calling
on governments to use government policies
to leverage private investment in green
sectors by redirecting public investments
to clean technologies and providing direct
public expenditure for research and development.
For example, tax incentives could make investments
in clean technologies more attractive, while
government funds could reduce the risk profile
of capital intensive new technologies.
In addition, experts
acknowledge that, in some cases, eliminating
these subsidies could have ramifications
on the poor or weaken the competitiveness
of domestic industries. Therefore, they
said, social protection measures are needed
to ensure vulnerable groups are not overlooked
and receive assistance during a transition
period.
Note to editors:
The landmark meeting
entitled, Reforming Fossil Fuel Subsidies
for an Inclusive Green Economy, is taking
place on 28-29 April 2014, in Conference
Room 3 at the UN's Gigiri Complex in Nairobi,
Kenya.
It is jointly organized
by UNEP, IMF, GIZ and Global Subsidies Initiative
(GSI) of IISD.
About 80 participants
are expected to attend, including government
officials from ministries of finance, energy
and environment; international and regional
organizations; academic institutions; NGOs
and local UN missions.
The purpose of the workshop
is to provide a better understanding of
the scale of fossil fuel subsidies and their
potential for reform, links to green investment,
and policies that support the production
and use of fossil fuels, as well as to share
countries' experiences.
This is the second workshop
that UNEP is co-organizing with IMF and
GIZ, the first having taken place in October
2012 in Geneva. This year, GSI joined as
a co-organizer, and the European Commission
also contributed funding for the event.
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