Published daily by the Lowy Institute

The G20 stalls on fossil fuel subsidies

The G20 stalls on fossil fuel subsidies
Published 12 Jul 2016   Follow @hannahjwurf

G20 countries agreed to phase out inefficient fossil fuel subsidies in 2009. Seven years later, they are still making the same promise with no agreement as to how and when they will achieve this goal. 

There have been some important developments in global energy since the 2009 Pittsburgh G20 meeting. The UN Framework Convention on Climate Change reached an agreement last December and low oil prices have made it easier for governments to reduce subsidies. When G20 energy ministers met in Beijing on 29 and 30 June, it was an opportune time to act collectively on fossil fuel subsidies.

Despite the efforts of the US and China (who have found common ground responding to climate change), pressure from the European Union and the United Nations, and a petition from 200 NGOs, the G20 energy ministerial produced a remarkably weak statement. If you were looking for good news; the US, China, Germany, Mexico, and Indonesia will conduct voluntary peer reviews on phasing out their fossil fuel subsidies. 

As a group, the G20 was only able to agree to 'endeavour to make further progress in moving forward this commitment'. All the US Secretary of Energy could add was that he would like to see 'substantial progress' on reducing fossil fuel subsidies by 2025 or 2030. [fold]

The discrepancies between countries are likely to continue to prevent the G20 from agreeing to a deadline. The fossil fuel subsidies of Russia, Saudi Arabia, and China are ludicrously high. You can see which G20 countries are the worst offenders in this interactive map based on a joint Overseas Development Institute and Oil Change International report from last year. Which of these subsidies are 'inefficient' is another contentious political issue.

Saudi Arabia has repeatedly blocked G20 agreements relating to climate change and fossil fuels. Even though the Saudis are reducing domestic subsidies due to budget pressures, they are not signing up for any international commitments that could have a negative effect on the world's demand for oil. Despite Russia's estimated $79 billion in total subsidies, the Russian energy minister did not even attend the G20 meeting.

In fact, the 2016 G20 energy ministerial was not very well attended overall. The Europeans were caught up in Brexit. India, Canada, and Mexico only managed to send deputy ministers. Unsurprisingly, Australia did not send its minister, as there was a general election two days later. Last year, Tristram Sainsbury questioned the value of the first G20 energy ministerial and the same doubts are being raised in 2016.

The relatively poor attendance was not the fault of the host, but the meeting did get a lot less coverage than trade, which is a higher priority for China's G20. It is in China's interests to promote more energy cooperation. But the weak G20 statement reveals the old differences between energy producers and consumers that are difficult to bridge.

The G20 has had some successes in the area of energy, for example, the G20 Principles on Energy Collaboration and the work on energy efficiency led by the International Partnership for Energy Efficiency Cooperation (IPEEC). Perhaps helped by the G20 principles, the International Energy Agency has deepened its cooperation with important non-OECD energy consumers, including China.

Despite these efforts, the G20 is currently failing to meet the challenges of global energy cooperation and transitioning to a low-carbon world. It remains to be seen if Germany, the 2017 G20 host, can add some momentum to the G20's energy work stream.

Photo: Getty Images/Anadolu Agency/Sergey Anisimov

You may also be interested in