All fossil fuel subsidies are inefficient, because they form a roadblock to effective climate action and sustainable development.
It is time to listen to the WTO’s group of Friends of Fossil Fuels Subsidies Reform and put their proposal into action, in line with the Glasgow Climate Pact.
WTO negotiators are reportedly working day and night to reach a “fish deal” before their Trade Ministers land in Geneva on 30 November.
By Rémi Parmentier, Director at the Varda Group. Twitter: @RemiParmentier
Logic dictates that if you want to starve a beast, you should stop feeding it. Accordingly, common sense dictates that governments should stop funding activities which contribute to crises they are working like crazy to address.
So it was a no-brainer for the Glasgow Climate Pact adopted at COP 26 to include a call for the phase-out of inefficient fossil fuel subsidies. As long as governments use taxpayers’ money to support coal, oil, and natural gas infrastructure development and operations, they are undermining their own commitments to the Paris Agreement target to keep global warming below 1.5ºC.
Governments should stop funding activities that drive the crises they are working like crazy to address.
When the adjective “inefficient” was added to “phase out fossil fuel subsidies” to weaken that commitment, it didn’t fool anyone. All fossil fuel subsidies are inefficient, because they form a roadblock to effective climate action and sustainable development, and in doing so they increase the vulnerability of people and our planet to climate change impacts.
In 2020, according to the International Monetary Fund (IMF), coal, oil, and natural gas received approximately USD 470 billion in explicit subsidies. Also in 2020, the International Renewable Energy Agency (IRENA) tracked some USD 634 billion in energy-sector subsidies, and they found that about 70% was going to fossil fuels.
The latest combined Nationally Determined Contributions (NDCs) submitted under the Paris Agreement at COP 26 will put us on a 2.7ºC warming trajectory, a long way from the 1.5ºC target. Governments in Glasgow therefore agreed that NDCs should be revised and improved next year, and not wait for the five years stipulated by the Paris Agreement. One clear and effective way to reflect an increased ambition in NDCs would be to eliminate fossil fuel subsidies, and to use this money to invest in improving energy efficiency and scaling up renewables.
Governments’ next gathering to discuss subsidies is coming up quickly. The multilateral forum for discussion and regulation of subsidies is the World Trade Organization (WTO) which is about to hold a ministerial conference for the first time since 2017. The 12th WTO Ministerial Conference (MC12) will take place in Geneva, Switzerland from 30 November to 3 December 2021.
In recent months, WTO Members have been discussing what role they can play in support of climate action and the Paris Agreement. Agreeing a mechanism to “discipline” fossil fuels subsidies and a time-table to eliminate them would be the right thing to do. Within the WTO, a group of Friends of Fossil Fuels Subsidies Reform has been meeting for some time. It is time that they be heard, and that their proposed reform gets underway in line with the Glasgow Climate Pact.
But will it? The WTO’s fisheries subsidies negotiations 20 years-long record is not encouraging.
In 2001, WTO Ministers launched negotiations to eliminate a much smaller set of subsidies, “harmful” fisheries subsidies which contribute to overfishing and overcapacity as well as illegal, unreported and unregulated (“IUU”) fishing and are estimated to represent some USD 22 billion per year. This is considerably less than fossil fuels subsidies, but after 20 years, the WTO has still failed to reach consensus on eliminating harmful fisheries subsidies.
Preventing the deliberate plundering of fish should be as much of a no-brainer as deciding not to add more fuel to the climate crisis. According to the Food and Agriculture Organization of the UN (FAO), in the two decades since the WTO fisheries subsidies negotiations began the proportion of fish stocks that are overfished has risen from 25% to 34%. Scientists have calculated that removing harmful fisheries subsidies could increase by 12.5% the fish biomass by 2050, or 35 million metric tons of fish that would contribute to mitigating hunger and restoring marine biodiversity.
Seeing that WTO discussions were stalled, in 2015 the UN General Assembly called upon the WTO to conclude fisheries subsidies negotiations “by 2020,” as part of the Sustainable Development Goals. WTO negotiators are reportedly working day and night to reach a “fish deal” before their Trade Ministers land in Geneva on 30 November. But still, it is unclear whether they will manage to “reel in the deal.”
If eliminating USD 22 billion in fisheries subsidies takes 20 years or more, what chance is there to eliminate fossil fuels subsidies amounting to USD 470 billion in time to prevent catastrophic climate change? In just a few days, the Trade Ministers of the 164 WTO Members will have to respond to this question. An existential question not just for the WTO, but for humankind as a whole.