26 May 2015: A high-level event on ‘Fossil Fuel Subsidy Reform and Investments in Clean and Affordable Energy,’ which convened as a side event during the Sixth Clean Energy Ministerial (CEM 6), reflected on the role of subsidy reform as it relates to promoting clean energy and mechanisms for investing subsidy savings into clean energy solutions that can mitigate the impact of the reforms on end-consumers.

The event was intended to highlight recent advances on fossil fuel subsidy reform and discuss ways to sustain progress made in the event that oil prices rise again. Speaking on the potential for subsidies to return with rising oil prices, Charles Feinstein, Director of Energy and Extractives, World Bank, called for a “depoliticization” of energy prices in order to maintain advances made.

The event was moderated by Scott Vaughan, President, International Institute of Sustainable Development (IISD), who has said that “fossil fuel subsidies are extremely harmful to sustainable development and they need to go.” He recalled the Fossil Fuel Subsidy Reform Communiqué endorsed in April 2015 at the Spring Meetings of the IMF and World Bank, which was intended to raise the prominence of fossil fuel subsidy reform ahead of the Paris Climate Change Conference in December and increase efforts to eliminate subsidies to fight climate change and “level the playing field for renewable energy.”

Ernest Moniz, US Secretary of Energy, underscored the US’ commitment to fossil fuel subsidy removal and the “imperative of freeing up resources to invest in a clean technology future.” Rasmus Helveg Petersen, Danish Minister for Climate, Energy and Building, noted that more than 50 countries have committed to phasing out fossil fuel subsidies, and called for sharing best practices and taking advantage of current low oil prices to reinforce efforts ahead of the Paris Conference.

Maria van der Hoeven, Executive Director, International Energy Agency (IEA), called on governments to “phase out fossil fuel subsidies, protect the poor and reinvest the savings.” She said that, in 2014, fossil fuel subsidies exceeded US$500 billion, four times the amount of renewable energy subsidies. She called for building public trust by demonstrating that monetary savings from subsidy removal would benefit consumers.

Rigoberto Ariel Yepez-Garcia, Inter-American Development Bank, pointed to a high variation in the impact of subsidies in his region and said that, in the past two years, the volume of subsidies has decreased, presenting an opportunity to tax fuel consumption to generate additional revenue. Participants also addressed: the role of energy ministers in subsidy reform; the merits of subsidizing energy access; and the main barriers to subsidy reform.

The event took place on 26 May 2015, in Mérida, Mexico. It was presented by the Government of Denmark and the Global Subsidies Initiative (GSI), and hosted by the US Department of Energy and the Government of Denmark. CEM 6 is taking place from 27-28 May in Mérida.

Established in 2005 by IISD, the GSI analyzes subsidies and how they support or undermine efforts to achieve sustainable development. In recent publications, the GSI has argued that the presence of fossil fuel subsidies in the electricity sector acts as an impediment to renewable energy development, and focused on how policymakers should design energy policy to ensure that fossil fuel generation is not be treated more favorably than cleaner alternatives. [GSI News Story] [IISD RS Coverage of the Event on Fossil Fuel Subsidy Reform]