Investors and insurers with over $2.8 trillion in assets under management are calling on the G-20 countries to phase out fossil fuel subsidies by 2020. The value of global fossil fuel subsidies totaled $493 billion in 2014, according to World Energy Outlook. And cutting that off could help reduce climate and accelerate green investment, stakeholders say.
G-20 governments must “lead in phasing out subsidies and public finance for fossil fuels – to accelerate green investment and reduce climate risk,” the investors and insurers said in a statement. They urged governments to create a deadline to phase out fossil fuel subsidies and public finance for fossil fuels at the G-20 Summit in Hamburg, Germany, this summer.
In their statement, the investors and insurers said subsidies and public finance that support the production and use of fossil fuels are a “key concern to the finance sector.” They went on to cite the pitfalls of such subsidies:
- Subsidies increase the risk of stranded fossil fuel assets.
- They decrease the competitiveness of key industries, including low-carbon businesses.
- They negate carbon price signals.
- They create a significant burden on government budgets.
- They perpetuate income inequality that benefits the richest consumers, and do not meet the energy needs of those without energy access.
- And they damage public health by increasing air pollution.
“[We] want to achieve an energy transition to clean, affordable and secure energy,” one of the investors, the Dutch fund and asset manager Actiam, said in a statement. “Subsidies to coal, oil and gas production hinder the historical Paris agreement, in which 196 countries agreed to limit global temperature rise to 1.5 or maximum 2 degrees [Celsius].”
The call to phase out fossil fuel subsidies came right before a G-20 foreign ministers meeting in Bonn, Germany.
Germany has the presidency of the G-20 group in 2017, and climate change action is a key focus. In a policy document outlining the priorities of the G-20 summit, Germany described climate change as “one of the most significant global challenges and is already leading to high costs and risks around the world.”
In November, the German government said it will work with the World Bank to deal with the effects of climate change. And Germany pledged to contribute 105 million euros (around US$110 million) to World Bank climate programs.
Why fossil fuel subsidies need to go
Completely removing fossil fuel subsidies would reduce carbon dioxide emissions by gigatons from 2017 to 2050, according to a study by the International Institute for Sustainable Development’s Global Subsidies Initiative and the Overseas Development Institute. That’s equivalent to burning all of the proven oil reserves in the U.S. and Norway.
California is a reminder of why greenhouse gas emissions need to be reduced. For six years, the Golden State experienced one of the worst droughts in American history. And in the last few months, the state received above-average rainfall that is causing massive flooding. California has literally gone from drought to deluge within a few months.
Last week, 188,000 people were evacuated in Butte County because the Oroville Dam’s emergency spillway was damaged by the storms. The state was able to repair the spillway and allowed people to return to their homes. But climate experts have long warned that a warming planet will increase the frequency of droughts and floods.
G-20 countries are not the only ones that need to phase out fossil fuel subsidies.
Support for fossil fuel subsidies accounts for up to 5 percent of GDP — and between 25 to 30 percent of government revenues — in 40 developing countries.
And some world regions offer even more support for fossil fuels. In the Middle East and North Africa region, fossil fuel subsidies total an estimated 13 percent of GDP and 35 percent of government revenues. Those countries are fossil fuel producers. And they’re also lagging behind when it comes to combating poverty — an issue that only appears to be growing worse. In 2010, 4.1 percent of the population in this region earned less than $1.25 a day. By 2012, that figure reached 7.4 percent, according to the U.N. Development Program (UNDP).
U.S. President Donald Trump has made it clear he does not believe in climate change and wants to ramp up fossil fuel production. His America First Energy Plan seeks to free the U.S. “from dependence on foreign oil.” And it commits the Trump administration to eliminating “harmful and unnecessary policies such as the Climate Action Plan.”
Luckily, where the Trump administration is failing on climate change and fossil fuels, California is leading. Last week Kevin de León, leader of the state’s Senate, introduced a bill that would transition California to 100 percent renewable energy by 2045. The state now mandates that renewables must comprise 50 percent of its energy use by 2030. The de León bill would speed things up even further and have California meet the 50 percent target by 2025.
There is a saying: As California goes, so goes the nation. If de León’s bill passes, California has an opportunity to be a climate change leader in the U.S. And that would be good for the nation — and possibly the world — as the global financial sector begins to warm to a world without fossil fuels.
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