There is a long road ahead to eliminating unnecessary subsidies to fossil fuels. Fortunately, China and the US have started the transparency process. The International Institute for Sustainable Development writes about the recently released voluntary peer reviews of both China and the United States.
IISD Welcomes Transparency on Fossil Fuel Subsidies by China and the United States
This week China and the United States released voluntary peer reviews of their fossil fuel subsidies. The two countries are the first among G20 members to undertake peer reviews as part of the G20 commitment “to phase out inefficient fossil fuel subsidies that encourage wasteful consumption.”
The peer review process starts with the preparation of a “self-review” report to identify, measure and evaluate fossil fuel subsidies. This report is then reviewed by a peer review panel. The panel for China included Germany, Indonesia, United States and the International Monetary Fund. The United States report was reviewed by China, Germany and Indonesia.
“The United States and China—the two largest economies in the G20—are to be congratulated for their leadership,” said Peter Wooders, Director of IISD’s Energy Program. “This gesture of openness signals a genuine desire to remove subsidies that are both environmentally and economically harmful. I hope the peer reviews encourage other G20 members to talk openly about their fossil fuel subsidies and develop plans for phase out.”
G20 peer reviews include inventories of fossil fuel subsidies, an evaluation of their effects and costs, and plans that countries have made to phase out those considered “inefficient” and which “encourage wasteful consumption.”
The United States’s review lists 17 subsidies valued at US$ 8.2 billion. The review for China lists 9 subsidies worth US$ 14.5 billion. China’s peer review report is notable for also including a reform plan and timeline, identifying subsidies for phase-out in the near future.
“It is encouraging to see that the reviews list both consumption and production subsidies, encompassing the many forms of budgetary transfers, tax breaks and regulatory privileges that can encourage wasteful use of energy,” said Richard Bridle, Research Officer with the IISD Global Subsidies Initiative.
Unfortunately, G20 leaders have not agreed a definitive timeline for the phase out of all inefficient fossil fuel subsidies, despite mounting pressure to do so. Ahead of the G20 leaders’ summit earlier this month, more than 200 NGOs from 45 countries and a group of insurers with US$ 1.2 trillion under management urged G20 leaders to remove subsidies for fossil fuels by 2020.
“Although time is running short, the G20 leaders still have a chance to meet these expectations and set a timeline for reform under next year’s G20 presidency by Germany,” said Wooders.
The United States and China peer review documents are available here.
For more information on IISD’s work on fossil fuel subsidies, visit the website of the IISD Global Subsidies Initiative.