G20 Leaders Agree to Phase Out Fossil Fuel Subsidies

Leaders of the world's major economies gather to discuss reforms that guard against the dangerous imbalances that contributed to the global economic downturn. Friday, the group decided they will serve as the board of directors on decisions for the global economy, taking over a role performed for more than three decades by a smaller group of wealthy nations.
By Juliet Eilperin
Washington Post Staff Writer
Friday, September 25, 2009; 4:25 PM

World leaders gathered in Pittsburgh for the Group of 20 summit agreed Friday afternoon to phase out fossil fuel subsidies over time, approving language that does not outline a specific timetable for the phaseout and makes clear that poorer citizens may still receive help in paying their energy bills.

But the wording of the statement, championed by the Obama administration, signals the world's most influential nations are taking an initial, tentative step away from the fossil fuels that power their economies.

"We commit to rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption," the statement said. "As we do that, we recognize the importance of providing those in need with essential energy services, including through the use of targeted cash transfers and other appropriate mechanisms. This reform will not apply to our support for clean energy, renewables and technologies that dramatically reduce greenhouse gas emissions."

The United States and many other countries around the world provide financial aid -- in the form of both direct payments and tax breaks -- to help produce oil, natural gas and other fuels that produce carbon dioxide, which has contributed to rapid climate change over the past half century. According to the Environmental Law Institute, the U.S. government provided $72 billion in subsidies to the fossil fuel industry between 2002 and 2008.

Jake Schmidt, international climate policy director at the Natural Resources Defense Council, said that while the statement is "not the firmest commitment" towards creating a low-carbon economy, "it's an important down payment" on such a policy.

"Given that we're talking about deep cuts across the world," Schmidt said, referring to greenhouse gas emissions, "we can't have investments in clean energy competing against investments in fossil fuels that are going in the wrong direction."

U.S. oil and gas industry representatives predicted the agreement would impose a new burden on Americans.

Jack Gerard, president of the American Petroleum Institute, said the administration and Congress "now face many difficult choices if they choose to comply with the G-20 commitment to phase-out fossil fuel subsidies."

"Above all else, the president and Congress should not use this commitment as an excuse to raise energy taxes on American consumers and businesses," Gerard said in his statement. "Does the president really think it wise to eliminate tax provisions that encourage investment in technology and exploration and development and would likely constrict future energy supplies, raise energy costs and kill jobs?"

The agreement calls on energy and finance ministers from the G-20 to devise "strategies and timeframes" for eliminating the subsidies and report back at the next meeting.

The leaders of countries including France, Britain, Japan and developing nations such as China and India were vague in describing how much money industrialized countries must provide to help vulnerable and major developing nations cut their emissions and respond to climate change impacts. They approved language saying: "Public and private financial resources to support mitigation and adaptation in developing countries need to be scaled up urgently and substantially, with public resources utilizing a variety of delivery channels and drawing upon the expertise of existing institutions." But they dropped a sentence that would have specified this language would be in addition to the existing development assistance rich countries already provide to poorer nations.

Keya Chatterjee, acting director of the World Wildlife Fund's climate change program, said the fact that the G-20 leaders could not agree to specific language on financial aid to developing countries when it comes to global warming puts intense pressure on the next G-20 meeting, which is expected to take place in November.

"It shows that industrialized countries haven't quite mustered the political will, and now they've got ten weeks to muster it up," she said.

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