Throwing petrol at a house on fire

Phase out fossil fuel subsidies and reduce other perverse or trade distorting subsidies by 2020. The reduction of subsidies must be accomplished in a manner that protects the poor and eases the transition for affected groups when the products or services concerned are essential.

The report – Resilient People, Resilient Planet: A Future Worth Choosing — sets out specific recommendations to “put sustainable development into practice and to mainstream it into economic policy as quickly as possible.” The report reinforces the push to phase-out inefficient fossil fuel subsidies, speed up the deployment of renewable energy, and accelerate energy efficiency efforts. The high-level report was the result of the U.N. Secretary General’s High-Level Panel on Global Sustainability.

Fossil fuel subsidies drain public resources, drive global warming, and make it harder for clean energy to compete. In fact, fossil fuel subsidies are 500% larger than the subsidies provided for clean energy which led one commentator to point out: “The house is ablaze and we are throwing bucket after bucket at it - buckets of petrol.”

Reforming subsidies without harming the poor should be within reach as the International Energy Agency estimates that the vast majority of the subsidies never reach the poor. The poorest 20 percent receive only 5-10 percent of the subsidies.

Hence, the report suggests that a large focus must be placed on the subsidies to produce more fossil fuels – known as “production subsidies” – and a targeted approach to subsidies that support consumption of fossil fuels (e.g., subsidized gasoline, etc) – so-called “consumption subsidies”. At least $100 billion per year goes to support production subsidies – such as tax breaks for oil companies – at a time when the fossil fuel industry doesn’t seem to be hurting financially.

Who will take the first step?