INTERGOVERNMENTAL INITIATIVES TO PHASE OUT FOSSIL-FUEL SUBSIDIES

There is a growing recognition that FFSs are not only economically inefficient but also harmful for the environment. The most visible aspect of this recognition is the proliferation of calls for the phasing out FFSs and efforts to do so over recent years. This section will highlight and briefly discuss the efforts that have been made thus far at the intergovernmental level. Although these efforts are yet to yield the desired results, they represent a major step forward in the quest to end FFSs, and offer valuable lessons for future multilateral efforts to eliminate FFSs.

One of the first intergovernmental responses to calls for FFS reform came in the form of the Kyoto Protocol to the UNFCCC (UN Framework Convention on Climate Change). FFS reform was included, albeit implicitly, in the Protocol’s non-exhaustive list of policies and measures to tackle climate change. Article 2.1(a) (c) of the Protocol states that:

Progressive reduction or phasing out of market imperfections, fiscal incentives, tax and duty exemptions and subsidies in all greenhouse-gas emitting sectors that run counter to the objective of the Convention and application of market instruments. (UN 1998, emphasis added)

Most FFS schemes fall under this provision, but the requirement to phase out FFSs is neither comprehensive nor mandatory. First, it applies only to the so-called Annex I countries and excludes some of the leading fossil-fuel subsidizing countries. Second, none of the policies and measures set out in Article 2 are mandatory, even for the Annex I countries (Feaver, McGoldrick, and Boyd-Wells 2010). The protocol gives the signatories absolute discretion to implement any particular policy or measure, as long as they meet their emission reduction commitments.

Perhaps the most concerted effort yet to phase out FFSs at the intergovernmental level has been that of the G20. At their Pittsburgh Summit in September 2009, G20 leaders agreed:

To phase out and rationalize over the medium term inefficient fossil-fuel subsidies

while providing targeted support for the poorest____(G20 Leaders 2009, Leaders’

Statement, emphasis added)[1]

A similar commitment was also made by the member states of the Asia-Pacific Economic Cooperation (APEC) shortly after (APEC 2009). Together, the G20 and APEC membership, which comprises a wide range of countries with the highest FFSs, accounts for about 83 per cent of global oil consumption, making the commitment even more remarkable (Aldy 2015). However, translating this commitment into action proved to be a slow and difficult process for several reasons. The first of these concerns the scope of the commitment. In the absence of a universally agreed upon definition and given the diverse range of interests involved, defining FFSs was one of the most contentious issues during the negotiations (Lang 2011). Since they were not able to agree on a common definition, the resultant compromise was a commitment to phase out ‘inefficient FFSs’, whereby each country determines for itself what constitutes an ‘inefficient’ FFS. The explicit reference to ‘inefficient’ subsidies was meant to permit some exceptions, but it is already hard enough to define FFSs, let alone to identify the inefficient ones. This provides a way for G20 countries to define FFSs as narrowly as they wish, and thereby claim not to have any FFSs. As noted by Koplow (2012), it was by defining FFS narrowly that eight out of the twenty G20 members claimed to have no inefficient FFSs, while those that reported having inefficient FFSs reported considerably lower figures than estimates had suggested. However, given that members are entitled to adopt their own definition of ‘inefficient FFSS’, there is no legal grounds for holding them accountable for the discrepancy.

Other noteworthy intergovernmental forums that have joined the fight against FFSs include the G7, the UN Conference on Sustainable Development (UNCSD), and the Friends of Fossil-Fuel Subsidy Reform (FFFSR). The G7, which is composed of seven G20 members, regularly reaffirms its commitment to phase out FFSs, but has never moved beyond such rhetorical commitments. The UNCSD has the potential to expand the geographical scope of the commitment to phase out FFSs due in part to its almost universal membership. However, this potential has yet to be fully realized. The issue of FFS reform was discussed during the Rio+20 Conference in 2012, but the outcome document— General Assembly Resolution 66/288—was confined to reaffirming the G20 and APEC non-binding commitments (with additional qualifying language) to phase out harmful and inefficient FFSs that encourage wasteful consumption and undermine sustainable development (UN 2012). Finally, FFFSR is an informal grouping of eight non-G20 countries—Costa Rica, Denmark, Ethiopia, Finland, New Zealand, Norway, Sweden, and Switzerland—formed in June 2010 to advocate for FFS reforms. Since then, the group has evolved to become a vital player in the international efforts to phase out FFSs. It has recently launched a communique calling for the elimination of FFSs in the context of the Paris climate change conference (FFFSR 2015). The communique has been endorsed by a number of countries and encourages the international community to advance FFS reform through three interrelated principles: (i) increased transparency, (ii) greater ambition in the scope of reform, and (iii) the provision of targeted support for the poorest.

  • [1] Available at:< https://www.treasury.gov/resource-center/international/g7-g20/Documents/pittsburgh_summit_leaders_statement_250909.pdf> (accessed 16 October 2016).
 
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