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From C20 to the G20: What We Need on Carbon Pricing and Fossil Fuel Subsidy Reform

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Blog Posts International Institute for Sustainable Development (IISD)

The IISD Global Subsidies Initiative (GSI) supports international processes, national governments and civil society organizations to align subsidies with sustainable development. GSI does this by...

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C20 Summit, June 18 2017

I presented recent initiatives by the Government of India to reform energy pricing and subsidies. In particular, I focused on how the carbon tax (clean energy [coal] cess) has funded research and innovative projects in clean energy technologies, or renewable energy sources, to reduce dependence on fossil fuels.  While the clean energy tax has given the right incentives and reduced the price gap between fossil fuels and renewable energy, there is considerable support in the form of direct budget support, tax incentives, income or price support being extended to fossil fuels, which makes renewable energy uncompetitive. Sale prices of both wind and solar energy have gone down in recent auctions in India, but it needs to be seen that the renewable energy will not have the same fate as coal-based generation, where developers are not honouring their commitments at low prices.

Vibhuti Garg, Associate with IISD Global Subsidies Initiative, delivering her presentation

Clearly, much more needs to be done in order to influence fossil fuel subsidy reforms and the phase-out of inefficient subsidies by a host of G20 countries.

IISD’s Global Subsidies Initiative presented at a side event on June 18 at the C20 Summit, a gathering that facilitated exchanges among civil society from G20 countries on the upcoming G20 Summit agenda and beyond.

GSI-IISD recommends the following actions:

  • Countries join an international peer review process. This will bring transparency, provide an opportunity to share experiences and insights, and strengthen bilateral relations between peer review partners.
  • Amplify the debate on how fossil fuel subsidies are contributing to the stranding of assets, leading to further pressure on scarce resources.
  • Advance the debate on renewable energy adoption, focusing on favourable impacts on employment, job creation and health, which are key to the government development agenda.
  • Deploy innovative measures like the Clean Energy Subsidy Swap by reallocating the existing fossil fuel subsidies towards more clean energy alternatives. A recent report by Oil Change International, Friends of the Earth – U.S., Sierra Club and the WWF European Policy Office reveals that G20 nations give four times more public financing to fossil fuels than to renewables. A framework that allows for reallocation of subsidies towards clean energy lies at the centre of fossil fuel subsidy reforms. GSI is currently working on a program in India to promote a kerosene subsidy swap, using innovative policy business models to reform kerosene subsidies while redirecting subsidy-related public finance to enhance energy access through solar PV.

The C20 Communiqué and policy recommendation on sustainability, climate and energy was presented to German Chancellor Angela Merkel. It emphasizes the G20’s commitment to climate action through phasing out fossil fuel subsidies and setting effective and fair carbon price signals. As the whole world watches this weekend’s G20 summit in Hamburg, all eyes will be on U.S. President Donald Trump and potential conflicts triggered by him. Countries will either allow themselves to fall for his attempts to undermine their role in the Paris Agreement, or they will leave the United States behind and move forward with their own commitments to a long-term, low-emitting development strategy.

By Vibhuti Garg

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