World Bank: Ditch fossil fuel subsidies to address climate change
Leaked documents seen by The Guardian say rich countries should use money to help poorer countries adapt to climate change
Leaked World Bank documents propose that rich countries should eliminate the $50bn a year they give in fossil fuel subsidies, in order to help poor countries address climate change.
The documents are due to be presented to G20 finance ministers in November, and suggest that countries redirect “climate aid” money already pledged to propping up ailing carbon markets.
The Mobilizing Climate Finance paper, seen in draft form by The Guardian, has been prepared at the request of the world’s leading economies. It is likely to provide a template for action in the UN climate talks that resume in Panama next week, in preparation for a major meeting of 194 countries in Durban in November.
According to the confidential paper, there is little likelihood that, in the current economic climate, public money will be available for raising the $30bn rich countries have pledged for the 2010-2012 period, and the $100bn a year that must be found by 2020.
Instead, says the paper, “the large financial flows required for climate stabilisation and adaptation will, in the long run, be mainly private in composition”.
“A starting point should be the removal of subsidies on fossil fuel use. New OECD estimates indicate that reported fossil fuel production and consumption supports in Annex II countries [24 OECD countries] amounted to about $40bn to $60bn per year in 2005-2010. If reforms resulted in 20 per cent of the current level of support being redirected to public climate finance, this could yield $10bn per year,” the report said.
“Reform of fossil fuel subsidies in developed countries is a promising near-term option because of its potential to improve economic efficiency and raise revenue in addition to environmental benefits.”
New analysis, says the paper, suggests that half the $50bn-a-year fossil fuel subsidies go to the oil industry, and around a quarter to coal and natural gas. “About two-thirds of total fossil fuel support in 2010 was estimated to be for consumer support, with a little over 20 per cent being producer support,” it said.
Developing countries are increasingly frustrated by the refusal of rich countries to meet their climate finance pledges. But they are unlikely to approve of the bank’s innovative proposal that some of the money pledged to them should be used to prop up struggling carbon markets.
“Governments could make innovative uses of climate finance to sustain momentum in the market while new initiatives are being developed,” the report proposes.
“They could, for example, dedicate a fraction of their international climate finance pledges to procure carbon credits for testing and showcasing new approaches, such as country programme concepts, new methodologies, CDM reforms and new mechanisms.
“This would be a cost-efficient use of climate finance as it would target least cost-options and would be performance-based. It would also help build up a supply pipeline for a future scaled-up market, preventing future supply shortages and price pressures.”
The report also appears to back a levy on aviation and maritime fuels. “Increasing from zero a tax on an activity that causes environmental damage is likely to be a more efficient way to raise revenue than increasing a tax that already causes significant distortion,” it says.
“A globally implemented carbon charge of $25/tonne CO2 on fuel used could raise around $13bn from international aviation and around $26bn from international maritime transport in 2020, while reducing CO2 emissions from each industry by around five to 10 per cent.
“Compensating developing countries for the economic harm they might suffer from such charges … seems unlikely to require more than 40 per cent of global revenues. This would leave about $24bn or more for climate finance or other uses.”
Last month, the UK shipping industry’s trade body roundly rejected calls to be brought into the EU’s carbon trading scheme, saying that any solution to reducing the industry’s emissions must be global.
This article first appeared at The Guardian
BusinessGreen is part of the Guardian Environment Network
Leaked World Bank documents propose that rich countries should eliminate the $50bn a year they give in fossil fuel subsidies, in order to help poor countries address climate change.
The documents are due to be presented to G20 finance ministers in November, and suggest that countries redirect “climate aid” money already pledged to propping up ailing carbon markets.
The Mobilizing Climate Finance paper, seen in draft form by The Guardian, has been prepared at the request of the world’s leading economies. It is likely to provide a template for action in the UN climate talks that resume in Panama next week, in preparation for a major meeting of 194 countries in Durban in November.
According to the confidential paper, there is little likelihood that, in the current economic climate, public money will be available for raising the $30bn rich countries have pledged for the 2010-2012 period, and the $100bn a year that must be found by 2020.
Instead, says the paper, “the large financial flows required for climate stabilisation and adaptation will, in the long run, be mainly private in composition”.
“A starting point should be the removal of subsidies on fossil fuel use. New OECD estimates indicate that reported fossil fuel production and consumption supports in Annex II countries [24 OECD countries] amounted to about $40bn to $60bn per year in 2005-2010. If reforms resulted in 20 per cent of the current level of support being redirected to public climate finance, this could yield $10bn per year,” the report said.
“Reform of fossil fuel subsidies in developed countries is a promising near-term option because of its potential to improve economic efficiency and raise revenue in addition to environmental benefits.”
New analysis, says the paper, suggests that half the $50bn-a-year fossil fuel subsidies go to the oil industry, and around a quarter to coal and natural gas. “About two-thirds of total fossil fuel support in 2010 was estimated to be for consumer support, with a little over 20 per cent being producer support,” it said.
Developing countries are increasingly frustrated by the refusal of rich countries to meet their climate finance pledges. But they are unlikely to approve of the bank’s innovative proposal that some of the money pledged to them should be used to prop up struggling carbon markets.
“Governments could make innovative uses of climate finance to sustain momentum in the market while new initiatives are being developed,” the report proposes.
“They could, for example, dedicate a fraction of their international climate finance pledges to procure carbon credits for testing and showcasing new approaches, such as country programme concepts, new methodologies, CDM reforms and new mechanisms.
“This would be a cost-efficient use of climate finance as it would target least cost-options and would be performance-based. It would also help build up a supply pipeline for a future scaled-up market, preventing future supply shortages and price pressures.”
The report also appears to back a levy on aviation and maritime fuels. “Increasing from zero a tax on an activity that causes environmental damage is likely to be a more efficient way to raise revenue than increasing a tax that already causes significant distortion,” it says.
“A globally implemented carbon charge of $25/tonne CO2 on fuel used could raise around $13bn from international aviation and around $26bn from international maritime transport in 2020, while reducing CO2 emissions from each industry by around five to 10 per cent.
“Compensating developing countries for the economic harm they might suffer from such charges … seems unlikely to require more than 40 per cent of global revenues. This would leave about $24bn or more for climate finance or other uses.”
Last month, the UK shipping industry’s trade body roundly rejected calls to be brought into the EU’s carbon trading scheme, saying that any solution to reducing the industry’s emissions must be global.
This article first appeared at The Guardian
BusinessGreen is part of the Guardian Environment Network
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