Ending Fossil Fuel Subsidies by 2020: A Goal for China G20

When leaders meet in China early in September, we’ll find out how committed countries really are to reducing emissions and shifting to a low-carbon economy. One measure of that commitment will be getting G20 nations to agree on phasing out fossil fuel subsidies by a certain deadline. At the moment, governments have only committed to phasing out “inefficient” fossil fuel subsidies without having specified a deadline for doing so. What countries need is greater certainty of multilateral action. G20 countries should set a joint deadline of 2020 for phasing out fossil fuel subsidies. The deadline can provide assurance that G20 nations are moving in sync.

It is inefficient and financially risky to subsidize fossil fuel production in a time of grave climate risks, when fossil fuels are the main source of carbon emissions causing climate change. Over 200 civil society organizations, including NRDC, have called on G20 nations in an open letter to set a deadline of 2020 for ending fossil fuel subsidies.

Investor groups representing over $13 trillion in assets have also called for a plan to phase out fossil fuel subsidies in support of the Paris Agreement on climate action. This includes the California Public Employees' Retirement System (CalPERS), BNP Paribas Investment Partners, and HSBC Global Asset Management. Insurers and investors such as Aviva and Aegon NV with more than $1.2 trillion in assets have specifically called for a 2020 deadline to phase out fossil fuel subsidies.

Since 2009, G20 nations have stated their commitment to phase out fossil fuel subsidies. They also repeated the commitment during the G20 Finance Ministerial in February 2016, in preparation for this week’s G20 summit in Hangzhou. But, each year leaders have fallen short at moving rhetoric to action.

More can be done within the G20 to reduce fossil fuel subsidies, including concrete steps:

  • Set a clear timeline for phase-out by all G20 members of all fossil fuel subsidies by 2020, starting with the elimination of all subsidies for fossil fuel exploration and coal production.
  • Set a clear timeline for the phase out of domestic and international public finance for oil, gas and coal production by 2020, except in extreme cases where there is clearly no other viable option for increasing energy access to the poor.
  • Commit all G20 members to be fully transparent from 2017 onwards about all fossil fuel subsidies in a consistent format that is publicly available on an annual basis, including reporting on investment by majority publicly-owned financial institutions and state-owned enterprises.

To achieve these goals, this is the text that we recommended for inclusion in the G20 communique:

We reinforce our commitment to phase out and rationalize fossil fuel subsidies by 2020, recognizing the need to support the poor, and supported by transparent and publicly available annual reporting. Fossil fuel subsidies encourage wasteful consumption, reduce our energy security, impede investment in clean energy sources and undermine efforts to deal with the threat of climate change.

We commit to strengthening green and low-carbon policies and regulations with a view to ending public investment in oil, gas and coal projects both domestically and internationally by 2020, starting with the elimination of public finance for fossil fuel exploration and coal, supported by transparent and publicly available annual reporting.

These proposals would align the G20 statement with the recent Paris climate agreement to “align finance flows with low-emission, climate-resilient development and to shift public finance away from high-emitting infrastructure.” This language also fulfills the U.S. and China’s commitment to working closely with other G20 members to phase out fossil fuel subsidies by a “date certain.”

Fossil fuel subsidies make it easier to finance fossil fuel projects that could operate for decades. At the same time, fossil fuel subsidies use up public funds that could be directed into clean energy projects, and make it more difficult to address climate change by fueling more carbon emissions. G20 governments are spending $444 billion every year on support to fossil fuel production. There’s no time to lose.