US-China Peer Reviews – Billions in Fossil Fuel Subsidies

As a key outcome of the G20 meeting in China earlier this month, China and the United States released voluntary peer reviews of their fossil fuel subsidies (links below). China and the US are the first countries in the G20 to undergo this review process. The reviews quantify the inefficient fossil fuel subsidies in need of reform in both countries—with billions of dollars in public financing on the line. 

The US review calculated over $8 billion in inefficient fossil fuel subsidies, many of which are enshrined in legislation. For China, the nine subsidies listed were valued at $14.5 billion. China’s peer-reviewed inventory of subsidies includes a timeline for reform of several subsidies. Unfortunately, there is no information about plans for removing these subsidies for fossil fuel companies in the US review, and the majority of fossil fuel subsidies in the US require Congress to pass legislation to remove them. 

The publication of the peer reviews is a positive outcome from the China G20 meeting on the issue of fossil fuel subsidies. However, one weakness of the peer reviews is that they do not require countries to submit a plan for phasing out subsidies by a certain date. The only way to address this weakness is through national leadership by heads of state for all members of the G20. Leaders have not yet agreed to an end date for phasing out fossil fuel subsidies. Prior to the China G20, civil societyinsurers and investors called for a deadline of 2020 to phase out fossil fuel subsidies. Investor groups worth over $13 trillion in assets supported the phase-out date as an integral part of achieve the climate goals of the Paris Agreement. Unfortunately, a phase-out date was not included in the final G20 statement.

While it is important to recognize the peer reviews as a step towards greater international transparency on fossil fuel subsidies, the next step to addressing subsidies is getting an internationally agreed deadline of 2020 for phasing out inefficient fossil fuel subsidies, bolstered by the fossil fuel subsidy inventories and peer review system to help achieve that goal.

In July 2017, Germany will host the next G20 meeting, and in the coming months Germany and Mexico will conduct their joint peer review of fossil fuel subsidies. It is important for Germany and Mexico to set the right example for nations moving forward. One way to do that is by including in their fossil fuel subsidy peer reviews a timeline and policy reform plan for phasing out subsidies, with a phase-out deadline of 2020. Given the significant progress made by China and the US in releasing their fossil fuel subsidy peer reviews, we hope that Germany can take the lead as host of the next G20, and secure a phase-out date of 2020 for all inefficient fossil fuel subsidies during the next G20 summit.

Links to Relevant Documents from the G20 Summit in Hangzhou, China