On 18 July 2018, the Green Fiscal Policy Network and Friends of Fossil Fuel Subsidy Reform held a side-event at the United Nations High-level Political Forum on Sustainable Development (HLPF) on "Leadership on fossil fuel subsidy reform for sustainable energy access and poverty reduction". The event focused on fossil fuel subsidy reform as a means to deliver the Sustainable Development Goals (SDGs), including through opportunities for financing and sustainable energy access. Panelists shared strategies, including better targeting of subsidies and shifts towards renewable energy and energy efficiency. At the event, the IISD-Global Subsidies Initiative (GSI) launched a report on interlinkages between energy access and fossil fuel subsidies, “Getting on Target: Accelerating Energy Access through Fossil Fuel Subsidy Reform”.
Moderator, Scott Vaughan, President and CEO, IISD, opened the side event, highlighting: opportunities of reform and possible benefits in support of energy access; and citing work by New Zealand as an example of leadership on the issue.
Craig Hawke, Permanent Representative of New Zealand to the UN, said his country has long held the view that fossil fuel subsidy reform is the building block to reaching the SDGs and 2030 Agenda. He noted that subsidies divert funds that might be used on other SDG priorities and are often contrary to other policy goals. Hawke said world leaders are committed to reform, noting support in a number of international fora, and stressed continuing to voice the case for reform.
Annika Lindblom, Secretary General, National Commission on Sustainable Development (NCSD), and Counsellor, Ministry of the Environment, Finland, stressed the urgency of shifting from a fossil fuel-based economy to a circular economy, noting that fossil fuel subsidy reform is a cross-cutting issue and tool to synergize actions on the Paris Agreement and SDGs. Lindblom outlined Finland’s efforts to: integrate subsidy reform into its Nationally Determined Contribution to the Paris Agreement; efficiently manage public resources through energy taxation, such as carbon pricing; conduct an assessment on environmentally and socially harmful subsidies; and reflect the SDGs and assessment results in its 2019 budget. She called for using the 2030 Agenda to bring on board relevant stakeholders, especially finance and energy ministries.
Anna Zinecker, Policy Advisor, IISD, presented results from the IISD-GSI report, including: financial implications of fossil fuel subsidies; potential impacts of reform; and strategies to remove subsidies to increase energy access. She highlighted:
- subsidies act on price, but providing more income through economic development will remove the need for a subsidy;
- production subsidies are substantial, hidden, and difficult to find;
- consumption subsidies don’t help people who don’t have energy access, mostly the poorest;
- subsidies can have unintended market impacts;
- global subsidies are 7.5 times larger than the amount required for universal access to electricity and clean cooking (US$ 425 billion vs. US$56 billion); and
- subsidies have a large opportunity cost in countries with low access rates and limited government funds, averaging US$ 573 for every house that had no access to electricity.
She described potential reform strategies, including: removing subsidies that don’t support energy access for poor people; better targeting of subsidies for those who need them; and swapping or shifting subsidies to investments in renewable energy and energy efficiency.
Charles Arden-Clarke, Head, 10-Year Framework of Programmes (10YFP), UN Environment, said removing fossil fuel subsidies could lower CO2 emissions by more than 20%, helping to reduce pollution and improve health. He outlined cases that mobilized public revenues from fossil fuel subsidy reform, including: reinvestment by Indonesia, of US$ 15 billion in savings, in infrastructure and poverty reduction programmes; and Morocco’s increased annual US$ 3 billion spending on health and education sectors and renewable energy. Noting energy efficiency efforts remain incremental and fragmented, he stressed: encouraging fossil fuel subsidy reforms through: transparent data and public information campaigns; capacity building for policymakers; and complementary policies in support of vulnerable groups to offset negative impacts of energy prices and potential job losses.
In ensuing discussion, topics included: using the 2030 Agenda process for engaging non-environmental sectors, especially energy, finance, and health ministries; addressing fossil fuel subsidy reform during HLPF 2019, linking to SDG 13 (climate action); evidence-based advocacy to make impacts in government policies; measures to maximize winners and minimize losers; sharing best practices; progress on reducing subsidies from US$ 800 billion several decades ago to US$ 425 billion today; India’s “Give it Up” campaign encouraging more affluent households to relinquish liquefied petroleum gas (LPG) subsidies; and how to identify and address stranded assets, that may occur after subsidy reform..
During closing remarks, Vaughn noted that reform efforts will generate opposition from those who benefit from existing fossil fuel subsidies, and lauded work by the countries and organizations participating in the event.