The big news last week was the two-day Group of 20 (G20) summit that took place in Pittsburgh, PA. Among other subjects on a sprawling agenda was fossil fuel subsidies. According to a Reuters article written by Jeff Mason and Darren Ennis, “The world’s largest economies agreed on Friday to phase out subsidies for oil and other carbon dioxide-spewing fossil fuels in the ‘medium term’ as part of efforts to combat global warming.” According to the article, $300 billion a year is spent worldwide to subsidize fuel prices, which boosts demand in many nations by keeping prices artificially low. More fuel being burned, of course, creates more emissions. The agreement to terminate subsidies was backed by all of the G20, including Russia, India, and China. US President Barack Obama called it a victory. As such, it was a boost for the president, who as we know is fighting a hard battle in the Senate to get his climate change initiatives passed. The president hopes the Senate will manage to pass a bill to reduce emissions before the December UN Climate Change Conference in Copenhagen. Obama was optimistic about the G20 success, noting “This reform will increase our energy security ... and it will help us combat the threat posed by climate change. “All nations have a responsibility to meet this challenge, and together we have taken a substantial step forward in meeting that responsibility,” Obama said. Citing data from the International Energy Agency (IEA) and the Organization for Economic Cooperation and Development Eliminating subsidies, supporters of this decision stated that eliminating subsidies by 2020 (barely a decade away) would reduce greenhouse gas emissions by 10% by 2050. Not surprisingly, although there was a lot of positive talk, there is actually no plan in place to achieve this goal. It will be difficult for countries with fairly stable economies like the US and UK to reach this objective. The economies of some of the world’s poorest countries haven’t much more than a prayer of surviving subsidy termination. The Reuters report goes on to say that the G20 committed to intensifying efforts to reach a UN deal on climate change later this year Reportedly, the plan is for leaders to ask their finance ministers to come up with a range of options for climate finance – payments from rich countries to poor countries dealing with global warming – at their next meeting. This doesn’t appear to me to be a very viable plan. The global economy is in disarray. And “rich” countries include the US, which carries a national debt of around US $11.8 trillion dollars (that’s approximately $38,377.83 per US citizen). Some estimate that by 2019, just before the plug is pulled on fossil fuel subsidies, the US national debt will be as much as $23.2 trillion. That doesn't leave the country a whole lot of money to dole out to "poor" nations. Needless to say, energy producers were less than enthusiastic about the subsidy phase-out plan. The American Petroleum Institute has asked for clarification of how the policy would affect the US. That loaded question has yet to be answered. The statement issued by the G20 also called on big institutions such as the IEA and OPEC to analyze the scope of energy subsidies and make suggestions at the next G20 summit for implementing the subsidy phase-out. The Reuters reporters believe that asking for OPEC input could have been enticement to Saudi Arabia to get onboard with the plan. However you look at it, terminating subsidies will be a tremendously difficult undertaking that has enormous and far-reaching repercussions. The feel-good solution that has given world leaders a reason to pat themselves on the back for a job well done will no doubt increase the strain on the backs of the world’s poorest workers. Positive words do not necessarily make for a positive message. The fact is that without a real plan, there is no real solution.
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