Steve KretzmannOil Change International

February 23, 2010

Shifting Fossil Fuel Subsidies:Overview andCampaign Opportunities

G20 leaders statement Pittsburgh, Sept. 25, 2009:

PLEDGE: “Rationalize and phase out over the medium term inefficient fossil fuel Subsidies that encourage wasteful consumption”

-Study undertaken by OECD, IEA, World Bank, and OPEC:

- Energy and Finance Ministers, based on their national circumstances, develop implementation strategies and timeframes, and report back to Leaders at the next Summit.

Next G20 meeting, June 26, 2010 Toronto

APEC November 15th in Singapore, used virtually identical language

Basic definition of a fossil fuel subsidy:

A fossil-fuel subsidy exists as a result of a government action that reduces the real cost of fossil fuels to consumers or reduces the costs or increases the revenues of fossil-fuel producers.

Consumption subsidies, mostly developing countries, aka “making gas cheap”

Production Subsidies, mostly developed countries, aka “corporate welfare”.

??

??

G20 pledge based on June 2009 IEA study

The last time gasoline wasrationed and price wasraised in Iran, 2007

Perhaps not the best place to begin subsidyremoval.

IEA, OECD, OPEC and World Bank are discussing the scope of report to be delivered to G20 in June. Technical group met last week in Paris

Currently there is no agreement on methodology – three camps;

-Those that believe the pledge should only apply to consumer subsidies;-Those that believe both producer and consumer subsidies should be included;-Those that believe the scope should also include nukes and renewables (ie, OPEC)

“impossible” to get agreement on methodology to calculate producer subsidies in time for report. There has been discussion of a “literature survey” on OECD production subsidies or simply a “pledge and review” reporting system.

Conclusion: Next report will also be heavily biased towards consumption subsidies. Definitional fights ongoing…

World Bank – Treasury Coal Guidance – December 14, 2009

“MDB should incorporate procedures that ensure full consideration of no or lowcarbon options before appraising a proposed greenfield or retrofit coal-fired power generation project for domestic power consumption or export.

Alternatives analysis: The MDB would seek to identify a portfolio of technologically feasible and commercially available3 no or low carbon resources that could serveprojected energy demand.

Incremental financing analysis: If incremental costs of electricity from the alternativeportfolio relative to the coal investment are positive and the ability of end users topay the additional costs is limited, the MDB would assist the borrower in identifyingpublic or private sources of external financing”

Nine World Bank Group Directors representing 90 developing countries including BASIC respond – ouch.

Last paragraph of Director’s response to Treasury Coal Guidance:

EXPLICIT linkage of subsidy removal to climate finance. IMPORTANT.

Policy Spaces:

G20 -Definitional fight ongoing in OECD, IEA, World Bank, OPEC.

Likely moving towards broad “WTO+” definition. Move to report fossil fuel subsidies against this definition raises possibility of legal challenges to ongoing fossil fuel subsidies that are not phased out intitially

-Carve Outs. Objective is to count as much as possible, establishthat they are indeed subsidies, but “carve out” some areas initially (ie “efficient” subsidies such as ccs, clean coal)

-Finance Minister meetings, sherpa meetings, Canadian and Korean meetings

National level G20 and APEC follow-up

-Energy and Finance Ministries implementation plans provide national points of entry, advocacyand organizing in all G20 nations. Demand to know your country plan – influence it – report itto international networks. Compare. Repeat.

-World Bank Energy Strategy

--global consultations

--ORGANIZING opportunities

Consultations now through end of May in DC, Paris, Den Haag, Oslo, Bonn, Cancun, Tunis, Rabat, Mexico City, Lima, Jakarta, Beijing

Plus…Spring and Annual Meetings of World Bank and other MDB’s

STRATEGIC Target:Pressure is critical in order to reform , Improve or stop the World Bank’s role in climate finance.

Energy Poverty / energy access frame is key

Export-Credit Agencies

-Early support by key inside players to defineas subsidy – despite/becauseof WTO “carve out”

-Strong, experiencedglobal network of campaigners with access

>$10 billion annually in fossil fuel support

-Additionality questions

-Opposition by some because“not only open to fossil fuels”

US Export-Import Bank Fossils vs. Renewables

UNFCCC

Possible role for COP / UNFCCC in subsidy removal

Transparency…

…also already discussion of national subsidy reform plans as NAMAs (Nationally Appropriate Mitigation Actions)

-compensation for response measures?

STOP funding the problem

START funding the solution

Political Momentum:-International Agreement and Process-National points of contact at ECAs, Energy, and Finance Ministries-US Budget proposal and process