Fossil fuel subsidies are bad economic policy, bad social policy and bad for the environment. Yet, many countries have some type of fossil fuel subsidy. In 2013, those subsidies added up to nearly $550 billion.
Why are so many countries spending so much on what is simply bad policy? And how can they reform these subsidies? This is what a panel of government ministers who have implemented reforms debated during the IMF/World Bank Group Spring Meetings in an event organized by ESMAP and co-hosted by the World Bank Group, the United States, and Friends of Fossil Fuel Subsidy Reform.
The panelists – representing countries as different as Angola, Egypt, Honduras, and Ukraine – described the countries’ varied experiences, but out of these varied experiences, four common messages emerged:
In the village of Aharkandhi in northeastern Bangladesh, life has changed since homeowners began installing solar panels on their roofs. At night, families gather at the local grocery store to watch TV, which boosts business. Children study longer than before.
This is due in part to a World Bank-financed electrification project to promote off-grid electricity in rural communities. This year, the project became the first renewable energy program in Bangladesh to be issued carbon credits for lowering greenhouse gas emissions and the world's first Programme of Activities for solar home systems under the UNFCCC’s Clean Development Mechanism (CDM) to generate carbon credits.
With access to electricity, people are finding new ways to increase their income, and the word is spreading quickly across villages.
New carbon pricing systems are being developed in China, Chile and other countries to help reduce greenhouse gas emissions and encourage clean energy and sustainable development. This will mean new reporting requirements and regulations for an increasing number of national and multi-national companies.
To help corporate leaders prepare, we studied the experiences of three companies that are already operating within one or more carbon pricing systems and the steps they took to prepare for a world where greenhouse gas emissions have a price.
Our report released today by the Partnership for Market Readiness describes the impacts of a changing climate on business strategies, analyzes risks and opportunities as new climate policies are implemented, and distills lessons learned by Pacific Gas and Electric Company, Rio Tinto, and Royal Dutch Shell. The three companies represent a variety of energy-intense industries, including oil, gas, metals, mining and energy generation, transmission and distribution. Two operate in more than one jurisdiction with emissions trading.
Amy Ericson, U.S. country president for technology company Alstom, spoke at the World Bank Group about the interplay between carbon pricing and innovation that can lower carbon emissions for cleaner, more sustainable development. Alstom is involved in the Carbon Pricing Leadership Coalition.
Anthony Earley is the chairman and CEO of PG&E Corporation, the parent company of Pacific Gas and Electric. He spoke ahead of the UN Secretary-General's Climate Leadership Summit about the importance of California's climate policies and carbon pricing in encouraging a shift to clean energy solutions.
By Gregor Robertson, Mayor of Vancouver, Canada
Around the world, cities are taking the lead on addressing the challenge of climate change. While senior governments stall, urban leaders are responding to the urgent need to make our cities more resilient as climate change impacts intensify.
In Vancouver, we are aggressively pursuing our goal to be the greenest city in the world by 2020. It's a bold goal, but in working toward it, we are protecting our environment and growing our economy. The successful cities of the future will be those making the investments and changes necessary to adapt to the impacts of climate change. Climate change poses a serious risk to global economic and social stability, and resilient cities will prove to be attractive draws for people and capital.
With decisive leadership, the everyday decisions of city governments can prepare our communities for climate change. By considering climate change when we evaluate new development or infrastructure proposals, cities can save lives, create jobs, and improve our streets and neighbourhoods.
A clear price on carbon enables governments, businesses, non-profits and citizens to make smarter decisions that will have real impact. Innovative businesses aren't waiting for governments to act; many are already internally pricing greenhouse gas emissions to gain a competitive edge. The forward-thinking businesses and regions that price carbon today will have more flexibility and capacity to respond to the uncertain conditions tomorrow.
By Yoichi Masuzoe, Governor of Tokyo
The IPCC’s Fifth Assessment Report firmly centered on the reality of human-driven climate change. If we don’t take immediate and tangible steps to reduce the consequences of these actions, we will face an environmental crisis that will have a major impact on mankind’s existence. Here in Tokyo, we are extremely concerned about this danger, as it poses a huge threat to our goal of becoming a sustainable and environmentally-friendly city.
In the year 2030, it is estimated that the number of people living in urban areas will exceed 60 percent of the world’s population, and measures at the city level are now crucial. The effects of climate change are already becoming apparent in a range of forms, and Tokyo is no exception. Tokyo has undertaken several measures to mitigate these effects, including launching the world’s first urban cap-and-trade program. In addition, Tokyo is implementing a number of pioneering initiatives, such as measures to counteract storm surges and floods, as well as major earthquakes, and advancing urban planning to realize a more resilient city.
A dangerously warming planet is not just an environmental challenge – it is a fundamental threat to efforts to end poverty, and it threatens to put prosperity out of the reach of millions of people. Read the recent Fifth Assessment Report from the Intergovernmental Panel on Climate Change if you need further evidence.
If we agree it is an economic problem, what do we do about it? There is general agreement among economists that a robust price on carbon is a key part of effective strategies to avert dangerous climate change. A strong price signal directs finance away from fossil fuels and toward a suite of cleaner, more efficient alternatives.
This logic is not lost on governments and companies. Momentum is building around the globe to put a price on carbon. Consider these facts:
In the weeks running up to the 3rd International Conference on Small Island Developing States, out of frustration and a sense that they must look after themselves, a new alliance was born: the Coalition of Atoll Nations on Climate Change. Or, as President Tong of Kiribati called it, the "alliance of the sinking". The coalition comprising Tuvalu, Kiribati, Marshall Islands, Maldives, Cook Islands, and Tokelau, with Micronesia associated as part of their territory, is atoll territory.
These nations have tried everything to bring their situations to the climate negotiators' and development organizations' attention and have their special situation recognized. With just 15 months until the Paris climate negotiations, they seek in a group to be able to support each other and to make themselves heard.
In the rarified atmosphere of Aspen, Colorado, last week, I attended the 11th American Renewable Energy Day Summit. Over the years, the event has grown into a fascinating brainstorming and networking event bringing U.S. domestic and international figures in the renewable energy business together – financiers, technology entrepreneurs, government officials, activists, and scientists from across the energy challenges and opportunities.
We talked about international climate negotiations and renewable energy progress in China and India, but the strongest focus was on the challenges and great potential for U.S. innovation and how to bring climate change and energy policy back from partisanship.