OECD Inventory of Support Measures for Fossil Fuels 2015

 

Opening remarks by Angel Gurría,

Secretary-General, OECD

Paris, 21 September 2015

(As prepared for delivery)

 

 

Ladies and gentlemen,

 

Welcome to the launch of the OECD Inventory of Support Measures for Fossil Fuels 2015.

 

With all eyes on a successful outcome at the COP-21 in Paris this December, countries need to show they are serious about combating climate change. For a long time the OECD has pointed to the removal of government support for fossil fuels as a potential “quick win”. Only last July we issued a report titled Aligning Policies for a Low-Carbon Economy that stressed the importance of removing such support – among other policy misalignments - to achieve the goal of net zero emissions in the second half of this century. Today provides an opportunity to take stock of our progress.

 

 

Progress to reform support for fossil fuels has been slow

 

This new OECD inventory puts the spotlight on almost 800 spending programmes and tax breaks that governments use to encourage the production or use of fossil fuels. These policies are found in both our member countries and in key emerging economies at national, state and provincial levels. In addition to subsidies for consumers (that often end up benefiting higher-income households), they encompass official support to oil and gas companies for the exploration and exploitation of new fossil reserves.

 

Interestingly, most of these policies - in fact about two-thirds of them – were introduced prior to 2000, at a time when the challenges facing policy makers were very different from today. In that regard, our OECD inventory reveals a great degree of policy inertia. For instance, some policies benefitting consumers in the United States were introduced in response to the oil crises of the 1970s, while other policies supporting oil and gas producers came in as oil prices collapsed in the mid-1980s. These policies are now obsolete – dangerous legacies of a bygone era when pollution was viewed as a tolerable side effect of economic growth.

 

Although support for fossil fuels seems to have peaked in 2011-12, global progress remains alarmingly slow. Our study finds that governments in the OECD and the BRIICS (Brazil, Russia, India, Indonesia, China and South Africa) collectively support fossil fuels to the tune of 160 to 200 billion US dollars a year. To give you some perspective, this represents more money than we need to meet the climate-finance objectives set at Copenhagen in 2009, which called for mobilising 100 billion US dollars a year by 2020.

 

 

The time is ripe for change

 

Fortunately, a number of countries have demonstrated that change is possible. Indeed, with low oil prices, the time is ripe for countries to remove consumer subsidies that can be politically so hard to withdraw.

 

Austria and the Netherlands have been among the first EU Member States to phase out the fuel-tax concessions enjoyed by many farmers in the OECD. Mexico stopped supporting motor fuels through its floating excise tax in late 2014 and will raise positive revenues of 1% of GDP in 2015. India scrapped its subsidies for diesel fuel, a step that reduced total consumer support by 8 billion US dollars between 2012 and 2014. More recently, in its revised budget for 2015, Indonesia removed gasoline subsidies, which alone cost the government 7 billion US dollars last year. I urge other countries to follow these positive examples.

 

 

The OECD – a partner for reform

 

The OECD stands ready to help guide and sustain fossil fuel reform efforts. This year, we are releasing an additional report to our catalogue of individual support measures (OECD Companion to the Inventory of Support Measures for Fossil Fuels 2015). This new report goes beyond descriptions of methodology and data sources to discuss the policy context for existing fossil‑fuel subsidies and provide summary results and recommendations. Together with our database, this companion report allows the OECD well-placed to monitor progress towards reform.

 

But the OECD is not a lone voice in advocating the reform of fossil-fuel subsidies. The International Energy Agency (IEA) has, for years, been an important ally, providing estimates of the magnitude of consumer subsidies in the Middle East and in other emerging and developing economies. We are also supporting the commitments that G20 and APEC Leaders made in 2009 to phase out fossil-fuel subsidies they deem inefficient. These initiatives are helping to focus the attention of the international community on this important issue.

 

Ladies and gentlemen,

 

This release represents a major step towards better transparency and accountability, showing just how much of taxpayers’ money is helping to sustain our dependence on fossil fuels. The OECD is dedicated to assisting countries in their efforts to reform fossil‑fuel subsidies to deliver better policies for better lives!

 

Thank you.