Fossil fuel subsidies top $550bn
7th June 2010
Fossil fuels are being subsidised by more than $550 billion (£380 billion) a year, according to the International Energy Agency (IEA), which is calling for a phasing out of them over the next decade to reduce energy consumption and cut CO2.
survey of oil, gas and coal subsidies found that in 2008, 37 large developing countries spent $557 billion (£384 billion) in energy subsidies
, $214 billion (£148 billion) more than in 2007.
The report estimates that without these subsidies global energy demand would reduce by 5.8 per cent, CO2 emissions
would be cut by 6.9 per cent and the demand for oil would be reduced by 6.5 million barrels per day.
In 2008, oil products received $312 billion (£215 billion) in financial assistance, gas $204 billion (£141 billion) and coal $40 billion (£28 billion), according to the IEA report. Countries such as Iran, Russia, India and China, operate the biggest subsidies.
Last year, the G20 countries agreed to phase out energy subsidies by 2020 to promote energy security and fight climate change.
IEA chief economist Pharih Birol told GreenWise phasing them out was a "win-win-win solution".
"Energy consumption will be reduced, CO2 emissions will be substantially reduced and it will increase energy efficiency
," he said.
Phasing out energy subsidies is not without its obstacles, though. For many countries they are a means of providing lower cost fuel to their citizens and industries.
Nevertheless, Birol said countries such as China, Russia and India, were showing "encouraging signals" towards pursuing such a policy.
The IEA findings form part of a joint report by the IEA, OECD (Organisation for Economic Co-operation and Development), World Bank and OPEC on energy subsidies presented to the G20 finance ministers and Central Governors this weekend in Busan, Korea. It will be discussed at the G20 summit in Toronto this month and will also inform the 'World Energy Outlook 2010’ report set to be published in November.