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RIO DE JANEIRO - 21 June 2012 - An Official side-event to the Rio+20 United Nations Conference on Sustainable Development on the political barriers to fossil fuel subsidy reform. 

Date/time: Thursday 21 June 2012, 15:00 – 16:30
Location: Room T-5, Rio Centro

IISD’s vision is for the Rio+20 Summit to deliver a few high-impact initiatives, like fossil-fuel subsidy reform, that will help create the enabling framework for sustainable development.

There are convincing rationales for reforming fossil-fuel subsidies:

  • Fossil-fuel subsidies are costly, amounting to US$409 billion in 2010 (International Energy Agency (IEA), 2011). In addition, the OECD estimates that subsidies for fossil-fuel production and consumption in its member countries cost US$45-75 billion annually (OECD, 2011). Globally, producer subsidies are estimated by the GSI to be at least US$100 billion annually (GSI, 2010).
  • Phasing out fossil-fuel subsidies would reduce growth in global energy demand by 4.1% and carbon dioxide emissions by 4.7% by 2020 (IEA, 2011). Fossil-fuel subsidies create incentives for higher levels of consumption, which in turn produce more local and global pollutants on behalf of both industry and consumers.
  • Fossil-fuel subsidies are socially regressive; the IEA estimates that only 8% of the US$409 billion spent subsidizing fossil-fuel consumption went to the poorest 20% of the population. While fossil-fuel subsidies are often designed for the interests of poorer populations, they typically benefit medium- to high-income households or lead to diversion.

Both G-20 and APEC countries have committed to phase out inefficient fossil-fuel subsidies that encourage wasteful consumption. However, actual progress on fulfilling these commitments has been slow. Beyond G-20 and APEC, only a few developing countries, including Iran and Ethiopia, have recently succeeded in significantly reducing their subsidies for fossil fuels.

From a political economy perspective, reforming fossil-fuel subsidies is challenging. If introduced too quickly, and without sufficient public support, it can have serious political repercussions. Moreover, there are concerns about negative effects on the competitiveness of domestic energy-intensive industries. Recent events in Nigeria, in which the withdrawal of fuel subsidies sparked public unrest, and significant political barriers to fossil-fuel subsidy reform in countries such as Indonesia and Bolivia demonstrate the need for a strategic approach to designing and implementing reforms.

This session aims to foster an open and constructive discussion among all stakeholders on the political barriers to fossil-fuel subsidy reform and how they can be overcome. The discussions will canvas a range of perspectives from government officials, trade unions and civil society organisations.

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