Germany and Mexico Publish Peer Reviews of Fossil Fuel Subsidies Under G-20
Germany and Mexico released their voluntary peer reviews of fossil fuel subsidies under the G-20, during the twenty-third Conference of Parties (COP23) to the United Nations Framework Convention on Climate Change (UNFCCC). This publication is a step towards more transparency on what the G20 calls “inefficient fossil fuel subsidies”. Fossil fuel subsidies are inefficient because they have been consistently found to be economically wasteful, socially regressive and harmful to health. Fossil fuel subsidies promote fossil fuel production and consumption and thus drive greenhouse gas emissions and climate change.
Germany’s peer review identified twenty-two measures that favour fossil fuels in the form of tax breaks and direct budgetary transfers, totalling USD 17.6 billion (EUR 14.9 billion) in 2016. Two of these twenty-two measures, with a value of USD 1.6 billion (EUR 1.4 billion) in 2016, will be phased out in 2018 as part of the existing EU-wide commitment to end subsidies to hard coal.
Mexico’s peer review report identified ten subsidies worth USD 2.6 billion (MXN 50 billion) in 2016. Two out of these ten subsidies have already been phased out as part of the large energy reforms that the country is carrying out. Indeed, Mexico’s listed subsidy bill in 2016 decreased to less than one third of its value in 2013, when subsidies amounted to USD 8.9 billion (MXN 172 billion). However, the Mexican review does not include subsidies to the consumption of fossil-fuel-based electricity and natural gas, which the IEA estimated at USD 5.4 billion and USD 570 million, respectively, in 2015.
On 16 November 2017, Mexico—but not Germany—also joined the Powering Past Coal Alliance, a diverse range of governments, businesses, and organizations, which are united in taking action to accelerate clean growth and climate protection through the rapid phase-out of traditional coal power. Through this, Mexico committed to phasing out “existing traditional coal power and placing a moratorium on any new traditional coal power stations”. In 2015, coal accounted for 11 per cent of the electricity generated in Mexico. When designed and implemented properly, the phase-out of coal would lead to a reduction of subsidies to fossil-fuel-based electricity.
Germany and Mexico is the second pair of G-20 countries that have undertaken a peer review process, following the pioneer reviews by China and US (under the Obama administration), published in September 2016. Indonesia and Italy will be the next two G-20 countries to conduct peer reviews. A similar FFS peer review process is underway in the Asia Pacific Cooperation (APEC). All these reviews are voluntary. G-20 reviews are chaired by the Organisation for Economic Co-operation and Development (OECD) as part of the 2009 G-20 commitment to “phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption”. More information is available from the GSI’s Guidebook to Peer Reviews of Fossil Fuel Subsidies: From self-report to peer learning.