Renewable Energy Subsidies & Fossil Fuel Phase-Out

Addis Ababa—July 14—The Global Subsidies Initiative (GSI) organized a high-level event on the role of fossil fuel subsidy reform as a means to provide financing for sustainable development.

The international community reaffirmed commitments on Thursday 16th July 2015, within the Addis Ababa Action Agenda "to rationalize inefficient fossil-fuel subsidies that encourage wasteful consumption ..."  and "phasing out those harmful subsidies". Fossil fuel subsidy removal remains on the agenda and is as important as ever when governments are squeezed for fiscal space and domestic resource mobilisation.

The International Energy Agency (IEA) has released a special report, Energy and Climate Change, as an input to ongoing climate negotiations, highlighting the pivotal role that fossil-fuel subsidy reform can play in reducing greenhouse gases (GHGs).

Government negotiators are meeting in Bonn for climate talks this week (1-11 June 2015), to prepare for negotiations in Paris towards a climate deal at the end of the year. At the time of writing 39 countries have submitted their Intended Nationally Determined Contributions or INDCs.

It is ever clearer that fossil fuel subsidies are detrimental to sustainable development. However, in a time of historic low oil prices, the gap between international oil prices and consumer energy prices has narrowed dramatically, thus offering countries a huge window of opportunity to phase-out these subsidies. For this and many other reasons, the elimination of these subsidies continue to make global headlines.

In recent decades, wind power in India been deployed at a tremendous rate, such that wind power projects now account for two thirds of total renewable energy generating capacity and almost one tenth of total installed generating capacity. This case study examines one of the policies that is widely considered to be the primary driver behind this expansion—accelerated depreciation (AD) for wind power projects.

Turkey faces a problem that is common to many developing countries: a growing economy and a growing demand for energy.  By 2030, electricity consumption is expected to rise from 240 TWh to over 600 TWh. Turkey plans a huge increase in coal-fuelled power generation to fill the gap.

A new report from the Nordic Council of Ministers and the Global Subsidies Initiative of IISD finds that the removal of fossil-fuel subsidies to consumers (US$ 543 billion in 2014) and to society could reduce global greenhouse gas (GHG) emissions by between 6-13% by 2050.