OECD tells G20 fossil fuel subsidies should end

PARIS Wed Jun 9, 2010 5:21am EDT

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PARIS (Reuters) - The OECD urged governments to end fossil fuels subsidies in a statement on Wednesday that argued this could cut greenhouse gas emissions by 10 percent and help deliver on G20 promises to combat global warming. Leaders of the Group of 20 economic powers meet in Toronto in late June and pledged last September in Pittsburgh to press for a phase-out over the medium term, the Organization for Economic Co-operation and Development said.

"Many governments are giving subsidies to fossil fuel production and consumption that encourage greenhouse gas emissions, at the same time as they are spending on projects to promote clean energy," OECD chief Angel Gurría said.

"This is a wasteful use of scarce budget resources."

Ending fossil fuel subsidies could lower global greenhouse gas emissions by 10 percent from the levels they would otherwise reach in 2050, said the OECD, a government-funded agency that was asked to advise the Group of 20 on the issue.

A gradual move to subsidy abolition made even more sense at a time when many governments are saddled with large debts, the OECD said.

The International Energy Agency, part of the OECD, estimated that subsidies for fossil fuel consumption are worth about $557 billion in emerging and developing countries.

Estimates were harder to produce for developed countries because such subsidies are often distributed in indirect ways, said the OECD, which noted that some estimates said the global total may be as much as $100 billion a year.

Tax exemptions for diesel fuel use and worth $8 billion a year for farmers and a further $1.1 billion for the fishing industry in the 31 countries of the OECD alone, it said.

(Editing by Toby Chopra)

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