June 15, 2011 / 2:09 PM / in 7 years

U.N. urges G20 to do more to phase out subsidies

BONN, Germany (Reuters) - Big economies should do more to phase out damaging subsidies on fossil fuels, farming and fisheries that are hindering a shift to a green economy, the head of the U.N. Environment Programme (UNEP) said on Wednesday.

The Group of 20 leading economies agreed at a summit in 2009 to phase out damaging fossil fuel subsidies in the “medium term” -- a step that would help cut greenhouse gas emissions and free up investments for cleaner energies to fight climate change.

“Not yet,” Achim Steiner told the Reuters Global Energy and Climate Summit in a telephone interview when asked if major economies were acting fast enough on subsidy reform.

“They keep on agreeing that they want to move on that,” he said. “Some countries are moving on that. But there is no collective implementation,” he said. He said he hoped for action at the next G20 summit in Cannes, France, in November.

UNEP says that between one and two percent of world Gross Domestic Product (GDP) -- roughly $650 billion to $1.3 trillion a year -- is spent on often wasteful subsidies on fossil fuels, farming, water and fisheries. It says fossil fuel subsidies alone account for $400-650 billion, depending on oil prices.

Steiner also said that some subsidies, especially to protect the poor, should stay. “One always needs to emphasize that not all subsidies are perverse,” he said.

“We have seen some fledgling attempts in the G20 on fossil fuels,” he said, adding that the phaseout should also include agriculture and fisheries.

UNEP says $27 billion alone goes every year on subsidies for fisheries.

A UNEP report in February urged the world to spend 2 percent of GDP to green the world economy, partly by diverting subsidies to aid areas such as cleaner transport and industry and to boost solar, wind and other renewable energies.


Steiner said he hoped subsidy reform would get a big boost at a once-a-decade “Earth Summit” to be held in Rio de Janeiro in June 2012. UNEP also wants the world to agree in Rio to review the way it measures economic wealth.

He said GDP, the conventional measure of goods and services in an economy, failed to take account of damage to the environment such as pollution, deforestation or loss of species of animals and plants.

“GDP is no longer an adequate yardstick for the world to measure progress,” he said, urging a shift to encompass the value of nature in national accounts.

Currently, a heavily forested country could boost its GDP -- at least briefly -- by chopping down all its forests and selling the timber. Revised accounting would show that deforestation meant an economic setback by damaging nature.

“If you destroy you have to factor it in,” Steiner said. A U.N.-backed study last year estimated that human damage to “natural capital” totaled $2.0 to $4.5 trillion a year.

Steiner said some countries -- such as Brazil, Mexico, India, Colombia, Britain -- were now following up to work out the amount of damage they were causing to nature.

He also urged governments to ensure greener choices in public purchases -- ranging from food to clean energy -- that could help the rest of society follow. Such public procurement accounts worldwide for 23 percent of GDP, UNEP says.

Editing by Philippa Fletcher

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