IEA Urges Reduction in Fossil Fuel Subsidies

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In an extract from the IEA’s World Energy Outlook annual report, the energy watchdog said spending figures from 2010 were a “significant economic liability.” (Image: Flavio Takemoto)
In an extract from the IEA’s World Energy Outlook annual report, the energy watchdog said spending figures from 2010 were a “significant economic liability.” (Image: Flavio Takemoto)

WORLD

  • Fossil Fuel subsides could hit $660 billion in 2020
  • $409 billion spent in subsidies in 2010, $97 billion more than 2009
  • Only 8% of spending reached world’s poorest population last year

The International Energy Agency (IEA) has renewed calls for a reduction in subsidies for the production and consumption of fossil fuels, warning spending could reach $660 billion by 2020.

The IEA said in a statement that $409 billion was spent by governments in 2010 compared to $312 billion the previous year, and that reforms must be implemented to stop subsidies growing out of hand. Some $193 billion was spent on oil worldwide, with $91 billion going to natural gas. Saudi Arabia, Iran and Russia racked up the highest totals of government spending on fossil fuels.

In an extract from the IEA’s World Energy Outlook annual report, the energy watchdog said spending figures from 2010 were a “significant economic liability.”

IEA Chief Economist Fatih Birol told journalists at an Organization for Economic Co-operation and Development (OECD) conference in Paris that if no action was taken, public spending would reach $660 billion in 2020, which would represent 0.7% of global GDP.

Cheap Fuel Leads To Wastefulness

In 2009 in Pittsburgh, G20 leaders of the world’s major economies agreed to eliminate subsidies that promote the careless consumption of fossil fuels. “Making energy cheap means we use fuel in a wasteful manner,” said Birol at the conference in Paris.

He added that phasing out subsidies on non-renewable fuel sources before 2020 would result in a 4% drop in global demand for energy and would have a significant impact on slowing the growth of carbon emissions.

In September, the Guardian reported on leaked World Bank files that suggested rich nations should cut billions of dollars in fossil fuel subsidies to help poorer economies tackle climate change. The IEA said only 8% of the $409 billion spent in 2010 had benefited those countries most in need, with OECD Secretary General Angel Gurria adding his support: “Subsidies are going to the middle and upper classes. This analysis is shouting that change is needed.”

Gurria said phasing out government spending was of utmost importance in light of the current global economic hardship.

"Both developing and developed countries need to phase out inefficient subsidies. As they look for policy responses to the worst economic crisis of our lifetimes, phasing out subsidies is an obvious way to help governments meet their economic, environmental and social goals," Gurria said.

Forecasts from 2010 indicated subsidies would rise to $600 billion in 2015, but significant efforts from energy hungry countries like China, India and Russia have seen an improvement in the rate of government spending.

Key Statistics – Global Coal Industry (source: MarketLine)

  • In 2010, the global coal market grew over 17.5% to $468 billion.
  • The global coal market is expected to be worth almost $918 billion by 2015, increasing over 96% from 2010.
  • In 2010, the global coal market grew around 9% to reach a production volume of almost 8 billion short tons.
  • The global coal market will reach a volume of 11.4 billion short tons in 2015, a rise of over 45.5% since 2010.
  • The Asia-Pacific region represents 71.5% of the global coal market value.

By James Mulholland for
James Mulholland is a Paris-based internet and broadcast journalist specializing in sports, current affairs and technology news, while also freelancing as a photographer.

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