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October 7, 2011

Half a trillion dollars last year supporting fossil fuels


04 October 2011 Paris --- Governments and taxpayers spent about half a trillion dollars last year supporting the production and consumption of fossil fuels. Removing inefficient subsidies would raise national revenues and reduce greenhouse-gas emissions, according to OECD and IEA analyses.


The G-20 Leaders in 2009 agreed to phase out subsidies that “encourage wasteful consumption, reduce our energy security, impede investment in clean energy sources and undermine efforts to deal with the threat of climate change”. OECD and IEA data and analysis are contributing actively to the follow-up on this commitment by the G20.
“Both developing and developed countries need to phase out inefficient fossil fuel 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,” said OECD Secretary-General Angel Gurria, “For this to succeed, we need well-targeted, transparent and timebound programmes to assist poor households and energy workers who might be adversely affected in the short-term. OECD and IEA data and analysis can help guide the process.”

The OECD Secretary-General and IEA Executive Director Maria van der Hoeven emphasised that subsidies to fossil-fuel consumers often fail to meet their intended objectives: alleviating energy poverty or promoting economic development, and instead create wasteful use of energy, contribute to price volatility by blurring market signals, encourage fuel smuggling and lower competitiveness of renewables and energy efficient technologies.

“In a period of persistently high energy prices, subsidies represent a significant economic liability,” said IEA Executive Director Maria van der Hoeven, noting IEA estimates that subsidies that artificially reduce the price of fossil-fuels amounted to USD 409 billion in 2010 – almost USD 110 billion higher than in 2009. This is based on the IEA’s global survey to identify economies that artificially lower end-use prices for fossil fuels to below the full cost of supply.

 

 [read full press release from the International Energy Agency ]


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