New Zealand Coordinates Action on Fossil Fuel Subsidy Reform

At the recent Climate Change meeting in Cancun, Tim Groser, the Minister Responsible for International Climate Change Negotiations, convened an informal meeting of Ministers of small and medium-sized countries which support the reform of inefficient fossil fuel subsidies.

The initiative was intended to reinforce early signs of a political commitment in this direction by the largest economies in the world, as set out in the most recent G20 and APEC Leaders' communiqués. The group, convened by New Zealand, is likely to be known as the 'Friends of Fossil Fuel Subsidy Reform'.

"Reform of huge subsidies for fossil fuels deserves to be far higher up both the climate change and general economic reform agendas”, Mr Groser said.

“The recent meeting in Cancun has taken a decisive step forward to establishing a US$100 billion per annum Fund to help developing countries combat man-made climate change. That sum is dwarfed by annual spending on fossil fuel subsidies which are anywhere between four and seven times as much. There are several developing countries that spend more subsidising fossil fuels than on educating their children. In others, the fiscal cost of these subsidies exceeds their health budgets. The political sensitivity of this is obvious, but this cries out for long-term reform”, Mr Groser said.

It may also be a key missing piece of the climate change puzzle, Mr Groser noted. Research suggested that reform could reduce global GHG emissions up to 10% by 2050 and make a substantial contribution to keeping global warming below 2 degrees in 2050.

“It is completely incoherent for the world to be now tentatively coordinating actions to put a price on carbon on the one hand, while simultaneously massively subsidising consumption of carbon”.

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"If the history of agricultural subsidy reform is any guide, reform will need to be gradual and progressive. It should focus on the most damaging subsidies. Extreme or purist approaches will not work. But I am confident that, with the support of the credible and constructive countries that we have spoken to, long-term progress is attainable”, Mr Groser said.