OECD hails US and China’s ‘ground-breaking’ fossil fuel peer reviews

6 Sep 16

The OECD has welcomed the release by the US and China of peer reviews into their national fossil fuel subsidy programmes, despite criticism over the G20’s failure to set a deadline to phase them out altogether.

 

The think-tank hailed the voluntary peer review mechanisms agreed at the G20 summit in Hangzhou, China, as “ground-breaking”. As the world’s two largest economies and worst fossil fuels polluters, the US and China are the first to sign up to the scheme.

According to the OECD, the aim is “to pave the way for widespread reform across G20 countries of inefficient public support to fossil fuels – a major contributor to air pollution and climate change”.

This marks the first time China has allowed another nation to review its domestic energy subsidies, and is widely seen as evidence of the Asian nation’s renewed commitment to controlling greenhouse emissions.

On Saturday it was announced that the US and China will formally ratify the Paris Climate Change Agreement. 

The OECD, which chaired the peer review teams, commended both nations for what it described as a high degree of transparency and openness throughout the process.

Speaking on the sidelines of the summit this weekend, OECD secretary general Angel Gurría said: “China and the US are to be applauded. These first G20 peer reviews are critically important.

“Reforming policies that support the production or consumption of fossil fuels is a vital step in the global effort to substantially reduce emissions of carbon dioxide and other greenhouse gases.”

The OECD quoted recent studies that showed phasing out fossil fuel consumption subsidies could reduce global annual greenhouse gas emissions by 6-13% by 2050.

China’s report proposes nine inefficient fossil fuel policies for reform, most of which are exemptions from excise or land-use taxes that benefit fossil fuels. The largest concerns a bundle of subsidies for fossil fuels used in transport, and is worth around $15bn. 

The US report highlights 16 policies for reform, most of which are special features of the tax code relating to upstream activities, such as the exploration, development, and extraction of oil of natural gas.

However, commentators have criticised the G20 for failing to set a specific deadline to end subsidies altogether, which it promised as far back as 2009.

Shelagh Whitley, research fellow at the Overseas Development Institute said: “Excuses are running out…once again the G20 makes a commitment without setting any deadline.”

She observed that next year’s summit in Germany would be the last chance to agree to end subsidies by 2020 and avoid trapping “future generations into a lifetime of dependency on centuries-old energy systems”.

Whitley added: “Our research shows G20 countries are continuing to fund fossil fuel production by $444bn. Failure to end this support will put a break on the transition to clean energy and pass the bill – and the climate fallout – on to far more vulnerable groups and countries.”

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