Cut fossil fuel subsidies to curb climate change–and poverty?

Are fossil fuel subsidies undermining progress toward a greener, more climate-resilient global economy – and one that more effectively fights poverty?Governments each year spend around half a trillion dollars on fossil fuel subsidies – a huge expense that pulls investment away from other budget priorities that might more directly help the poor, including education, healthcare and infrastructure. Egypt, Indonesia, Pakistan and Venezuela each spend at least twice as much on fossil fuel subsidies as on public health, and studies show the subsidies disproportionately benefit the rich around the world, as well as making it harder for renewable energy to find support and funding. Is it time to reduce or eliminate them? How might that happen, and how could the political obstacles be overcome? Our experts take your questions.

3rd & 7 37yd

@will_mcf - Actually, subsidy reform has proved instrumental to building up the social welfare system in Indonesia. The register of poor households that underlies all social welfare programs today was original put together to support a reform attempt in 2005, and was just this year updated again to support another reform attempt. So there are in fact some countries where it is certainly possible to set up cash transfer systems around subsidy reform, that can continue to provide long-term benefits.

by globalsubsidies 12/10/2013 12:38:12 PM
Clear information - key phrase. Part of that should be clear information on externalities and the social costs of these externalities. Any studies that lay people can use?

by Joydeep Gupta 12/10/2013 12:38:15 PM
@Armsfree Do you think its that "ripple effect" that discourages CSOs openly demanding fossil fuel subsidy end?

by Stella Paul 12/10/2013 12:38:35 PM
Actually, Temi's point is a particularly good one: People want their voices heard, somehow. Maybe just giving people a chance to talk first, before the subsidies are cut, and genuinely taking their ideas into account would be a first step. I assume that's going on some places, right?

by Laurie Goering @TR_Foundation 12/10/2013 12:38:56 PM
Without better public transport in developing countries, cutting #fossilfuel subsidies is problematic bit.ly/1bevj0e #cutsubsidies

by Alertnetclimate via twitter 12/10/2013 12:39:01 PM
@GSI Building on your point of setting up independent enquiries to explore the problem - it might be of interest to others that the UK just completed such an inquiry on energy subsidies - bit.ly

by Shelagh Whitley 12/10/2013 12:39:54 PM
The IMF website has a page with links to our studies, which I believe lay out well the problems with subsidies, but also the challenges of reform www.imf.org

by Carlo Sdralevich 12/10/2013 12:39:57 PM
Joydeep: Maybe part of the solution is journalists doing a better job of turning reports full of jargon into something people can genuinely understand

by Laurie Goering @TR_Foundation 12/10/2013 12:40:03 PM
Laurie :)

by Joydeep Gupta 12/10/2013 12:40:19 PM
Globalsubsidies: Sounds like Malaysia got it right

by Laurie Goering @TR_Foundation 12/10/2013 12:40:45 PM
Fuel subsidy reform has proved instrumental to building up Indonesia's social welfare system: @GSI bit.ly/1bevj0e #cutsubsidies

by Alertnetclimate via twitter 12/10/2013 12:40:50 PM
How often do you guys do this? I currently live in Portugal so a time idea will be nice

by Temi 12/10/2013 12:40:53 PM
@Laurie; I very much support solar in rural areas. It is off grid and gives people small, but green solutions. But we are light years away from the electric cars part.

by armsforreel 12/10/2013 12:41:16 PM
Temi: We run debates on various subjects around climate change every month or two....

by Laurie Goering @TR_Foundation 12/10/2013 12:41:18 PM
Stella Paul – you’ve hit the nail on the head, governments need the confidence to act and for that do need pressure from the public. There are many more vested interests protecting their positions than the majority pushing for change. Pressure comes from civil society and from politicians, and this needs championing and facilitation by local CSOs, with help from the international community. GSI works heavily with stakeholders and media around the world.

by GSI 12/10/2013 12:41:22 PM
GSI: I suppose what we really need is marches in the streets against fossil fuel subsidies, not just riots in the streets when they're removed

by Laurie Goering @TR_Foundation 12/10/2013 12:42:08 PM
Laurie: I don't know if others managed to copy or get to all the links posted. I certainly didn't. Is it possible for someone to put the links into a mail for everyone?

by Joydeep Gupta 12/10/2013 12:42:13 PM
One of the reasons that it is difficult to have transparency on subsidies is that they are very difficult to account for, because they are dispersed in the economy and very rarely on the budget. So the first step would be to do some accounting and budgeting of subsidies - and that's not necessarily easy in some countries even with the best of intentions.

by Carlo Sdralevich 12/10/2013 12:42:14 PM
Joydeep: We'll aim to write up a summary of this as a blog after the event, and will try to get links in there

by Laurie Goering @TR_Foundation 12/10/2013 12:42:45 PM
@Shelagh & @Will McFarland, the Iran case is another country where cash transfers were quickly developed for fuel subsidy reform it is true. But the % of households receiving support is now much larger than 80%. As of our last study, it was over 90%: www.iisd.org

by globalsubsidies 12/10/2013 12:42:47 PM
Okay cool Iwill watch out

by Temi 12/10/2013 12:42:51 PM
@Megan - maybe we will see businesses calling for market pricing, as opposed to fighting over a subsidy pie?

by Shelagh Whitley 12/10/2013 12:42:58 PM
You can get marches in the streets if you can give people actualo figures of the health costs of fossil fuel pollution

by Joydeep Gupta 12/10/2013 12:43:06 PM
Govts need confidence to act on #fossilfuel subsidies and for that we need public pressure: @GSI bit.ly/1bevj0e #cutsubsidies

by Alertnetclimate via twitter 12/10/2013 12:43:07 PM
@Stella...Yes. It is difficult to defend the fact that you put a people on the firing line, and they end up getting nothing for their pains.

by armsforreel 12/10/2013 12:44:14 PM
Last 15 minutes of our lively debate on fossil fuel subsidies. bit.ly/1bevj0e Don't miss your chance.... #cutsubsidies

by alertnet via twitter 12/10/2013 12:44:18 PM
@carlo, i think the GSI is coming out with an inventory of subsidies for some countries

by SDS 12/10/2013 12:44:21 PM
@ Laurie; exactly - the ideal situation would be a group of stakeholders who not only want fossil-fuel subsidy reform, but who have and demands of what they would like to achieve with the saved revenue. This, however, has never happened anywhere in the world! Perhaps the most we can hope for is relatively low opposition to reform?

by globalsubsidies 12/10/2013 12:44:27 PM
Armsforeel: good concept on the solar for off-grid. Could subsidy savings be ring-fenced and spent in this manner in Nigeria?

by GSI 12/10/2013 12:44:28 PM
@ Joydeep our recent report should be a good resource for subsidy data (from GSI, IMF, OECD and IEA) and resources on barriers to an opportunities for reform. www.odi.org.uk

by Shelagh Whitley 12/10/2013 12:44:35 PM
Great. Thanks Shelagh

by Joydeep Gupta 12/10/2013 12:45:20 PM
Globalsubsidies: Yes, always harder to organise a bunch of people to protest for something good rather than against something bad. That's one of the problems that needs to be figured out to address climate change issues in general

by Laurie Goering @TR_Foundation 12/10/2013 12:45:40 PM
On business - one of the most difficult issues is the impact of subsidy removal on the production sector. In many countries in the Middle East, competitiveness of many firms depends on subsidized inputs. So removing subsidies hits them hard and this should not be understimated. What's needed is a well thought out plan that somehow mitigates the transition but allows the move to correct pricing.

by Carlo Sdralevich 12/10/2013 12:45:42 PM
The health cost of fossil fuel is huuuuugggeee I researched it in class. God only if people know . Env. Sustainability major

by Temi 12/10/2013 12:45:42 PM
One barrier to transparency on subsidies is they are very difficult to account for, because dispersed in economy: Sdralevich #cutsubsidies

by Alertnetclimate via twitter 12/10/2013 12:45:56 PM
Great point by IISD - Global Subsidies!

by Mairi Dupar, CDKN 12/10/2013 12:45:57 PM
What we need is to put a number on that huuuuuuuge

by Joydeep Gupta 12/10/2013 12:46:22 PM
Carlo: I'd think that clear signals to business of change coming, but at a slow enough pace that companies can adjust, would help, right?

by Laurie Goering @TR_Foundation 12/10/2013 12:46:28 PM
@ shelagh and global subsidies -> those are really good examples. I was trying to reflect on lots of comments here that they would not trust their governments to effectively redistribute any savings. The IMF case studies are fascinating, but they don't neccessarily help us answer the 2nd part of our question (because they are focussed on fossil fuels) - whether we can reduce poverty too while we are at it

by will_mcf 12/10/2013 12:46:32 PM
@SDS - yes, we are currently working on a project with the ADB where we will come out with a comprehensive inventory of subsidies in India, Indonesia and Thailand. We're also using three kinds of macroeconomic models to project the impacts on households, energy systems and the macroeconomy. It should be interesting reading for those looking to conduct similar research to support governments.

by globalsubsidies 12/10/2013 12:46:41 PM
In Middle East, competitiveness of many firms depends on subsidised fuel inputs - need to cushion impact of reform: Sdralevich #cutsubsidies

by Alertnetclimate via twitter 12/10/2013 12:47:44 PM
Has Malaysia got it right? It can be argued that a country which is now middle income should no longer have energy subsidies. GSI's Citizens Guide to Energy Subsidies in Malaysiashows the history and illustrates why reform is a challenge. www.iisd.org

by GSI 12/10/2013 12:48:09 PM
The easiest way to enlighten people is to put it in pictures, people react better to pictures. A PowerPoint will be awesome. But the question is , which television station will agree to air something like that

by Temi 12/10/2013 12:48:26 PM
Short question: Who is going to prepare a summary of this discussion and collecting contact information, in order to continue this debate/exchange of information in future? I think many participants have useful and relevant material/ideas to share/discuss.

by Armin Wagner / GIZ 12/10/2013 12:48:43 PM
That's right - transition should be gradual. But commitment should also be there otherwise companies would not adapt to new pricing and new environment in the expectation that this will all pass soon. So credibility again is essential.

by Carlo Sdralevich 12/10/2013 12:48:51 PM
Carlo, you have talked about the pain felt by businesses in fossil fuel production, when production subsidies are withdrawn. Presumably it is challenging for them to change course quickly into other,less polluting areas. Have you seen govts help business to diversify in advance of the policy change (ie the fossil fuel subsidy withdrawal)?

by Mairi Dupar, CDKN 12/10/2013 12:48:56 PM
@GSI Yes, absolutely, but the process has to be meticulous and transparent, and somewhat removed from government bureaucracy. There have been too many failings in the past.

by armsforreel 12/10/2013 12:49:04 PM
There's one good thing about the Internet - if the message is strong enough, it spreads irrespective of the traditional media outlets

by Joydeep Gupta 12/10/2013 12:49:32 PM
@Temi - yes, couldn't agree more about the need for pictures! We need more interesting, interactive ways to interest people in the topic and help them see the opportunities, not just the risks. Check out this video we put together with the World Bank: vivayicsolutions.com
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by globalsubsidies 12/10/2013 12:49:42 PM
Armin: We'll aim to put together a writeup of the debate on our website: www.trust.org

by Laurie Goering @TR_Foundation 12/10/2013 12:49:42 PM
.@IISD_news working + @ADB to produce comprehensive inventory of fossil fuel subsidies in #India , #Indonesia + #Thailand #cutsubsidies

by Alertnetclimate via twitter 12/10/2013 12:49:58 PM
Governments try to help often with support to the more energy-intensive, export oriented companies. But doing it well requires strong administration.

by Carlo Sdralevich 12/10/2013 12:50:19 PM
Globalsubsidies: Anybody out there up to doing some good public service announcements in their countries laying out visually the costs of fossil fuel subsidies?

by Laurie Goering @TR_Foundation 12/10/2013 12:50:37 PM
Sorry all, link to video was truncated in last post: vivayicsolutions.com

by globalsubsidies 12/10/2013 12:50:44 PM
@will mcf the addressing poverty question links to others comments on where countries choose to divert money from subsidies (when they are provided in the form of direct payments). Many highlight budget for health and education - where else could it go?

by Shelagh Whitley 12/10/2013 12:51:17 PM
Coming up on our last 10 minutes! Might be a good chance for our experts to recap a bit of what they think is important from this. Where do we go from here?

by Laurie Goering @TR_Foundation 12/10/2013 12:51:51 PM
Would love to hear brainstorming from all of you on what you think is the single most important thing needed to effectively start removing these subsidies

by Laurie Goering @TR_Foundation 12/10/2013 12:52:48 PM
@globalsubsidies I think your latest figure is really interesting. I suppose I am keen to dive into what level of transfer leads to poverty reduction in the best way, and what level is nice and politically palatable! 90% seems a lot of the population to set up alternative payment schemes too, but I suppose in many LICs I suppose the figure could need to be that high

by will_mcf 12/10/2013 12:52:57 PM