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Australia to Ignore G20 Phase out of Fossil Fuel Subsidies

October 19, 2010

The G20 will meet again in Korea in November, at which point the IEA will release 2009 fossil fuel subsidy data for non-OECD.  Also in November, the IEA is due to issue a special report on fossil fuel subsidies, which will be published alongside the World Energy Report.

The OECD estimates significant greenhouse gas emissions benefits will result from fossil fuel subsidy phase-out.

While the focus is on major developing economies, it is clear that OECD countries are also guilty of major subsidies to fossil fuels, including Australia.

The most recent comprehensive effort to estimate the extent of Australia’s subsidy to fossil fuels was in 2003 – a working paper.

In this, $9bn of annual subsidies to fossil fuels was identified.

However, this time last year the Australian Government indicated that it would not move to reduce those subsidies.

The Australian Government’s rejection of subsidy removal was defended at the time by implying that social costs of fossil fuels would be captured in pricing by an emissions trading scheme.

In the continuing carbon pricing policy vacuum in Australia since then, this defence looks increasingly weak.

The recent report by Vivid Economics on implicit carbon pricing on electricity sectors in six major economies underlines this weakness, as it demonstrates that Australia’s tax on energy is well below other economies – including China, EU, and US.

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