Wednesday

24th Jan 2018

Opinion

EU takes step backward on fossil fuel subsidies

  • 'Averaged per person, each and every citizen of Luxembourg spends $4,000 a year subsidising fossil fuels' (Photo: Frank Kehren)

The G7 leaders’ meeting in Germany agreed on Monday to “decarbonise the global economy in the course of this century”.

For Germany, the US and the UK, the commitment follows on from their existing pledges to cut emissions 70 – 95% by mid-century.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

But for Canada and Japan, the G7 statement signals significant change. For the last decade or more, both countries had indicated little willingness to take meaningful climate action. For them, the G7 statement represents something of a U-turn.

It is ironic then that the same day global leaders were taking a step forward in Germany, EU energy ministers were taking a step backwards during a meeting in Luxembourg.

It concerns fossil fuel subsidies, which reduce the final costs of buying coal, oil and gas. Governments typically do this by using taxpayer funds to lower the final market price of energy or to the reduce costs of production, or both.

In February member states signed up to “biennial reports on energy prices, with an in-depth analysis of the role of taxes, levies and subsidies, in order to create more transparency on energy costs and prices”.

But the subsidies element has since been dropped. Governments are now just committed to “greater transparency in the composition of energy costs and prices by means of appropriate monitoring”.

And while European countries do recognise “the importance of the long-term benefits and costs of decarbonisation”, member states have been given a get-out clause.

New wording allows them to ditch the decarbonisation objective simply by citing goals on industrial competitiveness, economic growth or jobs.

Why is the EU slipping backwards?

The root cause is a sharp split between member states. Europe’s wealthier countries – chiefly Denmark and Germany – want to see the EU transition to a low-carbon energy mix without delay.

However, member states less advanced along the transition path, such as Poland and Czech Republic, are putting the brakes on.

Up to and including 2014, the European Commission actively encouraged member states to phase-out fossil fuel subsidies. In early 2015, Commission officials advised that 11 member states be asked to tackle their fossil fuel subsides under the EU’s annual cycle of fiscal review known as the Semester.

But all eleven draft recommendations were dropped from the final text issued by the Commission itself.

When asked why subsidy recommendations were excluded, the Commission said the issue would be taken up under the Energy Union, a commitment since revealed as hollow.

As the tension between governments increased, EU energy commissioner Maros Sefcovic felt obliged to quietly water down sustainability, and with it the ambition to tackle fossil fuel subsidies.

EU-wide, direct fossil fuel subsidies amount to more than $100 billion. However, direct costs exclude the healthcare fallout caused by the emissions released in burning fossil fuels together with the destabilising effect on climate.

In 2013, the IMF released country-by-country data based on 2011 figures for direct subsidies. Next month, the IMF will publish country-specific information which will factor in healthcare and climate costs.

This data is sufficient to give pause for thought.

In 2011, Germany spent $22 billion on fossil fuel subsidies. The UK and Poland each spent $11 billion, Italy spent $7 billion, Spain $6 bn, and France $5 bn. And it isn’t just the big six member states. Luxembourg, with a population of 550,000, spent some $2.2 billion. Averaged per person, each and every citizen of Luxembourg spends $4,000 a year subsidising fossil fuels.

Commissioner Sefcovic's challenge

By and large, however, higher-income member states want to transition out of fossil fuels. Led by Denmark, Sweden and Germany, a growing cohort of states is joining in the move to renewables, including Austria, the Netherlands and France. As the transition gathers greater momentum, these countries become home to increasing numbers of entrepreneurs, firms and employees profiting from the green economy. And with that, the relative influence of the fossil fuel industry declines.

This is somewhat different, however, in member states with regions where fossil fuel extraction remains a dominant employer. The Silesia region – partly in Poland, partly in the Czech Republic – has more working coal miners than the rest of the European Union combined.

The coal mines of Andalucia, southern Spain, are nearly exhausted but still retain 5,000 workers. Ploieşti, the main oil producing region of Romania, is the key source of Bucharest's antipathy to tackling fossil fuel subsidies. In each case, the opposition is regional but the tail of opposition is so strong it continues to wag the national dog.

This is Commissioner Sefcovic’s challenge.

Can he rally higher-income member states to support the energy transition, starting with coal-producing regions? If he can, Sefcovic might be able to overcome further disunity and get the Energy Union, announced earlier this year, back on track. The Commission will need to collaborate closely with energy ministers to ensure EU-wide acceptance of a new, shared goal, namely that energy transition progresses in every member state without delay.

Such an initiative, if successful, would also straighten out the EU’s backward lurch on fossil fuel subsidies in advance of climate talks in Paris at the end of November - something necessary if Europe is to maintain its leadership position acting in line with the long term interests of citizens.

James Nix is Director of Green Budget Europe, an expert platform on environmental fiscal reform.

EU commissioner to begin 'Energy Union' tour

EU energy commissioner Maros Sefcovic will start visiting EU countries this week to share initial findings of a commission analysis of each country's energy and climate policy.

Germany led EU's $5bn coal splurge

A larger portion of EU taxpayers' money than previously thought was used in recent years to help build coal-fired plants, the dirtiest energy source.

Europe is lacking tech leadership

Despite some 'unicorns', Europe lags way behind the US in tech innovation - and is in danger of being overtaken by China, whilst preoccupied by the online threat from Russia. The EU needs to back France's Macron's new thinking.

Ten Commandments to overcome the EU's many crises

A series of missteps - from the faulty institutional infrastructure of the euro, to the migration crisis - have left the EU battered and in near crisis. Here are ten steps to re-democratise the union.

EU's 'old men' must pressure Poland on abortion rights

Despite fresh crackdowns on Poland's already restrictive abortion laws, EU commission president Juncker did not raise the issue with the new Polish PM Morawiecki - perhaps because it was an all-male event?

News in Brief

  1. Japan-EU trade deal to start life by 2019
  2. Auditors criticise EU economic governance implementation
  3. Dutch environment group appeals air quality ruling
  4. Commission opens case into Polish railways state aid
  5. EU remove eight places from tax havens blacklist
  6. UK to keep forces in Germany over Russia fears
  7. Finnish presidential vote could go to second round
  8. Report: EU might pay Brexit residency fees for EU citizens

Stakeholders' Highlights

  1. European Free AlllianceNo Justice From the Spanish Supreme Court Ruling
  2. Nordic Council of MinistersNordic Solutions for Sustainable Cities: New Grants Awarded for Branding Projects
  3. Mission of China to the EUTrade Between China, Belt and Road Countries up 15%
  4. Nordic Council of MinistersOresund Inspires Other EU Border Regions to Work Together to Generate Growth
  5. Mission of China to the EUTrade Between China, Belt and Road Countries up 15%
  6. AJC Transatlantic InstituteAJC Calls on EU to Sanction Iran’s Revolutionary Guards, Expel Ambassadors
  7. Dialogue PlatformRoundtable on "Political Islam, Civil Islam and The West" 31 January
  8. ILGA EuropeFreedom of Movement and Same-Sex Couples in Romania – Case Update!
  9. EU2017EEEstonia Completes First EU Presidency, Introduced New Topics to the Agenda
  10. Bio-Based IndustriesLeading the Transition Towards a Post-Petroleum Society
  11. ACCAWelcomes the Start of the New Bulgarian Presidency
  12. Mission of China to the EUPremier Li and President Tusk Stress Importance of Ties at ASEM Summit

Latest News

  1. Berlusconi in Brussels on pre-election charm offensive
  2. ECJ should rule against Austrian online censorship lawsuit
  3. EU states loosen grip on tax havens
  4. Facebook promises privacy reboot ahead of new EU rules
  5. Europe is lacking tech leadership
  6. Spitzenkandidat system here to stay, MEPs warn capitals
  7. MEPs to keep 27 UK seats after Brexit
  8. Norway defends new Arctic oil drilling

Stakeholders' Highlights

  1. EU2017EEVAT on Electronic Commerce: New Rules Adopted
  2. European Jewish CongressChair of EU Parliament Working Group on Antisemitism Condemns Wave of Attacks
  3. Counter BalanceA New Study Challenges the Infrastructure Mega Corridors Agenda
  4. Dialogue PlatformThe Gülen Community: Who to Believe - Politicians or Actions?" by Thomas Michel
  5. Plastics Recyclers Europe65% Plastics Recycling Rate Attainable by 2025 New Study Shows
  6. European Heart NetworkCommissioner Andriukaitis' Address to EHN on the Occasion of Its 25th Anniversary
  7. ACCACFOs Risk Losing Relevance If They Do Not Embrace Technology
  8. UNICEFMake the Digital World Safer for Children & Increase Access for the Most Disadvantaged
  9. European Jewish CongressWelcomes Recognition of Jerusalem as the Capital of Israel and Calls on EU States to Follow Suit
  10. Mission of China to the EUChina and EU Boost Innovation Cooperation Under Horizon 2020
  11. European Gaming & Betting AssociationJuncker’s "Political" Commission Leaves Gambling Reforms to the Court
  12. AJC Transatlantic InstituteAJC Applauds U.S. Recognition of Jerusalem as Israel’s Capital City