U.S. and China Commit to Paris Climate Accord While Keeping Fossil Fuel Subsidies in Place

Subsidizing oil and gas companies runs counter to the Paris Agreement, says Alex Doukas of Oil Change International

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KIM BROWN, TRNN REPORTER: Welcome to The Real News Network. I’m Kim Brown in Baltimore.

The United States and China officially signed the Paris Agreement on September 3, the day before the G20 summit in Hangzhou. The two countries are the first major greenhouse gas emitters to join the climate pact, bringing the total number of nations to 26. At the end of the summit, G20 leaders committed to ratifying the agreement and said that they “welcome efforts to allow its entry into force by the end of 2016 and we expect a rapid implementation of the agreement.” Here is a clip of President Obama discussing the issue of climate change.

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We also added momentum to the fight to protect our planet for future generations. On Saturday, the U.S. and China formally entered the Paris Agreement. And today, the G20 welcomed efforts to enter the Paris Agreement into force by the end of this year.

So if there’s anything that the past eight years have taught us, it’s that the complicated challenges of the 21st century cannot be met without coordinated and collective action.

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BROWN: Our next guest says that the G20 leaders [have] failed yet again to end the billions of dollars in subsidies to fossil fuel companies and it’s not yet compatible with the Paris Agreement.

With us to break down the issue is Alex Doukas. He is a senior campaigner at Oil Change International. He previously worked at the World Resources Institute. And his work focuses on ending international subsidies and public finance for fossil fuels and shifting public resources towards building a clean energy future.

Alex, thank you so much for speaking with us again.

ALEX DOUKAS: Thanks very much for having me on.

BROWN: So, Alex, break it down for us. How much are the G20 countries subsidizing big oil companies? And are there tax exemptions? Is this a major part of this plan?

DOUKAS: Yeah. I’ll break it down by sort of subsidies. The way that the world typically thinks about them is often fuel subsidies. So those are subsidies for consumers to lower the price of gasoline or kerosene or diesel fuel, often in poor countries. And that’s a lot of what the discussion historically has been about when it comes to fossil fuel subsidies. And those are on the order of several hundred billion dollars a year.

But the subsidies that–it’s important to get rid of those subsidies for a variety of reasons. They don’t do a very good job of helping the poor, and they help drive climate change and increase air pollution.

But there’s a whole other set of subsidies that I like to focus on in our work at Oil Change International, which is subsidies to fossil fuel producers. And in a report that we released last year with the Overseas Development Institute, we found that G20 countries are subsidizing fossil fuel companies–so this is oil, gas, and coal companies, some of the most profitable and polluting companies in the world–to the tune of $444 billion every year.

BROWN: And the United States, obviously, is included that. Do you know what companies that the U.S. specifically allows these subsidies to go to?

DUKAS: Well, there’s no data available on the level of subsidy going to individual companies in the United States, but most any fossil fuel company benefits from some sort of subsidy or special tax break in the United States, whether it’s Exxon or Chevron, some of the big integrated oil and gas producers, to some of the smaller, independent oil and gas producers, as well as coal mining companies, coal-fired power plant operators. It sort of runs the gamut in the United States.

BROWN: So, Alex, you’ve written about G7 countries having said that they would phase out subsidies since 2009 just before the recent G20 meeting. Three of the world’s biggest multinational insurers–Aviva, [Aegon], and Amlin–they are all calling on the G20 leaders to implement a timeframe to the end of subsidies to fossil fuel companies. And even Bloomberg News published an opinion piece by their editorial, titled “Fuel Subsidies Are the World’s Dumbest Policy”. Do you think that we’ve entered an era where the cost is becoming clearer and the risks are outweighing the benefits of a fossil fuel based economy?

DOUKAS: I certainly hope so. I don’t think that the G20 showed a good sign of recognizing that shift, but I do think that the narrative and the discourse around fossil fuels and fossil fuel subsidies is changing pretty quickly.

So, as you pointed out, I definitely agree with the Bloomberg article that fossil fuel subsidies are the world’s dumbest policy, despite stiff competition.

And I also think that when you look at insurers–and these three insurers that you mentioned are worth $1.2 trillion in combined assets under management–when they’re calling on the G20 to commit to ending fossil fuel subsidies by 2020, that’s something the G20 leaders should be listening to. These are companies that assess risk for a living. That’s sort of their comparative advantage. That’s what they do. So when they’re saying that this is creating an existential risk and it’s driving climate change, then I think it’s incumbent on G20 leaders to take action, which so far they’ve failed to do.

So we’re looking toward the next G20 meeting in Germany in July of next year for real action and for G20 leaders to finally, as you said, since 2009, stop making the same commitment they’ve made every year, but actually commit to a deadline to phasing out fossil fuel subsidies once and for all.

BROWN: So we’re talking about fossil fuel subsidies here, Alex. Are there comparable subsidies for renewable energy companies and large-scale projects as well?

DOUKAS: There are subsidies for renewable energy in a lot of cases, as the International Energy Agency has noted, a small fraction of the subsidies that go to the fossil fuel industry. And I think it’s important to remember as well that a lot of these fossil fuel industries and companies have been around for a century. So some of the tax breaks in the United States, for example, have been available to oil and gas companies since before women had the right to vote, whereas we’re talking about renewable energy, which is more or less ready for prime time at the moment. But they’re not exactly an incumbent industry.

So, for me, when I think about the low-carbon benefits of renewable energy, I don’t object as much to them receiving support if it’s going to help us solve climate change, which is absolutely imperative. But in the case of the United States, again, Congress has already legislated a phaseout of tax credits that benefit wind and solar power by 2020, yet there’s no similar legislated phaseout for fossil fuel subsidies and tax breaks. Those stay on the books, and we haven’t seen any real action to try and pare those down from Congress at this point. So we’re phasing out renewable energy subsidies, which are a relatively new thing, while at the same time ramping up fossil fuel subsidies in the United States–again, some of which have been around for over a century. And to me that just doesn’t make a lot of sense.

BROWN: Is there a complication with countries like Russia and Venezuela, where the government funding is so deeply tied to money from oil and gas production?

DOUKAS: Yeah. I think it is complicated. But when you actually look at the figures, in terms of the proportion of government revenue, for Russia, for example, it’s not as high as you might think. There are some producers where there’s a really substantial proportion of the revenue, like Saudi Arabia and Venezuela, but there are ways for those economies to diversify.

And as you can see in Venezuela right now, for example, I don’t think the fact that the fossil fuel industry hasn’t yet gone away is really a big help to them. We see the volatility in commodity markets really hurting the Venezuelan economy at the moment. So I’m not sure that this overreliance on fossil fuels has really served them well.

So I think there are multiple reasons and rationales to diversify economies away from overreliance on fossil fuel production. And Venezuela is a good case study of that. Instead of suggesting that they get a lot of revenues from oil and gas, how are we going to replace that, I think it’s important to think about the economy of tomorrow and what can Venezuela and countries like it do to get out of this trap of relying on a relatively volatile commodity price.

BROWN: And what’s the next step in terms of pressuring governments to stop subsidies for the fossil fuel industry?

DOUKAS: So I think–we have the G20 coming next year in Germany. And Germany historically has in many ways been a climate leader, so there’s a lot of hope that if we apply enough pressure, if people power comes to the fore, if movements start asking Angela Merkel, the chancellor of Germany, to really put fossil fuel subsidies on the agenda for the next G20 meeting, that we have a good shot at getting a deadline to phase out these subsidies. And we really need help of regular people to add the voice to that call.

So we have a campaign at Oil Change International with many partners called Stop Funding Fossils. And that’s one of the things that we’re using as a platform to put some pressure on G20 leaders at StopFundingFossils.org.

And in the United States I think the important thing that we can do now is also make best use of the waning days of the Obama administration to say, look, you’ve committed to taking action on climate change by ratifying the Paris climate change agreement; now it’s time to get rid of all the subsidies that we can as quickly as possible. And that’s going to mean, again, building up people power over time and over years. It’s not going to happen overnight. But we need to make our voices heard to Congress, because they control the bulk of the subsidies through tax legislation, and we really need to let them know that spending our tax dollars to give handouts to Exxon and Chevron is wildly inappropriate, whether you’re a conservative or progressive or otherwise.

BROWN: And you bring up the Obama administration. Obviously President Obama, his days in office are waning as a lame duck president. Getting America’s name signed to the Paris Agreement certainly seemed to be a priority for him–sort of a stark contrast to President George W. Bush, who was very reluctant and refused outwardly to sign the Kyoto agreements many years ago. What is your assessment of how the Obama administration has been for the environment at large, not just the American environment? And what are your thoughts about the candidates, the two major party candidates that we have running for president now, Hillary Clinton and Donald Trump, about their policies and their forward, in terms of vision, for environmental action, and especially with fossil fuels?

DOUKAS: Yeah. I think with the Obama administration you’ve touched on something there which is internationally the administration, I think, has done, actually, a very good job of leading the conversation on climate change, helping secure the Paris Agreement. I think they invested a lot of diplomatic energy into winning that battle last year. And that was an exciting and an important achievement, although not nearly enough.

And I also think they’ve done a good job on getting, for example, fossil fuel subsidies on the agenda internationally. In 2009 in Pittsburgh, at the G20 summit there, the U.S. really drove the inclusion of fossil fuel subsidies on the agenda and helped secure the original commitment from G20 governments to agree to phase out fossil fuel subsidies over the medium term. And, unfortunately, we haven’t seen much action on that since 2009, but I do think it’s a credit to the Obama administration for pushing internationally for some of these important agreements.

Where they’ve fallen down, I think, is at home, on the domestic front. There’s been some really important progress in, for example, promulgating the Clean Power Plan to reduce emissions from electricity generation. But at the same time, we’ve seen oil and gas production increase rapidly through the Obama administration, including a rapid increase in fossil fuel production on federal lands.

And that’s one thing that I think the Obama administration can look at again in light of recent re-commitments to the Paris Agreement and ratifying the agreement is to say, how can we make U.S. energy policy more aligned with U.S. climate policy? And from our perspective, I think one of the answers is saying, well, we know that at least three-quarters of the existing reserves of fossil fuels have to stay in the ground unburned if we want to have a chance at meeting the targets outlined in the Paris Agreement, the limits that are enshrined in that agreement. And the Obama administration could take a stand. It could say, look, we’re not going to issue new permits for fossil fuel production on federal lands. And I think that would be an important step that they can take. It’s within their authority to do. And that’s something that we could see from the Obama administration before the administration leaves office.

In terms of the candidates, I think that both of them take money from the oil and gas industry, and I think that is something that should be scrutinized. How is that influencing their policy choices? I think that we have, obviously, a contrast in approaches–let’s put it that way–when it comes to climate. But I think the fundamental tenet for any new administration is going to need to be we must align our energy policy with our climate policy. We need to apply a climate test to ensure that every decision we’re making at the federal level on energy and energy-related infrastructure–pipelines and so on–is in line with our climate policy and our climate agreements. So I think that’s something that we’ll be looking to either administration for, depending on the outcome of the election in November.

BROWN: We’ve been speaking with Alex Doukas. He is a senior campaigner at Oil Change International. He previously worked at World Resources Institute. And his work focuses on ending international subsidies and public finance for fossil fuels and shifting public resources towards building clean energy in the Future.

Alex, so appreciate your time today. Thank you so much.

DOUKAS: Thanks very much.

BROWN: And thank you for watching The Real News Network.

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