IEA calls for cuts to 'wasteful' fossil fuel subsidies
- 4 October 2011
- From the section Business
The International Energy Agency (IEA) estimates governments spent $409bn (£266bn) on fossil fuel subsidies in 2010.
This figure is a 36% rise on the previous year. Support for oil products represented almost half of the total.
The IEA warns the aid is likely to increase to $660bn (£430bn) by 2020 unless action is taken.
The agency claims subsidies are inefficient and encourage wasteful energy use.
It says efforts to artificially cut costs encourage volatile price swings because they blur market signals. As a result it says they often fail to help the poorest households they are targeted at.
The IEA says phasing out the payments should make renewable energy sources, such as wind power, become more competitive. It says that would stimulate investment in the sector and create new jobs.
It says subsidy cuts would also encourage consumers and businesses to become more energy efficient.
Tracking the subsidies
To make the right choices the IEA says governments need access to data to help them work out the implications of changes in policy.
The Organisation for Economic Co-operation and Development think tank is helping make such information available. It has begun compiling an inventory of more than 250 different mechanisms used by its members to support fossil fuel production and use.
It says the research will help states assess each others' efforts to make reforms.
For example, it gives Germany's pledge to cut support to its hard-coal mining industry by 2018, and Mexico's attempt to limit subsidies by targeting them directly to its poorest households.
The IEA and OECD suggest that by following their lead other countries can also cut costs at the same time as stimulating growth and employment.