A Mexican detour on the run to Rio

Center for American Progress

The Group of 20 developed and developing nations will meet Monday in Los Cabos, Mexico, for their seventh meeting since the initial G-20 summit in November 2008, hosted by the George W Bush administration in Washington, D.C. What will be the role of climate and energy issues at this latest summit?

This is an especially intriguing question since this G-20 meeting, unlike those that came before it, starts a week that will end with the UN Conference on Sustainable Development in Rio de Janeiro, Brazil – more commonly known as the Rio 20 Earth Summit. This once-in-a-decade event brings together thousands of participants from governments, the private sector, and civil society to focus on addressing poverty and sustainable development. 

President Barack Obama will attend the G-20 meeting but not Rio 20, and other G-20 leaders are expected to make the same decision. For this and other reasons, some fear that the G-20 could upstage the Rio meeting. 

But can the G-20, a relatively closed but highly influential meeting of the world's largest economies, help set the stage for the Rio meeting, which, at this late date, is suffering from a lack of consensus on agreed goals? Yes.

The best thing the G-20 leaders can do to help Rio succeed is to double down on their core climate and energy commitment – phasing out fossil-fuel subsidies – and creating a concrete roadmap to making it a reality. This will demonstrate that what the world needs now is concrete steps to real commitments instead of another series of empty proclamations.

A focus on fossil-fuel subsidies

The G-20 can and should build momentum for the Rio meeting, and the best way to do so is to focus on establishing a roadmap for completing its signature commitment to date on climate and energy: the commitment made in Pittsburgh in 2009 in advance of the Copenhagen climate summit to phase out subsidies for fossil fuels in the medium-term.

G-20 leaders issued a joint statement at Pittsburgh declaring their commitment:

“To phase out and rationalise over the medium-term inefficient fossil fuel subsidies while providing targeted support for the poorest. Inefficient fossil fuel subsidies encourage wasteful consumption, reduce our energy security, impede investment in clean energy sources and undermine efforts to deal with the threat of climate change.”

They renewed this commitment to end fuel subsidies the following year at the two 2010 summits in Toronto and again in Seoul, and asked the International Energy Agency, or IEA; the Organization of the Petroleum Exporting Countries, or OPEC; the Organisation for Economic Co-operation and Development, or OECD; and the World Bank to assess progress and report back for the next leaders' summit.

These organisations' joint report to the G-20 leaders in Cannes during the November 2011 summit estimates energy and greenhouse gas reductions based on an IEA analysis of fossil-fuel consumption-related subsidy removal in 37 countries. These countries include the largest subsidizers and represent 95 per cent of emissions. Almost half of the countries analysed by the IEA have implemented some fossil-fuel subsidy reforms or announced plans for reforms by 2011, but so far progress across the board by these countries has been uneven. Still, the OECD estimates that total greenhouse gas emissions from 2020 to 2050 could be between 3 per cent and 4 per cent less than estimates from several years ago due to the cutback on subsidies.

Further, the IEA analysis finds that eliminating fossil-fuel consumption subsidies in all of these 37 countries would reduce global energy demand by 4.1 per cent relative to baseline projections and would cut 1.7 gigatons of carbon dioxide annually by 2020, or 4.7 per cent.

Fossil-fuel reforms would also have net economic benefits in most instances. Subsidies in the 37 countries analyzed by the IEA come with a huge price tag: $409 billion in 2010 alone. The IEA estimates that by 2020 these economies will spend $660 billion per year, accounting for 0.7 percent of GDP. That's on top of $45 billion to $75 billion per year for more than 250 aggregated fossil-fuel production or consumption subsidies in OECD countries between 2005 and 2010.

These figures are neither comprehensive nor inclusive of health costs or environmental costs associated with burning and producing fossil fuels. Inaction will cripple struggling economies and worsen strapped national budgets.  

What's more, these subsidies do not reach the poorest of the poor or the 1.3 billion people without access to modern, reliable electricity. The joint report notes that although providing basic energy services is a common goal of consumption subsidies, IEA analysis finds that only $35 billion of the $409 billion – 8 per cent – reached the bottom 20 per cent.

These emissions reductions and costs figures are often cited in advocacy efforts promoting the removal of fossil-fuel subsidies at the G-20. Only 9 of the 37 economies IEA analysed however, are G-20 nations (Argentina, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, and South Korea). The report cautions that the countries reviewed are not necessarily representative of the G-20 countries. Further, the analysis does not determine whether the subsidies examined are “inefficient” as the G-20 has not defined this term.

Nevertheless, the G-20 commitment to phase out inefficient and wasteful fossil-fuel subsidies in conjunction with a similar commitment at the Asia-Pacific Economic Cooperation Economic Leaders' Meeting in November 2010, along with rising energy prices, has undoubtedly built momentum on global actions to reduce fossil-fuel subsidies even though countries still have a long way to go before inefficient fossil-fuel subsidies are fully removed. 

G-20 leaders reaffirmed their commitment to eliminating subsidies in Cannes last year, welcomed the joint report, and asked finance ministers and other officials to continue moving forward with reforms and report back. This year they must take this analysis and this legacy of commitments and turn it into a concrete action plan. By doing so, they could set exactly the right turn for the Rio meeting that ends the week.

Ramping up to Rio

One of the biggest sources of skepticism about the Rio 20 meeting is whether it can actually do anything meaningful. Part of the concern is the lack of an action plan for the most meaningful parts of the agenda.

As we argued in May, one of the most important agreements that could come out of Rio is UN Secretary General Ban-Ki Moon's Sustainable Energy For All Initiative. It has three core goals:

-- Ensure universal access to electricity by 2030;

-- Double the rate of energy-efficiency improvement by 2030; and

-- Double the share of renewable energy in the global energy mix by 2030.

Like the fossil-fuel subsidy phase out, it's an aspirational global goal rather than a binding international commitment. But like that goal it's also something we can measure and use as a yardstick for success if a roadmap for achieving this goal is clearly articulated.

Take the energy-efficiency goals, for example. McKinsey & Company estimates that a global cumulative investment of $170 billion annually in energy efficiency will generate an internal rate of return of 17 per cent, producing overall global savings of $900 billion per year. Meeting this goal would also reduce global energy consumption by 14 per cent by 2030, avoiding the construction of approximately 1,300 midsize power plants.

What will give these goals bite, though, is if the Sustainable Energy For All Initiative, or whatever goals might be agreed to at the end of the meeting in Rio, are not just articulated as aspirations but as a commitment to creating a concrete process for actually achieving them. This means laying out a plan for sharing information that will allow countries to meet their part of each commitment and agreeing to burden-sharing agreements to help those countries that will have a harder road to achieving these ends.

And this is where the G-20 could lead by example. By starting the week out not only reaffirming their existing commitment to phasing out fossil-fuel subsidies but actually agreeing on a roadmap to making that commitment a reality, the G-20 parties could set a standard to be lived up to in Rio. Whether it is the Sustainable Energy for All Initiative or some other concrete commitment that emerges out of Rio, it will only be meaningful if it is accompanied by a roadmap, which very well could start a few hundred miles north in Los Cabos.

This is an edited version of an article that was originally published by the Center for American Progress. Republished with permission.