G20: Phasing Out Fossil

Fuels and Accelerating

Energy Transition

April 2019

Han Chen, hchen@nrdc.org

2 Source: OCI and ODI

Starting Point: Phasing Out Fossil Fuel Subsidies

What are subsidies? Any financial contribution by a government that is recipient-specific and confers a benefit on its recipient in comparison to other market participants

Direct Spending

(OECD)

Tax breaks (OECD)

Public finance (OCI)

Investment by state-owned

enterprise

Failure to price externalities

(IMF)

Government support includes: • all financial contributions or direct support from a

government; • foregone revenue through tax breaks; • transfer of risk through provision of debt, equity

and guarantees (public finance); • provision of infrastructure, goods and services

below market value (investment by state-owned enterprise).

3

Source: ODI, OCI

Aligning Investments with Paris Agreement and SDGs

Ask from 420 investors managing over US $32 trillion:

• Fossil fuel subsidies increase the risk of stranded fossil fuel assets, decrease the competitiveness of key industries, including low carbon businesses, and negate carbon price signals. They also potentially perpetuate income inequality while failing to meet the energy needs of those lacking energy access, and damage public health by increasing air pollution.

• They also generate potentially harmful economic, social and environmental costs that are impacting on investors’ portfolios and their ability to deploy capital to support the low carbon transition at the speed and scale required.

https://theinvestoragenda.org/wp-content/uploads/2018/05/GISGCC-briefing-paper-FINAL.pdf

• Commitment first made in 2009 at Pittsburgh G20 Leaders’ Summit: “rationalize

and phase out over the medium term inefficient fossil fuel subsidies that

encourage wasteful consumption”

• Has been reiterated every year since

• Increased commitment by G7 (and Mexico) calling for 2025 deadline

• Progress: “peer review” process has undefined methodology, no consistent

definition of subsidies, and only a few participants and coverage of fossil fuel

production subsidies. Although big countries have taken part – US, China,

Germany, Mexico, Indonesia, Canada – reviews are disappointing.

• Still no robust framework to track / monitor implementation, which makes

assessing progress or comparing countries very difficult

• Paris Agreement Article 2.1(c) and Sustainable Development Goals: Goal 12

(sustainable production and consumption) and Goal 13 (climate action)

4 Source: GSI

Progress on G20 commitment to phase out fossil fuel subsidies

5 Source: GSI, OCI, ODI and FARN: Stories from G20 Countries: Shifting public money out of fossil fuels

1. Set a timeline for the complete and equitable phase-out of

FFS by 2025, and develop by 2020 FFS phase-out

roadmaps to achieve this goal;

2. Establish a timeline and clear guidance for the completion

of peer review of FFS by all G20 members by 2020 to

enable equitable phase out of all FFS;

3. Set up a process to initiate the redirection of energy-

related domestic and international public finance to

only support cost-effective, clean, healthy, human-rights

compliant and safe environmental and social practices by

2020.

6 Source: C20 CCWG

Next Steps to Phase Out Fossil Fuel Subsidies

7

Energy Transition

8

Thinking Long Term: Accepting the Falling Cost of Renewables

9

Solar and Wind Have Become the Cheapest Form of Bulk Electricity

10 Example: China LCOEs in H1 2019

Cost Savings from Renewables and the Dangers of

Investment in Coal and Gas Power Plants

11

Renewables Plus Storage Are More Cost

Effective than Coal and Gas in the Long Term

12 Coalswarm and Greenpeace: A Coal Phase-

Out Pathway for 1.5°C

Phasing Out Coal-Fired Power Plants

13

Thank you.