The G-20 Summit in Toronto: Acting on Our Global Energy and Climate Change Challenges

At the Toronto Summit, G-20 Leaders reaffirmed their commitment to phasing out fossil fuel subsidies, a groundbreaking agreement at the Pittsburgh Summit which will encourage the conservation of energy, improve our energy security, reduce economically inefficient burdens on budgets, and provide a down-payment on our commitment to reduce greenhouse gas emissions.  The Leaders reviewed the significant work that has been done this past year to develop implementation strategies and timeframes, and committed themselves to continued and full implementation of this effort.

Background on the Pittsburgh Commitment and Implementation Process

At the Pittsburgh Summit, the G-20 Leaders committed to rationalizing and phasing out inefficient fossil fuel subsidies over the medium term.  Since Pittsburgh, the G-20 countries have focused on the following activities:

• Developed Country Strategies and Timeframes for Review:  In January 2010, the G-20 established an experts working group on energy, in which all 20 countries participate in an open and constructive manner. The G20 energy experts, under the supervision of the Finance and Energy Ministers, have taken initial steps to review fossil fuel subsidy programs in their own countries, and develop strategies and timeframes for rationalizing and phasing out inefficient fossil fuel subsidies.  
• Joint Report on the Scope and Impact of Global Fossil Fuel Subsidies: As requested by the G-20 leaders, the International Energy Agency (IEA), Organization of Petroleum Exporting Countries (OPEC), Organization for Economic Cooperation and Development (OECD), and World Bank will soon publish a Joint Report analyzing the scope of global energy subsidies and offering recommendations for rationalization and phase out.  Their report has found that fossil fuel subsidies displace important public investments and drain government finances, worsen balance of payments, lead to underinvestment in infrastructure, and can contribute to energy shortages.  The report estimates that fossil fuel consumption subsidies cost the the global economy $557 billion in 2008, and unless eliminated can be expected to impose similar costs in the future.  Additionally, the report found that subsidies do not provide meaningful, widespread benefits to low-income households, and that other types of targeted support for low-income families serve as a more effective social safety net.
• Recent Successes:  On June 25, India announced its decision to deregulate retail gasoline prices.  In addition, the government decided to raise the prices for diesel, kerosene, and liquid petroleum gases (LPG), with a further commitment to phase out the diesel subsidy over time.  This is a difficult decision in the short-run due to concerns about price inflation, but will provide long-term benefits to the country.  In Mexico the government has begun phasing out motor fuel subsidies while conducting a household-level census of fuel consumption that will allow the government to implement a well-targeted support program to compensate low-income households.  These models from India and Mexico are important examples of how the G-20, and countries around the world, can implement this pledge to the benefit of their national economies and most vulnerable citizens. 

Achieving Additional Progress

At Toronto, the G-20 Leaders welcomed the work to date of the Finance and Energy Ministers to fulfill the Pittsburgh fossil fuel subsidies pledge, and encouraged continued and full implementation of country-specific strategies.  The G-20 also committed to review progress towards this pledge at upcoming Leaders Summits. 

Global Action on Climate Change

The G-20 Leaders who have associated with the Copenhagen Accord reaffirmed their commitment to implementation of the Accord, and are working with countries around the world to carry out the Accord’s provisions on cutting emissions, promoting clean technologies, mobilizing financing, and ensuring the transparency of national efforts.  The G-20 countries are scaling up their domestic efforts to reduce emissions, and working to mobilize financing internationally so that developing countries can better adapt to climate change and invest in clean energy technologies.