A newly published UN report says scrapping fossil fuel subsidies could play an important role in cutting greenhouse gases while giving a small but not insignificant boost to the global economy.
The report by the UN Environment Program (UNEP) launched in Nairobi on Tuesday challenges the widely held view that such subsidies assist the poor, arguing that many of these price support systems benefit the wealthier sections of society rather than those on low incomes.
They are also diverting national funds from more creative forms of pro-poor polices and initiatives that are likely to have a far greater impact on the lives and livelihoods of the worse-off sectors of society.
The new UNEP report, Reforming Energy Subsidies: Opportunities to Contribute to the Climate Change Agenda, says globally around 300 billion U.S. dollars, or 0.7 percent of global GDP, is being spent on energy subsidies annually.
The lion's share is being used to artificially lower or reduce the real price of fuels like oil, coal and gas or electricity generated from such fossil fuels.
Cancelling these subsidies might reduce greenhouse gas emissions by as much as 6 percent a year while contributing 0.1 percent to global GDP, according to the report.
"In the final analysis many fossil fuel subsidies are introduced for political reasons but are simply propping up and perpetuating inefficiencies in the global economy -- they are thus part of the market failure that is climate change," said Achim Steiner, UNEP executive director.
The report acknowledges that some subsidies or mechanisms, whether in the form of tax breaks, financial incentives or other market instruments can generate social, economic and environmental benefits.
The report also accepts that there may be cases where some subsidies can, if well-devised and time-limited, meet important social and environmental goals.
But the report argues that many seemingly well intentioned subsidies rarely make economic sense and rarely address poverty.
The report therefore challenges the widely-held myth that scrapping fossil fuel supports would hit the poor.
The report concludes that in many developing countries the real beneficiaries of such subsidies are neither the poor nor the environment but well off households, equipment manufacturers and the producers of the fuels.
"There are now less than 500 days before the crucial climate change convention meeting in Copenhagen in late 2009," said Steiner.
"Governments should urgently review their energy subsidies and begin phasing out the harmful ones that contribute to the wasteful use of finite resources and delay the introduction of renewables or more efficient forms of generation while creating disincentives and barriers to public transport up to energy saving appliances," he added.
Source:Xinhua
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