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The Real G20 Subsidies News

by Michael Levi
June 28, 2010

The G20, in its final communique (PDF), reaffirmed its agreement of last September (PDF) to phase out inefficient fossil fuel subsidies in the “medium term”. Much is being written about how the Obama administration successfully blocked attempts to refer to each country’s efforts as “voluntary”, which, while not trivial, conveniently ignores the fact that everything agreed to by the G20 is voluntary anyhow.

The more important news is in less-reported language from the communique:

“We welcome the work of Finance and Energy Ministers in delivering implementation strategies and timeframes, based on national circumstances, for the rationalization and phase out over the medium term of inefficient fossil fuel subsidies that encourage wasteful consumption….”

G20 leaders, in order to show up at the summit prepared, were required to come up with actual strategies for reducing fossil fuel subsidies. I know from speaking with policymakers in several countries that governments were going through planning exercises that they otherwise wouldn’t have in order to deliver on their previous G20 commitments. These strategies will have real consequences for fossil fuel consumption. (I would love to see some of the submissions, in order to judge exactly what those consequences might be; I hear, though, that they’re generally pretty decent.) This is where summits like the G20 can have serious impact.

India, for example, announced last week in advance of the summit that is was removing price controls on gasoline and diesel. It’s impossible to tell whether there’s any relationship between this and the G20 process – the domestic political consequences of removing fuel subsidies are so high that G20 dynamics undoubtedly played at most a supporting role – but, given the timing, it certainly doesn’t hurt.

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