Just before COP22 kicked off last week, CAN Europe and ODI crafted a briefing that provides countries with a clear idea of how the Paris Agreement sets down pathways to phase out fossil fuel subsidies. Moving beyond the usual parameters of providing and mobilising climate finance, the Paris Agreement contains an overarching objective to make financial flows consistent with low greenhouse gas and climate resilient development. This objective brings in a new paradigm to the role of finance in the UN climate discussions; we understand it as an eventual end to any and all financial support for fossil fuels, including subsidies in all their forms.
Building on that objective, there are a number of other avenues in the Paris Agreement for removing subsidies to fossil fuels. Our briefing sets out to show those avenues and recommend how governments can effectively use them to pursue phase out of fossil fuel subsidies. The key messages and recommendations are set out below:
Ensure that global financial systems and flows (including those driven by government subsidies) work towards climate action and not against it.
Include fossil fuel subsidy reform, and other fiscal policy tools, such as carbon pricing, in Nationally Determined Contributions (NDCs).
Use the 2018 Facilitative Dialogue to integrate coherent fiscal policies and decisions which will strengthen countries’ Intended Nationally Determined Contributions and increase their greenhouse gas emission reductions.
Use the development of the Transparency Framework under the Paris Agreement to guarantee that climate finance is not used to support the production and consumption of fossil fuels, and instead is fully directed towards enhanced low-carbon and climate resilient development, including through supporting efforts to phase out fossil fuel subsidies.
Include reporting on fossil fuel subsidies and tracking of progress in phasing out fossil fuel subsidies as part of national communications and provide clear and understandable information to the public regarding the scope and scale of fossil fuel subsidies and efforts to address them.
- Use the global stock-take as an opportunity to re-visit and increase mitigation ambitions, including through phasing out of fossil fuel subsidies.
Looking at all the opportunities laid out, it is clear that the Paris Agreement can be a concrete framework for action on subsidies. Countries should look to their international commitments as an impetus to phase out harmful fossil fuel subsidies and pursue a sustainable transition to clean and low carbon energy systems.
As discussions continue at COP22 in Marrakech, countries are digging into the details surrounding the rules and implementation plans of the Paris Agreement. But these discussions take place with the backdrop of a collective understanding that the national climate plans currently on the table will not limit global temperature rise to well below 2°C. More speedy and effective action is needed, and that is where the removal of subsidies can make a positive difference. It will be essential that the discussions capture how countries can phase out fossil fuel subsidies and reflect their efforts within the broader scope of the Paris Agreement.
Looking towards the coming years where action becomes more concrete, we anticipate that finance will start playing a much more constructive role, starting with the removal of fossil fuel subsidies.