Of all the bad economic policy out there, fossil-fuel subsidies are perhaps the most perverse. They mess with markets and blow government budgets. Artificially low prices discourage investment and encourage the creation of more greenhouse gasses. And energy subsidies tend not to help the poor very much; you need a car to drive or a house to heat to benefit from this particular approach to poverty reduction. But the masses like them, which is why they persist. The G20 made a show of tackling energy subsidies at the Pittsburgh Summit in 2009. Leaders said they would, “rationalize over the medium term inefficient fossil fuel subsidies while providing targeted support for the poorest.” By way of justification, they added that, “inefficient fossil fuel subsidies encourage wasteful consumption, reduce our energy security, impede investment in clean energy sources and undermine efforts to deal with the threat of climate change.”
Little happened. Energy and finance ministers were instructed to report back with a strategy in time for the Toronto Summit in June 2010. They did so. The World Bank and other international organizations wrote a report on the issue. Interest quickly faded. By 2012, little, if anything, had been done. The University of Toronto’s G20 Research Group in 2013 said progress was mixed. This year in Brisbane, the G20 for the fifth year in a row reaffirmed its commitment to phasing out wasteful fuel subsidies. Gone, however, was the rote call for ministers to report on progress. The urgency of Pittsburgh was gone, replaced by worries about a sluggish global economy. In times like these, no society of politicians is going to commit itself to making fuel prices more expensive. Yet what if politicians started removing subsidies and voters failed to notice?
Continue reading ...