The Vine

First, Do No (energy Subsidy) Harm

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The U.N. Framework Convention on Climate Change divides the world into Annex I (developed) and non-Annex I (developing) countries, with the idea being that the richer countries should be doing more to cut their emissions, since their economies are better able to absorb the cost of reductions and because they produce more emissions per capita. One problem with this division, though, is that developing countries now emit more greenhouse gases, all told, than their rich counterpartsand they're increasing their emissions at an alarming rate. Indeed, it's been two years since China overtook the United States as the world's largest emitter of CO2, and if Beijing doesn't start reining in emissions growth soon, we'll all be screwed.

This has led a few politicians in both Europe and the United States to suggest carbon tariffs for goods coming from any developing country that doesn't have some sort of carbon tax or cap-and-trade system. These tariffs may eventually prove necessary, but before we start any trade wars over carbon, the world's wealthy countries may want to first try asking China and other developing countries to take an easier step toward reducing emissions: namely, by eliminating subsidies for fossil-fuel consumption.

According to a new Kennedy School report, non-OECD countries spend between $220 billion and $280 billion each year subsidizing fossil fuelsand, therefore, greenhouse gas emissions. This is about ten times as much as rich countries spend on fuel subsidies. In fact, just eight countries shell out more than half of the developing world's fossil-fuel subsidies, with China, Russia, and Iran at the top. China essentially pays its citizens $4.76 for every ton of CO2 they emit by burning coal, $10.98 for every ton of CO2 they emit by burning gasoline, and $24.90 for every ton of CO2 they emit by burning diesel. Removing these subsidies would save the Chinese government large amounts of money while, of course, reducing emissions. The resulting increase in energy prices would have a regressive impact, but the government could offset this regressivity in any number of waysfrom subsidies for energy-efficiency improvements to lump-sum transfer payments.

How much of a difference would getting rid of fossil-fuel subsidies make? Back in 2002, the UNEP reported that getting rid of all of the world's fossil-fuel subsidies would reduce carbon-dioxide emissions by 6 percent compared to business as usual. That's obviously not enough to avert drastic global warming, but it's a non-trivial place to begin. And it just might be the easiest way for emerging countries like China to start taking some responsibility for their own role in causing climate change.

--Rob Inglis, High Country News

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