Ending fossil fuel subsidies would give ‘boost to innovation’

The estimated $500 billion (€455 billion) per year in subsidies worldwide for fossil fuels consumption represents “an absurd energy policy” that urgently needs to change, according to Fatih Birol, executive director of the International Energy Agency (IEA).

Speaking at the COP21 climate change summit, the Turkish-born economist noted that energy was responsible for two-thirds of global carbon emissions. “Therefore, any agreement in Paris must have energy at its core. Otherwise, it risks being a failure.”

What needs to happen, Dr Birol said, is a “happy divorce” between economic growth and increasing carbon emissions. He also warned that it would be a “historical mistake” to reduce support for renewable energy because of the precipitate fall in oil prices.

The new emphasis in Paris on energy efficiency and renewables such as solar and wind “needs to be strengthened so that there is a peak of global emissions around 2020, which could keep the door open to reach the 2 degree target,” Dr Birol said.

If global warming is to be limited at that level, the long-term goal set by COP21 should give a strong signal to the energy sector and “give a boost to innovation, opening doors to a lot of new initiatives for advanced technologies,” he told the press corps.

His own assessment of the Paris summit was that it could already be characterised as a “historical success story” because so many countries -- 185, in all -- had pledged to reduce their emissions, while 150 world leaders came to Paris to “show political will”.

Dr Birol described the 2 degree target as “very challenging to reach, to be very honest, with the current policies on the table” and said the prospect of achieving 1.5 degrees would need “unprecedented support for low-carbon technologies and energy transformation”.

Setting either of these temperature targets would be “very important” for the energy sector because it would “send a signal to investors saying ‘this is our long-term goal’, and if you make investment in high-carbon infrastructure you may lose money in the future.”

The IEA chief also said that China “doesn’t get the credit it needs” for the policies it had put in place to boost energy efficiency and renewables. “If I was to pinpoint one country that’s most determined, China is top of the list here,” he added.

Half of the world’s coal is used in China, but demand was now slowing down and “this is excellent news for everybody”. Its government had already shut down several inefficient coal plants due to pollution concerns and he expected this trend to continue.

Dr Birol also endorsed the need to put a realistic price on carbon. At present, as he noted, the price of carbon under the EU’s emissions trading system was only $10 per tonne, whereas fossil fuel subsidies to incentivise more carbon use were worth $110 per tonne.