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ENERGY NEWS
EU launches debate on 2030 targets
by Staff Writers
Brussels (UPI) Mar 29, 2013


IMF calls for energy subsidy reform
Washington (UPI) Mar 29, 2013 - The International Monetary Fund, in a new report, calls for eliminating energy subsidies worldwide.

Energy subsidies are estimated to be $1.9 trillion, the equivalent of 2 1/2 percent of global gross domestic product or 8 percent of government revenues, says the IMF report "Energy Subsidy Reform: Lessons and Implications."

The IMF assessment, which reviewed energy policies in 176 countries, shows that almost half of fossil fuel subsidies occur in OECD countries. The top three energy subsidizers, in absolute terms, are the United States at $502 billion, China at $279 billion and Russia at $116 billion.

The report represents the first time the IMF has put a price on the global fiscal cost of energy subsidies.

Subsidies cause over-consumption of petroleum products, coal and natural gas and reduce incentives for investment in energy efficiency and renewable energy," the IMF said. "This over-consumption in turn aggravates global warming and worsens local pollution."

In advanced economies, such as the United States, "prices remain below the levels needed to fully capture the negative externalities of energy consumption on the environment, public health and traffic congestion," the report states.

Speaking at the Peterson Institute for International Economics in Washington to release the report, IMF First Deputy Managing Director David Lipton said, "For some countries the fiscal weight of energy subsidies is growing so large that budget deficits are becoming unmanageable and threaten the stability of the economy."

While subsidies are intended to benefit consumers, the measures are often inefficient and "could be replaced with better means of protecting the most vulnerable parts of the population," he said.

Energy subsidies also tend to reinforce global inequality because they largely benefit upper-income groups, which are the biggest consumers of energy.

"On average, the richest 20 percent of households in low- and middle-income countries capture 43 percent of fuel subsidies," IMF says.

"Because of low prices, there is little investment in much-needed infrastructure," Lipton said. "More is spent on subsidies than on public health and education, undermining the development of human capital."

Subsidy reform, Lipton said, can lead "to a more efficient allocation of resources, which will help spur higher economic growth over the longer term." Removing energy subsidies can strengthen incentives for research and development in energy-saving and alternative technologies.

U.S. President Barack Obama and congressional Democrats want to remove about $4 billion in annual tax provisions awarded to the oil and natural gas sectors, The Hill reports. But oil and gas interests maintain that the provisions are cost-recovery mechanisms and business deductions that are also claimed by other industries.

The European Commission has officially launched what promises to be a contentious debate over greenhouse gas reduction and renewable energy targets for 2030.

In releasing its "green paper" on a 2030 framework for climate and energy policies Wednesday, the commission kicked off a three-month process during which it will gather feedback from member states, industry players, environmentalists and others as it seeks to extend climate change efforts beyond the current binding 2020 targets.

The European Union sees the 2030 framework as an interim step along the path to its ambitious low-carbon energy "road map" for 2050, which envisions reducing greenhouse gas emissions to 80-95 percent less than 1990 baseline levels.

Renewable energy backers and environmentalists have long called on the commission to define firm 2030 targets, which they say are needed quickly not only to save the planet from global warming, but also to spur investments in alternative energy projects and energy efficiency measures.

The scope of the debate is ambitious, basically laying out the continent's energy policy future for years to come, and so is controversial.

It's coming at a time of economic recession and continuing financial crises in Europe which have affected what EU members are capable of or willing to do.

Meanwhile, opposition to mandating set levels of renewable energy development also remains strong among some member states, including Britain, The Guardian reported.

The effort is also being launched as the world's nations are still negotiating a successor to the U.N. global climate change treaty, which isn't expected to be signed until 2015 and likely won't come into force until 2020.

"We need to define our climate and energy policy framework for 2030 as soon as possible to ensure proper investment that will give us sustainable growth, affordable competitive energy prices and greater energy security," EU Commissioner for Energy Gunther Oettinger said.

"The new framework must take into account the consequences of the economic crisis, but it must also be ambitious enough to meet the necessary long-term goal of cutting emissions 80-95 percent by 2050."

"We have (binding) targets for 2020, but for most investors, 2020 is around the corner," added EU Commissioner for Climate Action Connie Hedegaard. "It's time to define the targets for 2030. The sooner we do that, the more certainty we get to our companies and our investors. And the more ambitious these targets are, the better for the climate."

In the green paper, the commission says there is a consensus that to reach its Roadmap 2050 decarbonization goals, greenhouse gas reductions will have to be stepped up from the 20 percent to be achieved in 2020 to 40 percent by 2030 -- anything less than that would result in higher energy costs.

For renewables, the 2050 policy scenarios would require a 30 percent share for renewable sources in Europe's energy mix by 2030, up from 2020's 20 percent.

"A 2030 target for renewables would have to be carefully considered as many renewables sources of energy in this time frame will no longer be in their infancy and will be competing increasingly with other low-carbon technologies," the commission noted.

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