Subsidies rise to $470bn despite deal to phase them out

Fossil fuel subsidies worldwide rose to least $470bn in 2010, according to analysts at the OECD and the International Energy Agency.

In 2009, G20 member countries agreed to cut fossil fuel subsidies, to foster green growth and to avoid encouraging overconsumption. But the subsidies instead rose last year by about $100bn on 2009, although they were about $150bn lower than in 2008, when oil prices peaked.

Roughly half of these government subsidies target oil prices, with about a quarter benefiting gas.

The IEA said that gradual phasing out of fossil fuel subsidies by 2020 would reduce global energy demand by 4.1%, cutting demand for oil by 3.7m barrels a day. Dropping subsidies could slow growth in CO 2 emissions by 1.7bn tonnes a year, equivalent to the total emissions of the UK, Germany, Italy and France.

The subsidies do not only concern fossil fuel producers but also consumers. Governments present them as a means of alleviating poverty and supporting economic activity, but the IEA analysts claim that such support misses its target. In 2010, only 8% of these subsidies reached the poorest 20% of the population, it said, while by lowering the price of fossil fuels the subsidies encouraged countries to import more, reducing their energy independence.

The IEA does, however, see some sign of progress. Nearly half the countries where energy prices are artificially kept low have taken steps since the beginning of 2010 to rationalise the discrepancy, as a result of the pressing need for budget restraint.

A version of this article first appeared in Le Monde