Global Renewable Fuels Alliance

Global Renewable Fuels Alliance

June 21, 2010 14:28 ET

GRFA Urges G20 to Phase Out Oil Subsidies: Oil Subsidies to Reach $500b in 2010

TORONTO, ONTARIO--(Marketwire - June 21, 2010) - The Global Renewable Fuels Alliance (GRFA) called on the G20 Leaders today to follow through on their commitment to phase out oil industry subsidies. In an open letter to the twenty Heads of State from the G20, the GRFA called for countries to immediately begin a phase out oil industry subsidies through domestic legislation.

"At a time when countries are struggling to reduce their budget deficits, the first cuts should be to the billions of dollars in subsidies to oil companies," said GRFA spokesperson Bliss Baker.

The G20 is poised to meet in less than 5 days in Canada and the issue of oil subsidies is on the agenda following a commitment made at the G20 meeting in Pittsburg in September 2009. Leaders are expected to provide implementation plans at the forthcoming meeting this June, however, the G20 stopped short last year of providing any timelines for the removal of these subsidies. The International Energy Agency has recently estimated global oil subsidies to be over $500 billion USD.

"It seems almost farcical that we continue to provide corporate welfare to some of the most profitable companies on the planet while leaders of the free world are preparing to gather in Canada to discuss rescue plans for the global economy," said Mr. Baker. "There are a host of production subsidies available to oil companies today in various countries through complicated tax mechanisms that add up to billions of dollars per year," added Mr. Baker.

Estimates of these global subsidies vary in large part because of a lack of transparency in some of these tax rules and the shear complexity of these subsidies but according to the Global Subsidies Initiative in Geneva, latest estimates put global production subsidies at close to $100 billion annually. At the international level, oil companies also continue to receive subsidies through various federal agencies and international bodies such as the World Bank.

"It is somewhat absurd that the World Bank has provided over $8 billion in support to international oil projects in recent years but still has not developed a sound policy on supporting alternatives to oil such a biofuels," said Mr. Baker. "The G20 must show leadership on this issue at the upcoming G20 meetings."

The GRFA's open letter also highlighted the fact that many wealthy countries with profitable oil industries continue to provide domestic subsidies at alarming rates. The Canadian oil industry for example continues to make record profits yet it is estimated that this industry receives over $2 billion per year in special subsidies. Similarly, the U.S. industry received over $72 billion in subsidies between 2002 and 2008 according to a Congressional Joint Committee on Taxation.

"It is time for the G20 to show leadership and reverse this practice of never-ending subsidies to big oil. It is time to move beyond oil to a world with sustainable alternatives to crude oil such as biofuels and other renewable forms of energy," concluded Mr. Baker.

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