The eyes of the world are set on Paris, as the COP21 climate summit started today with the ambitious goal of achieving a legally binding and universal agreement on climate, from all the nations of the world. But while this dance sometimes paces close to the impossible, there are also reasons to be optimistic: world leaders opened up with an unprecedented call to end fossil fuel subsidies and focus on sustainable development.

Image via COP21 Flickr.

“Fossil fuel subsidy reform is the missing piece of the climate change puzzle,” began John Key, Prime Minister of New Zealand. “It’s estimated that more than a third of global carbon emissions, between 1980 and 2010, were driven by fossil fuel subsidies. Their elimination would represent one seventh of the effort needed to achieve our target of ensuring global temperatures do not rise by more than 2°C. As with any subsidy reform, change will take courage and strong political will, but with oil prices at record lows and the global focus on a low carbon future – the timing for this reform has never been better.”

Indeed, in the first day of the Summit, I was surprised to see that many of the high representatives were not only advocating the development of renewable energy sources – but also stopping subsidies for the fossil fuel industries, and even charging them for negative externalities.

John Key was not the only one to say that fossil fuels are a losing bet. Stefan Löfven, Prime Minister of Sweden, said:

“History will prove fossil fuel to be a dead end. Sweden will be amongst the first fossil free welfare nations of the world. And eliminating fossil fuel subsidies is an important step on this path.”

Wait, what are subsidies?

If you have no idea what I’m talking about by now, then a short addendum is in order. A subsidy is an external financial support given to an economic sector with the aim of improving economic and social policies. For example, the government can reduce taxes for eco-friendly products since they can help reduce negative externalities and improve the consumers’ health, or provide incentives for companies with many employees to promote job creation. Globally though, fossil fuel companies get the lion’s share.

Fossil fuel subsidies reached $90 billion in the OECD and over $500 billion globally in 2011, and things haven’t changed much since. This means that in some cases, renewable energy can be cost competitive and even more efficient than fossil fuels, but the subsidies tip the balance the other way. This is what many governments and companies are proposing.

Close to 40 countries have endorsed the Fossil Fuel Subsidy Reform Communiqué, including Canada, Chile, France, Germany, Italy, Malaysia, Mexico, Morocco, Peru, the Netherlands, the Philippines, Samoa, the United Kingdom, the United States, Uganda and Uruguay. This seems fine and good, except…

Put your money where your mouth is

There are reasons to be skeptical. The United Kingdom, while endorsing this reform, recently announced an increase of fossil fuel subsidies – becoming the only G7 country to do so. So endorsing something unofficially doesn’t really cost anything, and I’m afraid that at least for the UK, this is a classic case of greenwashing. It remains to be seen if other countries are more committed to this plan, and whether we can expect a phasing out of fossil fuel subsidies.