“Weaponizing the Numbers”: The Hidden Agenda behind Fossil Fuel Subsidy Reform — TUED Bulletin 98

April 30, 2020

“Weaponizing the Numbers”: The Hidden Agenda behind Fossil Fuel Subsidy Reform

Among progressives concerned about climate change, few issues provoke as much anger as the knowledge that governments continue to subsidize fossil fuels. According to the International Monetary Fund (IMF), in 2017 these subsidies totaled $5.2-trillion annually.

Most policy elites think fossil fuel subsidies should go. A decade ago, the Group of Twenty (G20) leaders committed to “rationalize and phase out” government support for coal, oil, and gas, a decision supported by major institutions like the IMF and the World Trade Organization (WTO). At a summit in May 2019, U.N. Secretary-General António Guterres said “taxpayers’ money” was being used “to boost hurricanes, to spread droughts, to melt glaciers, to bleach corals. In one word – to destroy the world.” These are fighting words.

But there is good reason to be wary of global elites’ calls for subsidy reform. In his article, “‘Weaponizing the Numbers’: The Hidden Agenda behind Fossil Fuel Subsidy Reform” — originally written for the CUNY School of Labor and Urban Studies’ journal, New Labor Forum — TUED’s Sean Sweeney unpacks the differences between producer and consumer subsidies, digs into the numbers behind the calls for reform, and uncovers a disturbing reality. On close inspection, Sweeney argues, it’s difficult to avoid the conclusion that elite institutions are actually inflating the numbers — not in order to put pressure on fossil fuel interests, but to wage war on state regulation of energy prices. Sweeney concludes that “subsidy reform” would hurt workers in the global South, while doing little or nothing to reduce fossil fuel use or dependency.

“Green Structural Adjustment”

Looking at Mexico as an example, Sweeney shows how a series of “energy reform” measures carried out between 2012 and 2016 led to the opening up of the country’s markets to foreign producers and distributors, removal of subsidies for gas and electricity, raising of consumer prices for transport fuels, the establishment of higher levels of excise taxes, and the introduction of the carbon excise tax — reforms much praised at the time by a team set up by G20 Finance Ministers and the OECD, even as they led to road blockades, strikes, and nationwide protests. But the reforms did little to alter the country’s dramatic rise in energy use.

In Mexico and elsewhere, Sweeney argues, subsidy reform has been used as a “political water cannon” to flush the state out of the way and lay the groundwork for profit-making in the energy sector for private investors — even as the impact on emissions levels has been barely noticeable.

Shock Therapy 2.0

For activists in the North, making fossil-fuel subsidies a key political target is a mistake: “removing subsidies” — more accurately, imposing higher prices on fossil fuels — would hurt a lot of ordinary people, especially in poorer countries, and would exacerbate global inequalities. Calls for subsidy reform buy into the IMF’s obsession with “getting energy prices right,” which targets state ownership and regulation of prices. Such an approach may lead to a more judicious use of energy, but it would not address the mammoth challenges involved in transitioning away from fossil fuels, controlling and reducing unnecessary economic activity, or reducing emissions as expeditiously as possible.

Raising the price of fuels on which so many people depend, without ensuring alternative forms of low-carbon energy available for all, will not produce the kind of emissions reductions the world needs. The problem is not underpriced energy, but fossil fuel dependency.

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We hope that unions and their allies will find the full article useful. TUED would like to thank Junmo Koo, of  Korean Labour and Civil Society Network on Energy, and Mexican activist Patricia Belmont Luna for translation assistance.

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In solidarity,

The TUED Team in New York

By |2020-04-30T08:14:17+00:00April 30th, 2020|News, Uncategorized|Comments Off on “Weaponizing the Numbers”: The Hidden Agenda behind Fossil Fuel Subsidy Reform — TUED Bulletin 98