OECD welcomes peer reviews by Indonesia and Italy of their fossil fuel subsidies

 

30/04/2019 – The OECD welcomes the release of voluntary G20 peer reviews of Indonesia and Italy’s efforts to phase out and rationalise their inefficient fossil-fuel subsidies at the 2^nd meeting of G20 Energy Transitions Working Group under the Japanese Presidency in Toyama, Japan.

The peer reviews were released as an update of the OECD Inventory of Support Measures for Fossil Fuels database showed that government support for the production and consumption of fossil fuels in OECD countries and eight partner economies decreased to USD 140 billion in 2017 from USD 155 billion in 2016. The pace of reduction has slowed since 2015 as volatile oil prices have made it challenging for countries to implement reforms to energy prices and taxation.

"Indonesia and Italy’s peer reviews on fossil fuel subsidies should strengthen reform efforts in both countries and beyond. Our latest estimates show that support for fossil fuels is 40% below 2013 levels, however the pace of phasing out support is slowing down, underscoring the need to maintain momentum”, said Rodolfo Lacy, OECD Environment Director. “For this reason, the OECD looks forward to the upcoming peer reviews of Argentina and Canada."

Indonesia’s G20 peer review reports on the steps taken to reform subsidies to electricity, liquefied petroleum gas (LGP) and kerosene. It commends energy pricing reforms for gasoline (RON 88) and diesel that were carried out between 2014 and 2017. The Indonesian government was able to reduce its outlays for fossil fuel consumption by 75% between 2014 and 2017. These savings were deployed to fund public expenditure on health, education and infrastructure. The review encourages the country to continue reforms and to make sure not to back on its recent achievements.

Italy’s G20 peer review presents a comprehensive inventory of 39 measures subsidising fossil fuels accounting for EUR 13 billion in 2016. Nearly all measures take the form of preferential tax treatment targeting a specific sector or consumer group. While Italy has one of the lowest carbon intensities among developed countries, it undertakes appreciable effort to decarbonise its energy sector. The country is committed to transparency on its fossil fuel subsidies and already phased-out some of them. The review provides guiding principles and options for further reform in Italy.

These reports are the most recent in a series of G20 peer reviews chaired by the OECD, which included the China and the United States in 2016 and Germany and Mexico in 2017. Argentina and Canada will be the next G20 countries to undergo a peer review.

A report prepared for the G20 by the OECD and IEA, slated for release after the G20 Leaders Summit in June, will give a detailed overview of global trends in reducing inefficient public support for fossil fuels, which are a major contributor to climate change and air pollution. 

The peer reviews for Indonesia and Italy, along with OECD work on fossil-fuel subsidies, are accessible at: http://www.oecd.org/site/tadffss/publication.

For further information, journalists can contact Nathalie Girouard, Head of Environmental Performance and Information Division, Environment Directorate (nathalie.girouard@oecd.org).

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