White House officials are calling for international efforts to end fuel and electric power subsidies as part of the agenda for next week's G-20 meeting in Pittsburgh, according to a letter from a senior administration official.
The White House also says G-20 nations should take steps to improve oil market transparency and scale up financing for tackling climate change.
Michael Froman, the White House's deputy national security adviser for international economic affairs, said in a Sept. 3 letter that cutting the subsidies would improve energy security and help fight climate change by encouraging conservation and boosting new technologies.
"The move away from subsidies should be managed to protect those most vulnerable to price increases," Froman wrote. "The G-20 should commit to take the lead in eliminating non-needs based fossil fuel and electricity subsidies and to provide technical assistance to non-G-20 countries taking steps to reduce fossil fuel and electricity subsidies."
A White House spokesperson could not be reached for comment about the letter, which is addressed to "colleagues."
A bold enough plan?
Froman's letter does not include details of a proposal to phase out energy subsidies.
Steve Kretzmann of the group Oil Change International, which opposes subsidies for oil and gas and other fossil energy projects, said it remains unclear whether the proposal will be helpful.
"If the Obama administration is serious about eliminating all fossil fuel subsidies, that is wonderful and would go a long way toward correcting what Nicholas Stern called the greatest market failure of all time, which is climate change," he said. Stern is a former World Bank chief economist who wrote a landmark 2006 report on the economic costs of addressing global warming.
But Kretzmann, the group's executive director, said he was concerned that the plan would be aimed only at so-called consumption supports, like subsidies for consumer gasoline purchases. He said the effort should focus on ending public backing for large fossil fuel projects, such as U.S. royalty waivers for offshore drilling and lending for fossil projects through the World Bank and other financial institutions. He argued that such projects do not need public support and that subsidies work against efforts to counter greenhouse gas emissions.
"It is going to be very unfortunate if it is just the consumption side," Kretzmann said, noting that the United States has largely eliminated such consumer supports and the proposal would hence be viewed as finger-pointing at other nations like China and Russia.
Oil markets, climate support
The White House document also states that G-20 efforts on oil market transparency should include reporting of comprehensive data on domestic oil markets and oversight of over-the-counter markets "so that regulators have a more complete view into the actions of market participants."
Domestically, the Obama administration and Capitol Hill Democrats -- including House Financial Services Chairman Barney Frank (D-Mass.) -- are proposing new Commodity Futures Trading Commission oversight of OTC trading in energy and other derivatives.
Regarding climate change, the letter says G-20 nations, as the largest global economies, have a major role to play in crafting a "practical and effective international financial framework for climate cooperation that can support negotiations and achievement of an agreement in Copenhagen." Denmark's capital will be the site for U.N.-convened talks in December to try to reach a comprehensive global emissions reduction agreement.
Specifically, the document states that climate finance needs to be increased "significantly" while working "hand in hand" with development aid and private-sector incentives.
"This implies a critical role for the MDBs [multilateral development banks]," the letter states. "Therefore, we need to work together to increase public finance delivered through multiple channels, to coordinate climate finance with development assistance, and to leverage the private sector through improvement, expansion, and oversight of carbon markets."
The G-20 is made up of representatives of industrial and emerging-market nations. Members are the European Union and the following 19 countries: Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey and the United States.
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