In today’s energy-thirsty world, fossil fuel subsidy reform has been identified as a policy area that could aid in preventing the world from continuing on its course towards a global 2° C temperature increase over the next century. The good news is that the Overseas Development Institute’s previous research work called for bolder efforts to be taken to phase out fossil fuel subsidies by 2020. This was on the basis that they undermine efforts to avert climate change dangers by creating disincentives for investment in renewable energy and efficient resource usage, incentivizing wasteful growth in demand of fossil fuels which represents a drain on national budgets and dwarfs spending on health and education. This debate, however, need not be restricted to the first world only. The Economist reported early this year that the key driver of reform-change has been fiscal pressure on government budgets, rather than concerns of a changing climate, according to Fatih Birol of the International Energy Agency (IEA). Frequently in the developing world, the debate on climate change and the energy sector has focused mainly on how to leap-frog this sector onto a low-carbon development trajectory by increasing the investment in the not yet fully exploited renewable energy potential.
Early this month at the first ever US-Africa Leaders Summit in Washington DC, it was announced that a cumulative of 26 billion USD in investments to improve access to electricity for 60 million African households and businesses via President Obama’s Power Africa project. In a continent where about 7 in 10 Africans do not have access to regular and reliable electricity, this is undoubtedly welcome news for new on and off-grid renewable energy generation projects. Recent research by ODI, which sought to “provide a review of the organizations and governments involved in supporting other countries to reform their fossil fuel subsidies and the approaches being undertaken”, is a good starting point for developing countries to find effective ways to support fossil fuel subsidy reform processes. The simple reason to support fossil fuel subsidy reform is that it is essential to enable the scaling up of investment required for the transition to low-carbon economies. But politics will not be far away as a major influential factor in determining to what extent such a new way of tackling climate change can be embraced, as the complexities of scrapping fossil-fuel subsidies easily results in controversies like those witnessed in Malaysia and elsewhere around the world.