After the leaders’ summit ends this weekend in Buenos Aires, Argentina will hand over the G20 presidency without having fulfilled one of the group’s most important environmental goals.
In 2009, the group agreed to phase-out fossil fuel subsidies. Yet there has been negligible change under successive presidencies. G20 economies derive 82% of energy from coal, gas and oil, according to a recent report by NGO Climate Transparency.
Expenditure on subsidies for fossil fuels in G20 countries increased from US$75 billion in 2007 to US$147 billion in 2016. However, they have dropped since 2014 when they hit US$230 billion.
“There is a G20 commitment, but only to eliminate subsidies that are considered inefficient and there is no specific date. This allows countries to say that their subsidies are not inefficient and are not eliminated,” said Paul Horsman, project leader at Greenpeace Argentina. In Argentina, subsidies totalled US$2.7 billion in 2016, down from the US$11.3 billion spent in 2014. Yet from 2014 to 2016 the amount per unit of GDP (US$0.008) was twice the G20 average (US$0.004).
From 2013 to 2015, Argentina’s public institutions allocated an average of US$1.4 billion for fossil fuel energy projects (oil, gas and coal) and only US$4 million for renewable energy projects, such as wind and solar power.
Social and environmental organisations are calling for Argentina, as G20 president, to demand the group set a specific date for the elimination of subsidies. The G7 declared it would achieve this by 2025 and included it in the final statement of the leaders’ summit.
However, the outlook is not positive.
“The only thing that can come out of the leaders’ summit is a statement that mentions the commitment to reduce them progressively. The issue will not be very important, I don’t have high expectations,” said Enrique Maurtua Konstantinidis, director of climate change at Argentina’s Environment and Natural Resources Foundation (FARN).
The G20 brings together economies that represent more than 80% of global GDP, encompassing two thirds of the population and the largest countries in the world in terms of territory. Its members account for three quarters of global trade.
These characteristics mean the group plays a key role in fulfilling the objectives of the Paris Agreement on climate change. However, G20 goals are still not enough to prevent global temperatures rising more than 2ºC compared to pre-industrial levels, the Agreement’s target limit.
The G20 first addressed fossil fuel subsidies in the 2009 Declaration of Pittsburgh, committing to “withdraw and rationalise them gradually in the medium term”. The document deems them “inefficient” since they “impede investment in clean energies”.
Ten years later, the G20 countries have not been efficient in reducing subsidies. From 2013 to 2015, the group spent US $91.4 billion per year on coal, oil and gas projects.
“The costs are too high and there are alternatives. The development of renewable energy has made subsidies unnecessary. Reducing them is the best way to contribute to the reduction of greenhouse gases,” Horsman says.
Other organisations and international agreements have ratified the G20’s commitment. Objective 12 of the UN’s Sustainable Development Goals (SDG) establishes the goal of “rationalising inefficient subsidies” and the Convention on Biological Diversity (CBD) set the goal of eliminating them by 2020.
In one of his first moves as Argentina’s president, Mauricio Macri cut subsidies for the consumption of natural gas and electricity in 2016. The measure meant a first price increase in public services for more than 10 years.
However, the removal of subsidies for consumption was not matched by a reduction in funds received by oil companies, especially those operating at Vaca Muerta. The site is one of the largest unconventional hydrocarbon reserves in the world.
Without subsidies for production, extracting shale oil and gas at Vaca Muerta would not be profitable, according to experts consulted by Diálogo Chino.
In 2017, energy subsidies accounted for 5.6% of Argentina’s national budget, which represented 1.7% of GDP, according to analysis by FARN. 77% of budget items in the energy sector were subsidies for the generation and consumption of energy produced by oil and gas.
“The government has tried to address the problem of subsidies, but it started with consumption. Our analysis shows that subsidies are not reduced in the same way for everyone. It focuses only on consumption and increases the funds for production,” said Maurtua Konstantinidis.
At 53%, the energy sector contributes most to Argentina’s greenhouse gas emissions, according to latest government data.
The role of natural gas
Macri’s decision to subsidise and encourage the production of hydrocarbons was also accompanied by a strong push for renewable energy, which today only accounts for 2% of Argentina’s energy matrix.
Since 2016, Argentina has held three large tenders for solar, wind and biomass projects, among others, with the aim of increasing renewables to 20% of the mix by 2025. The G20 host has failed to meet a previous goal of reaching 8% this year.
Despite environmentalists’ claims to the contrary, the Argentine government argues that it cannot advance faster in clean energy. This has led to the development of wind and solar alongside hydrocarbons, especially natural gas.
“It is impossible to advance more in renewables. The network does not allow it,” said Juan Carlos Villalonga, a deputy for the ruling Cambiemos coalition. “Argentina is working at great speed. Meanwhile, natural gas will have a transition role and will grow a lot in the next 20 years,” he added.
Hydrocarbons account for more than 85% of Argentina’s energy matrix. Hydrocarbons account for more than 85% of Argentina’s energy matrix. Gas grew from making up 25% of the matrix in 1980 to 53.6% today. Macri further facilitated this growth in 2017 by guaranteeing gas subsidies until 2021.
At its last meeting in Argentina in June, G20 energy ministers highlighted the “key role” of natural gas and its expansion in the coming decades. They argued that it should be considered a transition fuel until renewable energies are more developed.
Environmental organisations refuse to recognise natural gas as a transition fuel and the decision to allocate funds to subsidise it, since they could be used for renewable energy. Although it generates fewer emissions than coal and fuel oil, they do not consider it a clean energy and it has a risk of leaks.
“We have to carry out extensive decarbonisation now, there is no time to use gas as a transition fuel,” Maurtua Konstantinidis said. “While Argentina continues to invest in producing gas now, it will not have anyone to sell it to in the future because the rest of the countries are going to have cleaner energy.”