Fossil fuel subsidies are the enemy of the green economy – minister

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Fossil fuel subsidies are the enemy of the green economy and of social development, according to Kimmo Tiilikainen, minister of the environment, energy and housing in Finland.

He took part in a panel discussion on how to unlock finance for sustainability during the recent Partnership for Action on Green Economy (PAGE) Ministerial Conference in Cape Town.

“How can we expect people to invest in green energy when there are fossil fuel incentives?” he asked.

“To remove fossil fuel subsidies can bring more taxes to governments and they can use that for more education and social welfare projects.”

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In his view, what is needed to unlock finance for sustainability projects is to remove fossil fuel subsidies and to create different tools for financing sustainability projects.

Furthermore, he sees a huge need for reliable and comparable information about the performance of different companies to avoid “green washing” what they are doing in terms of sustainability.

“That is one way to unlock private investment – and government into the right direction about how they report on what they do,” he said.

During the same panel discussion Winston Jordan, minister of finance in Guyana, said he does not agree with Tiilikainen’s view of fossil fuel subsidies being the enemy of the green economy.

“From a developing country aspect, it is not easy to remove subsidies that are targeting the poor in developing countries,” he said.

“If you want those people (in a developing country) to buy into the green economy, you must be careful how fast you move to a green economy. Fossil fuel subsidies are not necessarily an enemy.”

READ: SA running out of time to implement green economy – minister

In his view, meaningful partnerships are very important in unlocking finance for sustainability, as well as better budgeting, access to finance and relooking at funding criteria for the process to be inclusive.

Frank Rijsberman, director general of the Global Green Growth Institute, said its members have indicated that there is not a lack of finance available for sustainable projects, but that policy barriers often stand in the way.

“Governments sometimes do not realise the big picture that fossil fuel subsidies create unfair competition for green options. This then leads to investors not going for green projects in that country,” he explained.

“Governments should also make feed-in tariffs attractive for investors.”

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