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Jakarta Post

G20 and the issue of fossil-fuel subsidies

  • Izhari Mawardi

Cambridge, Massachusetts   /   Thu, June 7 2012   /  09:30 am

The leaders of the 20 major economies ( G20 ) will meet in a summit on June 18–19 at Los Cabos, Mexico. The summit will build on past commitments of the Cannes Declaration inked last year, when the leaders reaffirmed their commitment to rationalizing and phasing out over the medium term inefficient fossil-fuel subsidies that encourage wasteful consumption, while providing targeted support for the poorest people.

The International Monetary Fund (IMF) estimates that fossil-fuel subsidies result in US$500 billion worth of trade lost annually from global gross domestic product (GDP). Focusing on Indonesia as a model for subsidy reform is crucial, as it is one of the four G20 countries that posted positive economic growth beyond 5 percent (6.4 percent) during the financial crisis in 2011.

Energy subsidies that keep fuel prices artificially below market rates absorb 2.2 perce...