IEA for phasing out fuel subsidies

Says clean energy system is not possible without prices reflecting true cost of energy

Advocating phasing out of fuel subsidies, International Energy Agency today said clean energy system was not possible without prices reflecting true cost of energy.

"For too long have we supported, directly or indirectly, wasteful use of energy. Largely this is because prices do not reflect the true cost of energy. Altering this means creating a meaningful carbon price and phasing out fuel subsidy," IEA Executive Director Maria van der Hoeven said at the Clean Energy Ministerial conference here.

The Paris-based IEA said the level of carbon emitted in global energy supplies had barely changed in 20 years. This trend has not been halted by focus on renewable sources like wind and solar and the 1997 Kyoto Protocol accord aimed at limiting greenhouse-gas emissions in industrial nations.

Stating that the transition to actual pricing of energy may not happen overnight, van der Hoeven said: "If we do not get prices and policies right the transition to clean enrgy system simply will not happen."

"While that may not happen over night, let's not fool ourselves," she said.

India heavily subidises power by under-pricing domestically produced coal and also sells fuel like diesel and kerosene at sub-market prices.

In a presentation of an IEA analysis on the status of clean energy deployment and related policies around the world, she said Governments must think beyound individual technologies and electoral cycles, and consider the larger picture.

This includes accelerated and most strategic support for research and innovation," she said.

"Our analysis is strak reminder that the world is not on track to realise the benefit of a low carbon energy system - to limit long term temperature rises to 2 degree centigrade," the IEA head said.

With clean energy investment fell to its lowest in four years, IEA reiterated that $5 trillion of investment is needed worldwide by 2020 to switch to a clean energy system.

Ministers from 23 economies accounting for 80 per cent of greenhouse gas emissions and 90 per cent of clean energy investment are attending the fourth meeting of the Clean Energy Ministerial group to help devise policies that cut emissions.

"Progress remains alarmingly slow for a majority of technologies that could save energy and reduce CO2 emmissions," she said, adding: "We believe that transparant and predictable renewable energy policies that take into account changing market conditions and technology cost development are essential to keeping renewable on track."

Energy hungry China and India pushed increased usage of coal that kept the amount of CO2 output in energy almost static, the IEA said.

In 1990, carbon intensity, or the level of CO2 emitted for each energy unit supplied, was 2.39 tonnes of CO2 per tonne of oil equivalent, compared with 2.37 in 2010.

The data is a "wake-up call" if nations are to avoid potentially catastrophic warming, van der Hoeven said. "We cannot afford another 20 years of listlessness".

"The 2012 slowdown in renewable investment globally highlights the direct link between effective policy design and private sector investment. If governments are serious about transferming the energy system, it is clear that energy research must get a higher priority that it does today," she said.