The United States plans to call on the Group of 20 to eliminate fossil fuel subsidies in five years and increase oil market transparency when the group meets at the end of the month, according to a source familiar with the proposal.
The world’s biggest energy user intends to argue fuel subsidies distort oil and product markets and artificially raise fuel demand, leading to higher greenhouse gas emissions, said the source, who asked not to be named.
This proposal—which could rankle G20 states with big fuel subsidies such as China, Russia, and India—calls on members to eliminate subsidies in five years. It argues non-members should end subsidies by 2020.
The plan for the 24-25 September summit in Pittsburgh, Pennsylvania, also says members should provide more timely and accurate information on the notoriously murky oil market, including on inventory levels and positions held in the futures markets.
Transparency and speculative activity have become an issue in commodity markets following the six-year record run that sent oil to all-time highs near $150 a barrel last year, battering the economies of import-reliant nations.
In addition, food prices rose sharply last year as investors bought contracts in wheat, corn and soybean futures.
The US proposal also calls for tighter monitoring of over-the-counter markets in G20 nations, similar to steps taken in the United States.
The United States has already taken steps to improve its domestic data collection quality and increase the information provided by speculators in weekly trader commitment reports released by the Commodity Futures Trading Commission (CFTC).
The CFTC and the UK Financial Services Authority (FSA) have also agreed they would work together to audit more closely and allow mutual on-site visits of exchange operators, to gain a better view of trading in US oil futures trading on London’s Intercontinental Exchange.
But the ICE and the London Metal Exchange, both FSA-regulated, have said they have no plans to change the way they regulate large positions.
A move to drop fossil fuel subsidies would cheer environmental groups who have complained of scant progress to commit funds to fight climate change under a global deal meant to be thrashed out in Copenhagen in December—and a possible topic for the 4-5 September meeting of G20 finance ministers in London.
“We certainly see huge opportunity for finance ministers to finally properly engage with the global (climate) deal discussion,” WWF UK’s head of climate change Keith Allott said on Friday.
“One of the reasons why things have proceeded so slowly has been the lack of engagement from finance ministers.”
Finance ministers and central bankers are meeting in London on Friday and Saturday to discuss what steps should be taken next on global economic recovery efforts.