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Europe Cuts Energy Subsidies, Calls for Tougher Emission Reductions

Europe is in the midst of cutting both budgets and low-carbon energy subsidies, while governments are looking for tougher emission reductions, reports The New York Times.

Spain, Germany, France, Italy and the Czech Republic have all announced subsidy cuts. As an example cited in the article, Spain, which has had years of generous subsidies for renewables, will cut €1.3 billion ($1.7 billion) off the national budget by 2013, primarily by cutting susidies for the wind energy sector by 35 percent over the next 30 months.

In Germany and France, the cuts are aimed at future projects and the solar sector, where the subsidy had remained stable even though the costs of solar panels dropped by about one-third over the past year due to oversupply, reports The New York Times.

The UK may be next as it seeks to reduce a deficit of more than 160 billion pounds ($250 billion), according to the article. The UK’s independent Committee on Climate Change is calling for the government to maintain the £550 million ($859 million) a year it spends on clean energy.

All these cuts are coming when the European Union is committed to getting 20 percent of its energy consumption from renewable sources and cutting carbon emissions by 20 percent, both by 2020.

However, the climate, energy and environment ministers of France, UK and Germany have been calling for a unilateral move to cut emissions by 30 percent, which is also supported by executives from more than 20 leading European businesses with global operations, reports the New York Times.

Stephen Lilley, managing director of green investment bank Climate Change Capital, told ClimateWire the challenge is balancing the need to cut costs and to combat climate change.

He adds: “We would expect tariffs to come down as the market develops and costs come down, but there is a floor in the market. Investors want to know what returns they will get and to have certainly that government policies will not alter. If the returns become unattractive or there is policy uncertainty, they will look elsewhere.”

A study just released by Bloomberg New Energy Finance indicates that global subsidies for fossil fuels far outpaces the support for renewable energy sources, reports Bloomberg Businessweek.

The report finds that governments gave $43 billion to $46 billion to support renewable energy last year through tax credits, guaranteed electricity prices (feed-in tariffs) and alternative energy credits. This is in comparison to $557 billion that was spent to subsidize fossil fuels in 2008, according to the International Energy Agency.

Michael Liebreich, chief executive of New Energy Finance, said in the article: “One of the reasons the clean energy sector is starved of funding is because mainstream investors worry that renewable energy only works with direct government support. This analysis shows that the global direct subsidy for fossil fuels is around ten times the subsidy for renewables.”

The report finds that the most expensive clean energy subsidy last year was Germany’s feed-in tariff, which cost $9.6 billion, and across Europe, the tariffs amounted to $19.5 billion.

The U.S. spent $18.2 billion on clean energy subsidies last year, and China provided about $2 billion, but it also supports the renewable sector through low-interest loans, reports Bloomberg Businessweek.

G20 leaders have been discussing the possibility of phasing out subsidies for fossil fuels to combat global warming since last year.

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