eBusiness Weekly
G20 member nations last year provided a record US$1,4 trillion — more than double that of pre-Covid levels — to support fossil fuels that have fanned global warming, a report has revealed, despite previous pledges to phase out subsidies.
The International Institute of Sustainable Development (IISD) think tank’s report released on Wednesday said the amount included fossil fuel subsidies worth US$1 trillion, investments by state-owned enterprises worth US$322 billion and lending from public financial institutions worth US$50 billion.
“These figures are a stark reminder of the massive amounts of public money G20 governments continue to pour into fossil fuels despite the increasingly devastating impacts of climate change,” said Tara Laan, senior associate of IISD and lead author of the study.
“It is crucial for the bloc to put fossil fuel subsidies on the Delhi Leaders’ summit agenda and take meaningful actions to eliminate all public financial flows for coal, oil and gas.”
G20 nations in 2019 provided US$613 billion, of which US$247 billion were subsidies, to support fossil fuels.
The bloc is set to meet in New Delhi on September 9-10 with climate change as a top agenda, reminding members of the arduous task ahead despite individual nations’ commitments to carbon neutrality.
The IISD said most nations last year provided the subsidies by retailing fossil fuels such as crude oil at a discounted rate to international prices.
Crude oil prices have risen to US$85 per barrel from a low of US$72 per barrel in June amid production cutbacks by oil majors Saudi Arabia and Russia. G20 members had in June only issued an outcome statement with watered-down commitments to phase out fossil fuels and triple green energy production.
They had pledged to phase out and rationalise over the medium term inefficient fossil fuel subsidies as far back as 2009, but support for fossil fuels last year was more than four times the average in the previous decade, Laan said.
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The International Energy Agency said earlier this month world oil demand was scaling record highs, boosted by strong summer air travel, increased oil use in power generation and surging petrochemical activity.
Global oil demand is set to expand by 2,2 million barrels per day to 102,2 million barrels per day in 2023, with China accounting for more than 70 per cent of growth.
IISD researchers said G20 members could raise an additional US$1 trillion every year by setting minimum carbon taxation levels of US$25 to US$75 per tonne of carbon dioxide emissions across the G20 to encourage the phase-down of dirty fuels.
They warned that taxes on fossil fuels in G20 nations do not reflect their costs to society — averaging just US$32 per tonne of carbon dioxide across the G20. Carbon emissions add to Earth’s insulation that prevents the sun’s rays from radiating out after striking the surface, leading to unusual warming that causes glaciers to melt and sea levels to rise.
Climate activists say imposing a tax on carbon emissions puts a price on production of dirty energy and factors in hidden costs such as environmental damage and impact on health.
The IISD report encouraged more production of clean energy like wind and solar by making them more price competitive.
Many members failed to impose windfall taxes on gains by fossil fuel companies last year when crude oil prices surged following second-largest oil producer Russia’s invasion of Ukraine, it said, adding that artificially lowering fossil fuel prices increased consumption and intensified climate change that had led to heatwaves, wildfires and torrential rains.
The researchers urged G20 members to set a clear deadline to eliminate fossil fuel subsidies —2025 for developed countries and 2030 for developing countries — to deliver on their 2009 commitment to reform subsidies.
Governments can use the money spent on fossil fuel subsidies on welfare programmes instead.
“As the current G20 president, India can confidently demonstrate global leadership in this area, having reduced its fossil fuel subsidies by 76 per cent from 2014 to 2022,” it added.
The report noted that US$2.4 trillion could be generated through subsidy reform and carbon taxation, and using a quarter of that amount could help close the investment gap of US$450 billion per year needed until 2030 to limit the global temperature rise to 1,5 degree Celsius (2,7 degrees Fahrenheit).
It could also be used to help end world hunger, provide universal access to electricity and clean cooking, and reduce fossil fuel-related pollution.— South China Morning Post
