(2023-08-23) G20 Poured More Than $1tn On Fossil Fuel Subsidies Despite Cop26 Pledges

The G20 poured more than $1tn on fossil fuel subsidies despite Cop26 pledges. The amount of public money flowing into coal, oil and gas in 20 of the world’s biggest economies reached a record $1.4tn(£1.1tn) in 2022, according to the International Institute for Sustainable Development (IISD) thinktank, even though world leaders agreed to phase out “inefficient” fossil fuel subsidies at the Cop26 climate summit in Glasgow two years ago.

G20 governments last year provided fossil fuels $1tn in subsidies, $322bn in investments by state-owned enterprises and $50bn in loans from public finance institutions.

The total amount was more than double what they had provided in 2019, the authors found.

• The subsidies are mainly concentrated in emerging market and developing economies, and more than half were in fossil-fuel exporting countries.
  • this is largely consumption subsidies - e.g. government keeping consumer prices "affordable"
• High fossil fuel prices hit the poor hardest, but subsidies are rarely well-targeted to protect vulnerable groups and tend to benefit better-off segments of the population.

living costs have risen sharply as a result of the Covid-19 pandemic and the Russian invasion of Ukraine. The latter sparked an energy crisis that prompted many governments to intervene in the costs of fuel and cap energy bills.

In June, a report from the World Bank found that “by underpricing fossil fuels, governments not only incentivise overuse, but also perpetuate inefficient polluting technologies and entrench inequality”.

The authors also found that of all subsidies to the energy sector, about three-quarters go to fossil fuels.

The IISD found that by setting a higher carbon tax of $25-50 per ton of greenhouse gases, G20 governments could raise an extra $1tn a year. To offset the costs to vulnerable people living in poverty, the authors recommended targeted welfare payments to those who need it most.

“With fossil fuel companies gaining record profits amid the energy crisis last year, there is little incentive for them to change their business models in line with what’s needed to limit global warming,” said Laan. “But governments have the power to push them in the right direction.”