According to a report by analysts at the International Monetary Fund (IMF) released on Thursday, fossil fuel-related public aid amounted to $7 trillion in 2022 — about €6.5 trillion, or 7.1% of global GDP which advocates the complete abolition of these subsidies. Coal, oil and natural gas, which benefit from these huge amounts of money, are the main drivers of climate change, fueling, for example, the extreme heat and large fires that will ravage much of the northern hemisphere this summer. Paradoxically, humanity’s enormous dependence on these fuels, which push it to its limits, is largely funded by public funds.
When these fuels are burned to generate electricity, they release greenhouse gases that overheat the planet. And ending direct and indirect aid to redirect it to cleaner ways of producing energy has been one of the key demands of climate change activists for years. In addition, it is at the heart of the actions that need to be taken to combat global warming and are being discussed within the United Nations. The final declaration of the Glasgow climate summit, which took place in the Scottish city at the end of 2021, expressly called for the phasing out of this public support for fossil fuels. But they continue to rise, as the IMF analysis warns.
The experts on this panel consider explicit subsidies (related to what producers and consumers of these fuels receive) and implicit subsidies (related to indirect environmental and health costs and tax revenues that the government no longer pays with the deductions). Taking these two variables into account, the IMF reaches this amount of seven trillion dollars in 2022, about 6.5 trillion euros. Explicit subsidies make up 18% of the total, while implicit ones make up 82%. This last chapter covers externalities that are not carried over, such as the cost of damage caused by pollution to the health of the citizens of an economy.
As a solution to the nonsense of continuing to fuel the climate crisis with public money, IMF analysts advocate “complete reform of fossil fuel prices by removing explicit subsidies”. In addition, they are calling for the introduction of “corrective taxes” such as a tax on carbon dioxide, which would mean a 34% reduction in emissions of this greenhouse gas (the main greenhouse gas) by 2030 compared to 2019 levels. Analysts stress that “global warming within must be maintained within the limits established by the Paris Agreement”.
The last IMF analysis of this aid was from two years ago and estimated the 2020 subsidy at $6 trillion. “Explicit subsidies have more than doubled since the IMF’s last assessment, from 0.5 trillion in 2020 to 1.3 billion in 2022,” the study said. However, analysts explain that “much of the increase is due to temporary price support measures” related to the energy crisis caused by the invasion of Ukraine. “Hence, explicit subsidies are expected to decline if international prices continue to decline from their peaks.”
But the big problem is implicit aid, which accounts for more than 80% of the total, and which the IMF expects to increase further as fossil fuel consumption increases in emerging economies “where local environmental costs are generally higher.” These subsidies mean that “governments are giving up a valuable source of much-needed revenue,” thereby “undermining” poverty reduction goals. The IMF report warns that “most of the benefits” of fuel subsidies accrue to “the richest households”.
Information is the first remedy against climate change. Subscribe to her.
subscribe to
By region, East Asia and the Pacific accounts for almost half of the world’s official development assistance. Looking at the analysis by country and in absolute terms, “China remains the largest subsidizer of fossil fuels, followed by the US, Russia, the EU and India,” according to the IMF. At the same time, they are the world’s largest emitters of greenhouse gases.
Spain: $11.5 billion
The IMF study offers data from 170 countries, including Spain. The agency estimates the public aid Spain provided directly and indirectly to fossil fuels last year at $11,500 million (€10,500 million). Globally, it represents the best data in the historical series offered by this facility, beginning in 2015. In 2020, for example, aid amounted to 17,900 million.
However, looking only at implicit help, there is a significant increase. In 2020 they amounted to 1,500 million compared to 4,400 in 2022. And the largest recipient of these funds are the natural gas consumers in Spain. According to the IMF, aid payments to energy companies and coal producers followed.
You can follow KLIMA UND UMWELT on Facebook and Twitteror sign up here to receive our weekly newsletter
Subscribe to continue reading
Read without limits