Fossil fuel subsidies and costs break record – 08/25/2023 – Environment

Global fossil fuel subsidies hit a record $7 trillion total in 2022 as governments raced to protect consumers from rising energy prices triggered by Russia’s invasion of Ukraine, estimates the International Monetary Fund (IMF).

The IMF study claims that coal, oil and natural gas subsidies in 2022 were equivalent to 7.1% of global GDP (gross domestic product). This represented more than governments spent on education and two-thirds of spending on health.

The high number presented by the IMF includes so-called implicit subsidies, which are the result of governments undercharging the environmental costs of burning fossil fuels. Those costs include air pollution and global warming, the IMF said.

Most of the global subsidies accounted for in the study fall into this category, said the authors, who expect the figure to rise as developing countries increase their consumption of fossil fuels.

The IMF report comes as the world hits the highest monthly global average temperatures on record. The increase in global temperatures of at least 1.1°C during the industrial age is mainly caused by the burning of fossil fuels, scientists have concluded.

“Explicit” subsidies — defined as consumers paying less than the costs of supplying fossil fuels — have tripled since the previous IMF assessment in 2020, from $500 million to $1.5 billion in 2022.

That compares with the most recent estimates by the International Institute for Sustainable Development (IISD) think tank, released this week, that subsidies from G20 economies stood at $1.4 trillion, including investments by state-owned companies and loans by public financial institutions. An independent research report earlier this year estimated the value at $1.8 trillion.

However, the IMF report concluded that the increase in explicit subsidies was due to temporary government support measures and was expected to decline.

East Asia and the Pacific region accounted for nearly half of the total global subsidy. China was the largest fossil fuel subsidizer, followed by the United States, Russia, the European Union and India.

G20 leaders agreed to phase out inefficient fossil fuel subsidies in 2009, before pledging to accelerate these efforts at the UN’s COP26 climate conference in Glasgow in 2021.

But the sharp rise in the cost of living and the energy crisis have led governments to intervene ever since with energy price caps and fuel subsidies.

World leaders have let climate experts and activists down in the run-up to this year’s UN COP28 conference, which will take place in Dubai, United Arab Emirates. There, negotiators will take a “global stocktaking” of the progress of countries that committed to reducing emissions under the 2015 Paris Agreement.

Emissions need to be reduced by 43% by 2030 to stay within the 1.5°C warming threshold, beyond which scientists predict irreversible changes to the planet. Instead, however, they continue to increase annually.

In May, leaders of the G7 group of advanced economies failed to set a deadline for phasing out coal use without capturing emissions. In the context of the full-scale Russian invasion of Ukraine, the G7 stated that “publicly supported investment in the gas sector may be appropriate as a temporary response” to the resulting energy crisis.

At the G20 climate talks last month, several negotiators told the Financial Times that China and Saudi Arabia had stalled any progress in the talks by refusing to discuss crucial issues such as greenhouse gas emissions targets.

This year was the third warmest on record and could overtake 2016 as the hottest in modern history, according to the European Union’s Earth Observation Programme.

Simultaneous heatwaves and record flooding hit large parts of the United States, Europe and Asia in July, and scientists have warned that these weather extremes will grow more frequent and intense with every fraction of a degree of warming.

_{Translated by Luiz Roberto M. Gonçalves}