The International Monetary Fund, (IMF) has said that fossil fuels benefited from record subsidies of $13m (£10.3m) a minute in 2022, despite being the primary cause of the climate crisis.
In its new analysis, the IMF found that the total subsidies for oil, gas and coal in 2022 were $7tn (£5.5tn), that is equivalent to 7% of global GDP and almost double what the world spends on education.
According to reports, while countries have pledged to phase out subsidies for years to ensure the price of fossil fuels reflects their true environmental costs, they have achieved little to date.
Explicit subsidies, which cut the price of fuels for consumers, doubled in 2022 as countries responded to the higher energy prices resulting from Russia’s war in Ukraine.
Rich households benefited far more from these than poor ones, the IMF said. Implicit subsidies, which represent the “enormous” costs of the damage caused by fossil fuels through climate change and air pollution, made up 80% of the total.
The IMF said that ending the subsidies should be the centrepiece of climate action and would put the world on track to restrict global heating to below 2C, as well as preventing 1.6 million air pollution deaths a year and increasing government revenues by trillions of dollars.
The researchers acknowledged that subsidy reform was politically difficult, but said carefully designed policies that supported poorer households could work, especially if coordinated internationally.
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The IMF’s findings come as the climate crisis wreaks havoc across the world, from heatwaves, wildfires and floods from the Americas to Europe to Asia.
Reacting to the latest analysis, Ian Parry of the IMF said that cutting fossil fuel subsidies “needs to be the centrepiece of efforts over the next few years to get on track with limiting global warming to below 2C.
“Ideally this is done through carbon pricing [and] some of the revenues from reforms should be used to compensate poor and vulnerable households,”he said. “We are in this situation because it can be very difficult to increase taxes on fossil fuels, not least when countries are acting unilaterally,”. “We recommend that large emitting countries coordinate on carbon pricing or similar policies to help scale up global action.”
Ipek Gençsü, who is a subsidies expert at the ODI thinktank, said: “The IMF report shows that, at a time when the world is starting to experience worsening impacts of climate change, governments continue to pour fuel on to the fire by providing record levels of subsidies for fossil fuels.
“If we are to have any chance of avoiding irreversible and tragic consequences of climate change, governments simply have to show bolder leadership, by phasing out their support for production and consumption of fossil fuels, “he said.
The G20 nations, which cause 80% of global carbon emissions, pledged to phase out “inefficient” fossil fuel subsidies in 2009. Sadly, they poured a record $1.4tn (£1.1tn) into fossil fuel subsidies in 2022, according an estimate by the International Institute for Sustainable Development thinktank.
Recall that the World Bank reported in June that fossil fuel and agricultural subsidies combined could amount to $12tn (£9.5tn) a year and were causing “environmental havoc”. Canada recently announced plans to end some fossil fuel subsidies. Nigeria, which had been spending four times more on petrol subsidies than on healthcare, removed them in May. However, past subsidy removals often have been reversed after protests.
Story was adapted from the Guardian.
