Title: Fossil Fuels Receive $13 Million per Minute in Subsidies, IMF Analysis Reveals
According to a recent analysis by the International Monetary Fund (IMF), fossil fuels received an unprecedented $13 million per minute in subsidies in 2022. The total subsidies for oil, gas, and coal amounted to a staggering $7 trillion for the year, equivalent to 7% of global GDP and nearly double the world’s spending on education.
While countries have long vowed to phase out these subsidies to account for the true environmental costs, progress has been slow. In fact, explicit subsidies, which result in lower fuel prices for consumers, doubled in 2022 due to increased energy prices stemming from Russia’s war in Ukraine. Shockingly, it was revealed that rich households benefited more from these subsidies than the poor.
Implicit subsidies, which encompass the enormous costs associated with climate change and air pollution caused by fossil fuels, made up a substantial 80% of the total subsidies. Ending such support for fossil fuels should be a primary focus of climate action as it could not only help restrict global heating to below 2°C but also prevent 1.6 million air pollution-related deaths annually and generate significant government revenue.
To address this critical issue, the IMF recommends the implementation of carefully designed policies that bolster poorer households and emphasizes the need for international coordination to reform subsidies. The urgency of the matter is underscored by the ongoing climate crisis, characterized by devastating heatwaves, wildfires, and floods wreaking havoc worldwide.
Moreover, the G20 nations, responsible for 80% of global carbon emissions, pledged to phase out inefficient fossil fuel subsidies in 2009. However, their actions have been contradictory, as a record-breaking $1.4 trillion was poured into subsidies in 2022. The World Bank estimates that the combined subsidies for fossil fuels and agriculture may reach a staggering $12 trillion annually, with detrimental environmental consequences.
Although some countries, such as Canada and Nigeria, have recently taken steps to end certain fossil fuel subsidies, past actions were reversed due to public protests. In 2022, 50% of explicit subsidies were allocated to petrol and other oil products, while coal and fossil gas received 30% and 20%, respectively. Particularly concerning is the fact that coal was heavily subsidized, with 80% sold below half its true cost.
Phasing out fossil fuel subsidies has the potential to cut emissions by 34% by 2030, a significant contribution towards the necessary 43% reduction to keep global heating below 1.5°C. For successful reform, experts recommend gradual implementation, financial support for low-income individuals, and efficient utilization of increased government revenues.
The World Bank emphasizes that while cutting subsidies may require demanding policy reforms, the costs of inaction would be far higher. The time for action to combat climate change and transition to sustainable energy sources is now, and addressing the issue of fossil fuel subsidies is an essential step towards a greener future.
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