Just two
years ahead of a crucial UN climate change summit, many of the world’s richest countries
continue to pour finance into fossil fuel subsidies, with average spending
running at $112 per adult according to a new report from leading global
development think tank, the Overseas Development Institute.
The report Time to change the game notes that fossil
fuel subsidies cost over half a trillion dollars globally every year. It says that these subsidies create perverse
incentives favouring investment in carbon-intensive energy.
The author
Shelagh Whitley calls for bold action led by the G20 to phase out these
subsidies by 2020, with rich countries making the deepest and earliest cuts.
Ms Whitley
said:
The report accuses
governments of ‘shooting themselves in both feet’ by failing to put a proper
price on carbon, and instead incentivising the use of high-carbon fossil fuels.
Fossil fuel subsidies
include measures to help to reduce fossil fuel prices paid by consumers, and
tax breaks to oil and gas companies.
According
to the ODI report:
- The average subsidy provided by rich governments for every tonne of carbon is $7. This is the same as the current cost of carbon in the EU carbon trading system – meaning the carbon price may as well not exist.
- Domestic subsidies in rich countries outstrip international climate finance provided to help address climate change in developing countries by a ratio of 7:1.
- In some countries – India, Pakistan and Bangladesh – fossil fuel subsidies are more than double the level of spending on health services.
- In countries such as Egypt, Pakistan, Morocco and Bangladesh, fossil fuel subsidies outweigh the national fiscal deficit.
These facts
add to research from the International Energy Agency (IEA), which revealed that
global subsidies to fossil fuels are six times higher than those for renewable
energy – despite the popular perception that it is too expensive to go green.
The Organisation for Economic Cooperation and Development (OECD) also recently
stated that coal – the most polluting fuel of all – is subject to the lowest
levels of taxation.
The report builds on earlier ODI research, showing
that climate change is likely to hit the developing world the hardest of all,
posing a threat to poverty eradication.