In a surprising turn of events, G20 nations channeled an astronomical USD 1.4 trillion of public funds into bolstering fossil fuels throughout 2022. The motive behind this unprecedented allocation was to counteract the escalating costs triggered by the Ukraine conflict while fortifying energy reserves. This groundbreaking revelation stems from a comprehensive study conducted by the internationally acclaimed Winnipeg-based Independent Institute for Sustainable Development (IISD) and its collaborative partners.
As the G20’s summit meeting in New Delhi draws near, the study emerges as a timely disclosure. Scheduled for September 9-10, the summit carries significant weight as leaders converge to address global challenges. India, the incumbent G20 president, emerges as a noteworthy outlier in the report, having prudently slashed fossil fuel subsidies by a remarkable 76 percent between 2014 and 2022. Simultaneously, the country bolstered its support for clean energy, positioning itself as a formidable advocate for sustainable practices.
The staggering USD 1.4 trillion figure encompasses diverse categories: fossil fuel subsidies accounting for USD 1 trillion, state-owned enterprise investments amounting to USD 322 billion, and public financial institutions’ loans contributing USD 50 billion. This mammoth sum dwarfs pre-pandemic and pre-energy crisis numbers, emphasizing the exceptional nature of this financial maneuver.
Tara Laan, a distinguished Senior Associate at IISD and the lead author of the study, underscores the criticality of these findings. She remarks, “These figures are a stark reminder of the massive amounts of public money G20 governments continue to pour into fossil fuels despite the increasingly devastating impacts of climate change.” With climate change ramifications worsening by the day, the urgency to address fossil fuel subsidies takes center stage.
The study posits that the G20 holds both the authority and the obligation to drive transformation in fossil fuel-based energy systems. The imperative to place fossil fuel subsidies on the agenda of the Delhi Leaders’ Summit is highlighted. Meaningful actions aimed at eliminating public financial flows for coal, oil, and gas are advocated to mitigate the adverse impact of financial support for fossil fuels, which exacerbates human-induced climate change.
In the pursuit of solutions, the researchers propose a visionary approach. G20 nations stand to reap an additional USD 1 trillion annually by adopting minimum carbon taxes ranging from USD 25 to USD 75 per metric ton of CO2 equivalent, correlated with a country’s income. This proactive strategy is an antidote to the current lackluster average tax rate of USD 3.2 per metric ton of CO2 equivalent within the G20.
The report presents a clear roadmap for phasing out fossil fuel subsidies. Developed countries are urged to halt subsidies by 2025, with emerging economies following suit by 2030 at the latest. Furthermore, the report urges precision in determining the continuance of subsidies based on specific needs, not merely branding them as “inefficient.”
Astoundingly, the report illustrates the transformative potential of reallocating a fraction of the trillions committed to fossil fuel subsidies. This repurposing could revolutionize wind and solar energy investments, address global hunger, provide universal access to clean electricity and cooking methods, and bolster climate funds for developing nations.
The study’s implications extend to state-owned enterprises and public financial institutions. A call to action is sounded, urging governments to establish definitive carbon-neutral transition plans to mitigate investment risks associated with fossil fuels.
In the words of Tara Laan, “Fossil fuel companies made big profits during the energy crisis last year, so they don’t want to change. But governments can push them in the right direction.” The urgency is further accentuated by the G20’s recent shortfalls in critical climate negotiations. Despite their collective might, a consensus on pivotal issues eluded them at recent meetings, underscoring the need for immediate, impactful action.
The report concludes on a note of accountability, reminding the world that G20 nations pledged to phase out “inefficient” fossil fuel subsidies at the COP26 climate summit. As the world watches, the G20’s actions will determine whether this commitment becomes reality or remains a distant aspiration.
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