Climate concerns: G20 nations poured $1.4 trillion into fossil fuels in 2022

A recently published report suggests that redirecting fossil fuel subsidies from G20 countries towards investing in renewable energy sources can have a multifaceted impact. Not only would it contribute to combating climate change, but it could also address pressing global issues like hunger, energy access, and environmental pollution.

Report urges G20 action on fossil fuel subsidies

The report underscores the need to prioritize discussions around fossil fuel subsidies during the upcoming G20 leaders' summit due to its urgent nature.

The report titled "Fanning the Flames: G20's Unprecedented Financial Support for Fossil Fuels" brings attention to the alarming extent of financial assistance given by G20 countries to the fossil fuel industries. It has been authored by the International Institute for Sustainable Development (IISD) and its partners, emphasizing the staggering figures involved in their findings.

In 2022 alone, G20 nations are projected to allocate a massive $1.4 trillion towards bolstering the fossil fuel sector, surpassing the levels observed prior to the pandemic and energy crisis in 2019.

Tara Lahn, the lead author of the study and senior associate at IISD, highlighted the crucial significance of the findings, stating, "These data serve as a strong reminder that G20 governments are channeling extensive public funds towards fossil fuels, disregarding the catastrophic impact of climate change that persists." In light of this, they appealed to G20 leaders to give utmost importance to transitioning towards energy systems based on alternative sources and urged them to take concrete steps in eliminating any public financial support towards coal, oil, and gas.

Researchers propose a crucial measure for tackling the issue, which involves setting a carbon tax floor ranging from $25 to $75 per ton of CO2 emissions. This solution holds immense potential as it could enable G20 nations to generate additional annual revenue of approximately $1 trillion.

G20 fossil fuel tax inadequate, profits soar

Currently, G20 nations only impose an average fossil fuel tax of $3.2 per tonne of CO2 emissions, a meager amount that fails to accurately account for the real societal expenses involved, particularly amidst the backdrop of soaring profits made by fossil fuel corporations.

The exacerbation of climate change and the increase in frequency and intensity of extreme weather events are direct consequences of artificially lowering fossil fuel prices. Furthermore, the report strongly advocates for setting definitive timelines, where developed countries should aim to eliminate fossil fuel subsidies by 2025 and emerging economies by 2030.

The authors stress that subsidies should only be deemed appropriate in exceptional circumstances, such as ensuring energy access, and their primary objective should be to support those facing genuine need.

Experts emphasize that alternative methods such as directed payments for public welfare prove significantly more effective in aiding vulnerable populations during a crisis. The report highlights India, the current G20 Chair, for its remarkable achievement of reducing fossil fuel subsidies by 76% between 2014 and 2022, while concurrently increasing support for clean energy.

Furthermore, by reallocating a fraction of the funds from subsidy reform and carbon taxation, specifically less than a quarter of the $2.4 trillion, a wide range of global challenges can be addressed effectively.

Challenges: energy, hunger, climate, finance

These challenges encompass bridging the investment gap in wind and solar power, facilitating the attainment of the 1.5°C temperature target, eradicating world hunger, ensuring widespread access to electricity and clean cooking, and bridging the climate finance gap between developed and developing nations. Notably, reduction measures are also encompassed within this comprehensive approach.

Moreover, the report emphasizes the crucial role played by state-owned enterprises and public financial institutions in shaping the energy sector and lending practices. It strongly advocates for these entities to demonstrate a strong commitment to an ambitious net-zero roadmap, thereby mitigating the risks associated with ongoing investments in fossil fuels.

"Amidst the energy crisis, fossil fuel companies relentlessly raked in record profits last year without much motivation to align their business models with efforts to curb global warming. Fortunately, governments possess the power to influence and guide them towards the right path," concluded Lan.

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