Eliminating Fossil Fuel Subsidies to Curb Climate Change

In 2008, governments around the world gave a whopping $557 billion in subsidies to fossil fuels. Photo by Mike Bitzenhofer.

A recently leaked draft of a report by the World Bank recommends rich countries eliminate fossil fuel subsidies in order to provide financial assistance to developing countries in their struggle to address climate change.

The confidential document—available through The Guardian—is a draft report requested by the G20 Finance Ministers in their exploration to find finance options for climate change adaptation and mitigation in developing countries. The report defines the removal of fossil fuel subsidies as a starting point but also adds carbon pricing policies, carbon offset markets, and both public and private flows as promising strategies to securing climate financing.

A fossil fuel subsidy is any kind of government action that lowers the cost of energy production, raises the price received by energy producers or lowers the price paid by energy consumers, Oil Change International explains. “There are a lot of activities under this simple definition—tax breaks and giveaways, but also loans at favorable rates, price controls, purchase requirements and a whole lot of other things,” OCI adds.

In 2008, governments around the world gave $557 billion in subsidies to fossil fuels. Renewable energy, on the other hand, received between $43 and $46 billion through tax credits, feed-in tariffs and alternative energy credits, the New Republic reports.

The G20 group and the Obama administration have all committed to ending fossil fuel subsidies. In 2010, President Obama proposed eliminating subsidies for fossil fuels and investing instead in clean energy projects. Obama’s proposal would have eliminated about $4 billion annually from fossil fuel subsidies. Yet, despite the many proposals and agreements, zero subsidies have actually been eliminated, OCI reports.

Read the document in full here.

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