A series of recent surveys of global fossil fuel subsidies, including from world-class financial institutions such as the International Monetary Fund, climate agencies and independent think tanks, have found surprisingly consistent results: global subsidies to fossil fuels remain high, especially in developed countries.
According to the latest IMF analysis, coal, oil and gas were subsidized globally to the tune of $5.9 trillion in 2020, or $11 million per minute. Of this, only 8% are explicit subsidies, while the remaining 92% are implicit subsidies, mainly tax breaks.
The IMF found that five countries, including the US, India and Japan, account for two-thirds of fossil fuel subsidies. Underpricing has also led to overconsumption of fossil fuels, with data showing that 47% of natural gas and 99% of coal are priced at less than half their true cost.
According to the International Energy Agency (IEA), subsidies for fossil fuels are a way of "artificially lowering prices" and encourage excessive consumption of high-carbon fuels, with negative environmental and health impacts that cost the equivalent of $2.6tn - $8.1tn.
Between 2010 and 2020, electricity produced by fossil fuels collectively received nearly 75 per cent of all subsidies, according to the IEA. Fossil fuel subsidies fell to a 10-year low in 2020 as the COVID-19 pandemic reduced fuel demand and triggered a collapse in oil prices, but in 2021 the epidemic eased, demand picked up again and, combined with insufficient supply, fossil fuel subsidies rose 142% for the year from 2020.
Similarly, a study by the Business Nature Alliance and climate group B Team found that despite pledges to accelerate emissions reductions, subsidies supporting polluting industries such as coal, oil and gas are conservatively estimated at at least $1.8 trillion a year, or 2% of global GDP.
The alliance for Business Nature said the continued high subsidies for fossil fuels ran counter to the promise of mitigating the climate crisis.
Mike Coffin, a senior analyst at the Carbon Tracker Initiative, an international think-tank, stressed that developed countries should lead the way in subsidising fossil fuels.
Subsidies for fossil energy in developed economies have been "business as usual" in recent years, according to a new survey by the International Institute for Sustainable Development, an independent think-tank. In Canada, for example, its four major fossil energy producing provinces -- Alberta, British Columbia, Saskatchewan and Newfoundland and Labrador -- provided a total of $2.5 billion in subsidies for fossil fuels in the 2020-2021 fiscal year. Alberta, the oil-sands province, has the highest fossil fuel subsidies at C $1.3 billion, followed by British Columbia at C $765 million.
According to undp analysis, the world spends three times more on fossil fuel subsidies each year than it needs to eradicate extreme poverty, and this should be changed through gradual reforms.
