The world spends an astounding US$423 billion annually to subsidize fossil fuels for consumers – oil, electricity that is generated by the burning of other fossil fuels, gas, and coal.
This is four times the amount being called for to help poor countries tackle the climate crisis, one of the sticking points ahead of the COP26 global climate conference next week, according to new UN Development Programme (UNDP) research.
The amount spent directly on these subsidies could pay for COVID-19 vaccinations for every person in the world or pay for three times the annual amount needed to eradicate global extreme poverty. When indirect costs, including costs to the environment, are factored into these subsidies, the figure rises to almost US$6 trillion, according to data published recently by the International Monetary Fund (IMF).
Instead, UNDP’s analysis highlights that these funds, paid for by taxpayers, end up deepening inequality and impeding action on climate change.
"The COVID-19 pandemic has exposed outdated aspects of the global economy. It includes the fact that the world continues to spend billions of dollars on fossil fuel subsidies, while hundreds of millions of people live in poverty and the climate crisis accelerates. Against this backdrop, we must ask ourselves: is subsidizing fossil fuels a rational use of public money?" said Achim Steiner, UNDP Administrator.
The report, published ahead of the upcoming G20 and COP26 meetings, is being launched in the context of a growing recognition of the need for reform of fossil fuel subsidies by economists and policymakers as well as the IMF and World Bank. The United Nations Secretary-General António Guterres has also made a strong call for reform.
“Affordable energy access for all is essential to development. The energy transition must be multidimensional, inclusive, equitable and just – it must consider the diverse realities of African countries and propose various pathways for the continent,” emphasized Ahunna Eziakonwa, Assistant Secretary General for Africa at UNDP. “Effectively fighting back against the devastating impact of COVID 19 requires new approaches that support Africa to accelerate SDG action through a green recovery that ensures no one is left behind.”
UNDP’s new campaign “Don’t Choose Extinction” spotlights one of the world’s most well-known extinct animals, the dinosaur – which, in a speech to the UN General Assembly urges world leaders to shift away from fossil fuel subsidies.
“Addressing fossil fuel subsidies is a politically charged issue, but the facts show that reform is both necessary, and when done correctly, supports the poor, creates jobs, and protects the planet,” said George Gray Molina, Lead Economist of UNDP’s Bureau for Policy and Programme Support and co-author of the research. “We hope this research will catalyze the conversation on the critical role reform can have in driving green and fair transitions in all countries.”
Led by a cast of celebrity voices from around the world — the Don’t Choose Extinction campaign aims to raise public awareness of how fossil fuel subsidies are canceling out significant progress to date towards ending climate change and are driving inequality by benefitting the rich.
The main contributor to the climate emergency is the energy sector which accounts for 73 per cent of human-caused greenhouse gas emissions. Africa has created the least of the CO2 emissions (at less than 4%) but faces disproportionate impacts of climate change. For Africa – an end to fossil fuel subsidies is a critical first step towards correctly pricing energy.
Many African countries have vast wind and solar reserves and therefore immense potential for renewable energy – and could, with the right policy, capacity support and grid upgrades programmes, build new capacities for resilience, cost-efficiency, and independence of Africa’s energy sector.
With that in mind, UNDP’s research advocates for a progressive and gradual response to reforms. It includes analysis of success stories gathered from several countries across regions as well offering a ‘toolkit’ for policymakers to support fossil fuel subsidy and energy pricing reforms. The toolkit allows for a phased approach that is just and equitable and includes income protection and compensation for less advantaged groups.
“When we consider how we are going to pay for the fight against climate change, fossil fuel subsidies mean that we are effectively starting at a point of minus US 423 billion dollars,” added Achim Steiner. “Reform is not easy and the transition to clean energy presents a range of difficult challenges in many countries. Indeed, each country needs to take their own path. But we also know that we must move away from these energy sources that are contributing to our planet’s decline.
The Don’t Choose Extinction campaign features a collective intelligence platform, the Global Mindpool, to help tackle the most important issues of our time. Linking insights from around the world - on the climate emergency, the crisis in nature and inequality – the Global Mindpool will support UNDP to better inform and equip policy makers in government, civil society, and the private sector.
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Find out more about the campaign here: www.dontchooseextinction.com
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