The jump in G20 fossil fuel subsidies

Of all the crazy things to be doing in an age of climate breakdown, subsidising fossil fuels is among the craziest. It prolongs the problem, undermines the development of clean energy alternatives, and rewards the wrong things. And so at COP26, the G20 countries made a (qualified) pledge to phase them out.

We’re not off to a great start, according to a new report from the International Institute of Sustainable Development. The year following COP26, subsidies rose to a new record of $1.4 trillion.

There’s a fairly straightforward explanation for this, which is evident in the graph. The huge jump is in that blue slice, consumer subsidies. This is the spending on keeping prices down and supporting people in paying their bills as Russia’s war in Ukraine drove up energy prices.

Desperate times call for desperate measures, so some of that is entirely necessary. The good news is that most of the consumer support is temporary. As the energy price crisis eases, those support schemes can be rolled back.

However, if we take consumer subsidies out of the picture, subsidies are still higher than they were in 2021. They have risen since that promise to reduce them. The least excusable aspect of this is the $440 billion to support investment in new sources of oil and gas, which is just hosing petrol on the climate fire.

The priorities of the G20 are also exposed when we compare fossil fuels subsidies to renewable energy subsidies. Overall, fossil fuels are still getting four times more support than clean energy. This is perverse for multiple reasons. It’s destroying the climate, yes. It’s also failing citizens, because solar and wind power are now the cheapest forms of power in many parts of the world. Supporting renewable energy now means lower bills later.

There’s plenty more to explore in IISD’s report, including their recommendations to the G20, and some outliers that buck the trend. India, for example, shows us what is possible. It’s not finished yet, but India has cut its fossil fuel subsidies by three quarters since 2014, while shifting support towards clean energy.