Fossil Fuel Subsidies are Funding Global Warming

Fossil fuel subsidies are growing as we are running out of time to act on the climate crisis. With a few exceptions, most nations are increasing their fossil fuel subsidies. The energy policies of nations like the United States and Australia convincingly demonstrate this point. Countries like China and Canada try to have it both ways. On the one hand, they engage in climate action, and on the other, they are increasing subsidies to the fossil fuel industry. According to an International Monetary Fund (IMF) report fossil fuel subsidies have increased by more than half a trillion dollars since 2015. These subsidies currently amount to more than $5.2 trillion globally or the equivalent of more than 6 percent of global GDP.

Fossil fuels are the leading cause of climate change yet they receive 85 percent of global subsidies. According to the IMF report, efficient fossil fuel pricing including externalities would lower global carbon emissions by 28 percent and fossil fuel air pollution deaths by 46 percent.

The report also skewers economic arguments in support of subsidies. Efficient fossil fuel pricing would increase government revenues by 3.8 percent of GDP. Eliminating fossil fuel subsidies would create “net economic welfare gains” of more than $1.3 trillion. Ending these subsidies would provide a vast amount of resources to fund things like education, health care, and infrastructure projects.

Ending fossil fuel subsidies is a crucial first step in our efforts to tackle climate change. Government inaction on subsidies highlights the tremendous gulf between what needs to be done and what we are doing.