In May, the environment ministers of the G7 agreed to end fossil fuel subsidies within this decade. Around $650 bn/year is spent worldwide on subsidising all energy sources, with the majority ($450bn) going to fossil fuels despite the climate crisis. But simply removing the subsidies has proven difficult. They keep energy costs low for consumers. It’s why public protest resisted the change in Ecuador and France in 2019. And developing nations (i.e. not the G7) use them to give citizens access to energy. Ludovic Subran and Günther Thallinger at Allianz, writing for the World Economic Forum, present three solutions. The first is the scaling up of clean energy, lowering its cost to undercut fossils. Secondly, keep some subsidies for producers but make them strictly conditional on lowering emissions; failure to meet targets means the money is clawed back. Thirdly – and most importantly – shift the subsidy away from the consumer’s energy meter and target it directly at poorer households through things like education, health and employment programmes. Subsidies for energy consumption are a sticking plaster for deeper social and political fault lines. Simply abolishing them for climate reasons is therefore not a sustainable solution, say the authors.
Energy Post 9th July 2021 read more »