The analysis showed that global public subsidies to fossil fuels nearly doubled to $700 billion in 2021, presenting an “obstacle” to addressing the climate crisis.
Despite the huge profits for fossil fuel companies, subsidies have risen as governments seek to protect citizens from rising energy prices as the global economy recovers from the Covid-19 pandemic.
Most of the subsidies were used to reduce the price consumers paid. This largely benefits wealthier families, as they use the most energy, rather than targeting those with lower incomes. Subsidies are expected to rise further in 2022 as the Russian war in Ukraine has driven up energy prices.
Fatih Birol, Director of the International Energy Agency, which issued Analytics with the Organization for Economic Co-operation and Development.
“Increasing investment in clean energy technologies and infrastructure is the only permanent solution to today’s global energy crisis and the best way to reduce consumers’ exposure to high fuel costs,” Birol said.
“Large increases in fossil fuel subsidies encourage wasteful consumption, while not necessarily reaching lower-income households,” said Matthias Kormann, Secretary-General of the Organization for Economic Cooperation and Development. “We need to take measures that protect consumers [and] It helps keep us on track toward carbon neutrality, as well as energy security and affordability.”
The analysis covers 51 major countries and represents 85% of the world’s total energy supply. Subsidies that kept fossil fuel prices artificially low more than tripled to $531 billion in 2021, compared to 2020. Oil and gas production subsidies reached a record $64 billion. The International Energy Agency said in May 2021 that No new fossil fuel projects should be developed If the world is to achieve its climate goals.
“The period of rising fossil fuel energy prices, when oil and gas companies are posting record profits, should be the perfect time for governments to eliminate fossil fuel production subsidies — so seeing increased government subsidies for fossil fuels now is infuriating,” said Georgi Dalos, of Peace Green International.
Governments must stick to their green pledges. On the consumer side, they urgently need to replace non-target support measures with targeted income support for people suffering from fuel poverty.”
The G-20 agreed in 2009 to phase out “inefficient” fossil fuel subsidies, and in 2016, G7 has set a deadline of 2025. But little progress has been made.
The total amount of $697 billion covers explicit subsidies, including price cuts, government funding and tax credits. Estimates including implicit subsidies, ie the cost of climate and the damages of air pollution from fossil fuels, are much higher. This amounted to $5.9 trillion in 2020, according to the International Monetary Fund, or 11 million dollars a minute.
The Guardian revealed in July that the oil and gas sector achieved an average of 1 trillion dollars annually in net profit over the past fifty years. Professor Aviel Verbruggen, the author of this analysis, said these huge sums provided the power to “buy every politician, every system” and delay action on the climate crisis.
The energy crisis has proven very profitable for oil companies, even without subsidies. In the first six months of 2022, five leading companies - BP, Shell, ExxonMobil, Chevron and Total - made Adjusted profit of nearly $100 billion. The figure is the same amount that rich countries promised poor countries to help deal with the climate crisis by 2020, but failed to deliver.