Climate change threatens the world as we know it and the need for climate action is getting more pressing every day. The impacts of the Covid-19 pandemic on oil prices opens the door to a green recovery without fossil fuel subsidies.
According to Sustainable Development Goal 13 – Climate Action, the global community must come together and respond to climate change urgently. This requires getting rid of old policies and establishing policy coherence which inhibit greener alternatives.
Climate change threatens to adversely impact our societies, while Covid-19 has given us an indication of how fragile our global world is today. Although climate change’s negative impacts have grown over the past years, the urgent need to address the pandemic diverts attention away from climate initiatives.
To mitigate the climate crisis and address the pandemic, major organizations such as the Organisation for Economic and Co-operation Development (OECD) and the United Nations are calling for a green Covid-19 recovery. This includes stopping fossil fuel subsidies, which governments use to support polluting industries. Continued subsidies will exacerbate the climate crisis and create even more disastrous problems for our societies.
An International Monetary Fund (IMF) working paper, estimates that global fossil-fuel subsidies amounted to a total of US$ 4.7 trillion in 2015, which is 6.3% of the global GDP. According to the study, global carbon emissions would be 28% lower without the costly subsidies. In the European Union, fossil-fuel subsidies grew by 6% between 2015 and 2018. Combined, G20 countries provide at least US$ 63.9 billion per year in government support solely for coal industries.
While the world focuses on Covid-19, G20 countries have continued the subsidy trend. So far, they have committed US$ 151 billion towards fossil-fuel industries as part of the Covid-19 economic recovery. This contradicts recommendations from leading international organizations.
The pandemic’s adverse impacts on the world’s economy are clear. The fossil fuel industry is especially hard hit. The drop in demand for fossil fuels has lowered prices, whereas the International Energy Agency (IEA) predicts that the price for Brent crude oil prices will have gone down from US$ 64 in 2019 to US$ 41 in 2020.
Traditionally, fossil fuel subsidies have been justified to support ordinary citizens due to the high price of fossil fuel and its importance in people’s everyday lives. The recent drop in prices undermines the rationale behind why subsidies for fossil fuels are needed, while they limit the incentives of investing in new greener technologies. The pandemic’s impact on oil prices instead offers an opportunity for countries to reform and embrace new climate-friendly solutions.
Countries are slowly opening up to the idea of green energy and improved emission targets. China recently committed to carbon-neutrality by 2060, Japan and South Korea pledge to reach it by 2050, while the European Union aims to be climate-neutral by 2050. To reach these emission targets nations must address fossil fuel subsidies.
Missing the opportunity of ending fossil-fuel subsidies will have disastrous impacts. The world failed to mitigate one crisis, continued government support for fossil fuels will fail to mitigate another.