A comprehensive reform could drastically reduce global emissions, save millions of lives, and bring billions of dollars to states for necessary investment. The key to this is to abolish fossil subsidies and introduce CO2 prices.
The highest Grants in China
As a result of the price shock caused by the war in Ukraine, explicit subsidies (governmental financing such as loans, grants, tax incentives, and guarantees) have increased rapidly between 2020 and 2022, from USD 0.5 billion to USD 1.3 billion. However, the IMF expects these subsidies to fall again. Implicit subsidies, on the other hand, do not directly affect the budget and can be concealed, for example, in the form of targeted preferences in government regulation, state provision of goods, services, and rights at non-market prices, or the incomplete internalisation of environmental costs.
China is first on the list of explicit subsidies with USD 269.7 billion, followed by Saudi Arabia with USD 129 billion, Indonesia with USD 78.2 billion, Russia with USD 70.7 billion, and Iran with USD 62.7 billion. The US only comes up with USD 3 billion for this direct aid.
A reform of subsidies is “in the country’s own interests, even if climate benefits are cut off,” Focus magazine quotes the report. States would then have revenue that totaled 3.6% of global economic output. This could reduce labour costs, make “productive investments,” or reduce debt.
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Rescue for Air and Life
The abolition of all subsidies and the imposition of a CO2 tax would reduce greenhouse gas emissions in ways that are close to the Paris climate targets: minus 43% by 2030, which is close to “halving emissions by 2023,” making it realistic to limit global warming to 1.5 degrees by 2100. This would also prevent 1.6 million statistically calculated premature deaths due to air pollution from fossil fuels every year.
A progressive alliance of the EU, smaller developing countries, and NGOs calls for a road map for global exit. The oil and gas countries, including many of the newly formed BRICS+ states, can at most imagine an exit from “fossil emissions”. According to the report, the countries with the highest nominal amounts of subsidies are China, the US, Russia, the EU, and India. Almost half of all aid comes from the East Asia/Pacific region.
