New report: reforming subsidies could pay for a clean energy revolution

Date: 08/08/2019

Reforming the EUR 335 billion countries spend each year on fossil fuel subsidies and reallocating between 10 and 30 per cent of the savings to renewable projects would pay for a transition to clean energy. This is the finding of a new study by the International Institute for Sustainable Development (IISD).

The report authors highlight that the “subsidy swap” concept could not only make the transition to renewable energy possible but also save taxpayers’ money for other priorities. “Often fossil fuel subsidies are inefficient, costly to governments and undermine clean alternatives,” said Richard Bridle, IISD Senior Policy Advisor. “All countries should be looking to identify where swaps can kickstart their clean energy transitions.”

“The good news is that fossil fuel to clean energy subsidy swaps are already taking place,” said Bridle. Since 2008, annual global renewable investments have been greater than investments in fossil fuel-based generation. In 2014, annually installed renewable capacity started to exceed annually installed fossil generation capacity. “As renewables have become cheaper, the same dollars can now fund more renewable-powered generation,” he explained.

Examples of four countries
The report provides examples of four countries—India, Indonesia, Zambia and Morocco—where governments have already been taking concrete actions to reform fossil fuel subsidies and kickstart the replacement of fossil fuel energy sources with renewables. In India, petroleum subsidies have been cut by around 75 per cent since 2014, freeing up funds to support the development of world-leading wind and solar industries. Given country-specific political barriers to policy reform, sharing country experiences is a key tool to show how swaps can be a feasible option for other countries.

“Public money is far better spent delivering the clean energy transition than propping up the fossil fuel industry,” said Bridle. “Currently, there are far more subsidies directed toward fossil fuels than toward supporting renewable energy (USD 100 billion). The reform of subsidies alone is not enough to meet global emissions targets, but it is a good first step. Ultimately, the cost of each energy source should reflect its social and environmental impacts. That means increasing taxes on dirty energy and redirecting subsidies to align with government priorities,” he concluded.

Three approaches to fossil fuel subsidy reform: Remove, target and swap.
Source: IISD report

Taxpayers’ money are used to “destroy the world”
In May, the UN Secretary General António Guterres told a gathering of politicians and business people at a Vienna, Austria conference on climate change that subsidies for oil, gas and coal should be ended, according to Reuters. “Many people still think that to give fossil fuel subsidies is a way to improve living conditions of people. There is nothing more wrong than that. What we are doing is using taxpayers’ money – which means our money – to boost hurricanes, to spread droughts, to melt glaciers, to bleach corals. In one word – to destroy the world.”

According to The Guardian, reform of fossil fuel subsidies could have a significant impact on global heating. An earlier IISD study of 20 countries with large fossil fuel subsidies found that a 30% swap to renewables would lead to emissions reductions of between 11% and 18%.

The report “Fossil Fuel to Clean Energy Subsidy Swaps: How to pay for an energy revolution” is available here

Source: International Institute for Sustainable Development