The greatest amount ever recorded was more than €900 billion paid by governments on fossil fuel subsidies in 2022, as reported by Euro News.
Disruption in gas exports
The staggering amount is more than double the number for 2021, according to a recent analysis by the International Energy Agency (IEA).
The staggering number is related to Russia’s incursion into Ukraine.
Energy costs skyrocketed as a result of the war and the disruption to Russian fossil gas exports that followed.
Governments have spent a lot of money on fossil fuel subsidies like petrol price ceilings, which restrict how much fuel businesses may charge for their products and compensate them for the difference.
The IEA’s senior energy analyst Toru Muta and energy analyst Musa Erdogan, however, warn that the massive expenditure imperils climate ambitions.
“Our analysis shows that many of these government measures were not well targeted,” they write in an analysis of the report, which is entitled Fossil Fuels Consumption Subsidies 2022.
“And while they may have partially protected customers from skyrocketing costs, they artificially maintained fossil fuels’ competitiveness versus low-emissions alternatives.”
Why did governments spend so much money on fossil fuel subsidies in 2021?
Last year, subsidies for oil and “natural gas” (also known as fossil gas) skyrocketed.
Last year, governments spent $343 billion (€321 billion), an increase of 85% from 2021. More than twice as much money—$346 billion (€323 billion)—was invested in natural gas subsidies as the year before.
From $3 billion (2.8 billion euros) to $9 billion (8.4 billion euros), coal subsidies increased by three times annually.
An additional $399 billion (€373 billion) went towards subsidising power.
These reductions were primarily made to protect consumers from the significant energy market volatility caused by the conflict in Ukraine.
These came in a variety of shapes, including energy caps. For instance, the UK government temporarily reduced fuel duty on gasoline and diesel while Thailand instituted a price cap of THB 30 (€ 0.82) per litre of diesel.
What do fossil fuel subsidies mean for the planet?
The primary contributor to global warming is the exploitation and use of fossil fuels.
Society must quickly decarbonize if we are to keep temperature increases brought on by climate change below 2 degrees Celsius.
The Glasgow Climate Pact’s signatories promised to phase out “inefficient fossil fuel subsidies” by 2021.
But, the energy crisis has halted this advancement.
According to the IEA research, it is essential to shield consumers from the harshest effects of rising fossil fuel prices.
Yet, authorities must be aware of the effects on the environment and appropriately target their support.
The responsibility to safeguard consumers takes precedence over government pledges to phase off subsidies during an energy crisis, the paper states.
“The ensuing government efforts lessen hardship but also undermine consumer motivation to save or move to alternative energy sources and consume public monies that could be used in other ways, such as on clean energy transitions.”
The IEA analysts come to the conclusion that subsidies for fossil fuels are ultimately an ineffective approach to assist consumers. Governments ought to spend money on clean energy infrastructure instead.
The report’s authors argue that rather than providing emergency relief when fuel costs rise, governments would be better off investing their time and resources in structural improvements that would reduce the need for fossil fuels.
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Source: Euro News
