Soaring Energy Prices Doubled The Fossil Fuel Consumption!

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  • Official data show that overall government support for fossil fuels in 51 countries worldwide doubled to 697.2 USD billion in 2021, from 362.4 USD billion in 2020 owing to increased energy prices.
  • Consumption subsidies are predicted to rise even further in 2022.
  • Analysis of transfers and tax breaks in G20 economies showed total fossil fuel support rose to USD 190 billion in 2021 from USD 147 billion in 2020.
  • Combining estimates covering 51 major economies, G20 and 33 other major energy-producing and consuming economies embody around 85% of the world’s total energy supply.

According to the new analysis done by OECD and IEA, support for fossil fuels has almost doubled in 2021 thereby hindering growth toward international climate goals.

The Current scenario 

According to the recent analysis published by the Organisation for Economic Co-operation (OECD) and Development and the International Energy Agency (IEA), there has been a rise in support for the production and consumption of coal, oil, and natural gas by major economies.

Although, many countries are still struggling to balance long-standing treaties to phase out inefficient fossil fuel subsidies with endeavours to safeguard households from swelling energy prices.

The reports show that overall government support for fossil fuels in 51 countries worldwide almost doubled to 697.2 USD billion in 2021, from 362.4 USD billion in 2020 owing to heightened energy prices.

Notions on the prevailing scenario

OECD Secretary-General Mathias Cormann said that sharp increases in energy prices and undermined energy security have resulted due to Russia’s war of aggression against Ukraine. Substantial increases in fossil fuel subsidies facilitate inefficient consumption.

In order to protect consumers from the extreme impacts of shifting market and geopolitical forces, certain measures are to be adopted in a way that helps keep us on track to carbon neutrality as well as energy security and affordability.

IEA Executive Director Fatih Birol feels that fossil fuel subsidies are obstacles to a sustainable future. The best solution to lower the exposure of consumers to high fuel costs and amend the global energy crisis is to boost investment in clean technologies and infrastructure.

What do the analysis and data reports say?

By correlating prices on international markets and prices expended by domestic consumers using measures like direct price regulation, pricing formulas, border controls or taxes, and domestic purchase or supply mandates, the IEA produces estimates of fossil fuel subsidies.

OECD analysis of budgetary transfers and tax breaks associated with the production and use of coal, oil, gas, and other petroleum products in G20 economies showed total fossil fuel support rose to USD 190 billion in 2021 from USD 147 billion in 2020.

By combining the estimates covering 51 major economies, G20, and 33 other major energy-producing and consuming economies represent around 85% of the world’s total energy supply.

The assessment for producers’ support attained USD 64 billion in 2021, therefore going up by almost 50% year-on-year, and 17% above 2019 levels. Consumer support reached USD 115 billion, up from USD 93 billion in 2020.

Need of the hour

The subsidies sought to benefit low-income households often tend to favour affluent homes and should be replaced with more targeted forms of support. Redirection of public funding toward the progress of low-carbon alternatives alongside modifications in energy security and efficiency is being pursued by the OECD and IEA for the phasing out of ineffectual fossil fuel support.

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Source: OECD

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