In the lead up to the COP 26 global climate conference, UNDP releases new research revealing that fossil fuels’ subsidies, paid for by taxpayers, end up deepening inequality and impeding action on climate change.
The world spends an astounding US$423 billion annually to subsidize fossil fuels for consumers and keep the cost of coal, oil and gas low – which represents the cost of COVID-19 vaccinations for every person in the world or three times the annual amount needed to eradicate global extreme poverty.
In Europe and Central Asia, 88 per cent of the region’s primary energy supply comes from fossil fuels, while economies are two- to five times more energy-intensive than in most European Union countries.
Fossil fuel combustion exacerbates air and water pollution and contributes to wider social and economic issues, including urban congestion. The direct impact of air pollution on human health is a growing concern in a region where most capital cities have higher concentrations of atmospheric ultrafine particles than what is recommended by the World Health Organisation.
Phasing out fossil fuels while integrating renewable energy and new technologies would result in significantly cleaner air and improved human health and would likely have a positive effect on the creation of green jobs.
Fossil fuel subsidy reforms would also contribute to reducing CO2 emissions, and they are a first step towards correctly pricing energy – one that reflects the ‘true’ and full cost of using fossil fuels to society and the environment.
“To achieve the climate target of the Paris Agreement, wide-ranging societal and economic changes are necessary,” said Mirjana Spoljaric Egger, Director of UNDP’s Regional Bureau for Europe and CIS, during a recent visit to Kazakhstan to attend the launch of the country's vision to achieve carbon neutrality by 2060. “According to the International Energy Agency, significant fossil fuel consumption subsidies are present in more than 40 countries, including in Kazakhstan. Such subsidies are incentives for wasteful fuel consumption; they exacerbate air pollution and increase greenhouse gas emissions. Their removal, on the other hand, coupled with carbon pricing and green fiscal reform, makes economic sense,” she added.
But UNDP’s analysis shows that fossil fuel subsidy reforms can also be unfair and harmful for households and society if they are poorly designed. While fossil fuel subsidies tend to be an unequalising tool - as the lion’s share of the benefits concentrate among the rich - these subsidies also represent an important portion of poor peoples’ incomes that otherwise must be paid for energy consumption. Fossil fuel subsidies’ removal thus could easily become an income- and energy-impoverishing strategy. This contributes to making fossil fuels reform difficult and imposes a key barrier to transitioning to clean and renewable energy sources.
With that in mind, UNDP’s research advocates for a progressive and gradual response to reforms. It includes analysis of success stories gathered from several countries across regions as well offering a ‘toolkit’ for policymakers to support fossil fuel subsidy and energy pricing reforms. The toolkit allows for a phased approach that is just and equitable and includes income protection and compensation for less advantaged groups.
To make the sometimes complex and technical issues relating to fossil fuel subsidies and the climate emergency more accessible, UNDP has produced an engaging short film as part of a new campaign in which one of the world’s most well-known extinct animals, the dinosaur, gives a speech to the UN General Assembly urging world leaders to shift away from fossil fuel subsidies and “Don’t Choose Extinction.”
Led by a cast of celebrity voices from around the world — the Don’t Choose Extinction campaign aims to raise public awareness of how fossil fuel subsidies are canceling out significant progress to date towards ending climate change and are driving inequality by benefitting the rich.
The Don’t Choose Extinction campaign features a collective intelligence platform, the Global Mindpool, to help tackle the most important issues of our time. Linking insights from around the world - on the climate emergency, the crisis in nature and inequality – the Global Mindpool will support UNDP to better inform and equip policy makers in government, civil society, and the private sector.
Learn more at dontchooseextinction.com.