Emmanuel Addeh in Abuja
Although world governments agreed at the COP26 climate summit in Glasgow two years ago to phase out “inefficient” fossil fuel subsidies to help fight global warming, however, global fossil fuel subsidies have risen $2 trillion to $7 trillion.
According to the International Monetary Fund (IMF), this development came as governments around the world moved to protect consumers from rising energy prices.
At this year’s climate gathering in Dubai, EU countries will be looking to harden the COP26 deal to phase out the subsidies by pushing for a deadline of 2030 to get it done, but it is unclear how much support the proposal will gain.
EU governments were among those that have increased support for fossil fuels since Glasgow, mainly as a response to energy security concerns following Russia’s invasion of Ukraine.
A report by Reuters stated that China’s total fossil fuel subsidies were the highest in the world at $2.2 trillion in 2022, amounting to 12.5 per cent of the country’s total Gross Domestic Product (GDP).
The bulk of the subsidies are “implicit”, a category which includes undercharging for environmental costs or forgoing tax revenues, the IMF said.
Support offered to coal-fired power plants includes direct funding, preferential loans, and power purchase guarantees.
In the United States, fossil fuel subsidies stretch across the tax code, which makes detailing their costs complex. The IMF estimates they stood at $760 billion in 2022, a figure topped only by China.
One US tax break called intangible drilling costs allows producers to deduct a majority of their costs from drilling new oil wells. The Joint Committee on Taxation, a nonpartisan panel of Congress, has estimated that eliminating it could generate $13 billion over a decade.