Globally, fossil fuel subsidies still run into hundreds of billions of dollars
To have any hope of meeting emissions targets, fuel prices must be allowed to move towards their market level.
This new study suggests removing subsidies can have a major impact on industrial CO2 emissions.
There is no shortage of evidence on why governments should ditch fossil fuel subsidies. Artificially low prices prompt increased consumer demand and so more environmentally harmful fuels are produced, adding to air pollution and CO2 emissions. Subsidies also deter industry from putting energy-efficiency measures in place and may delay moves to invest in more efficient machinery, which could harm long-term industrial competitiveness. From an economic welfare point of view, they misallocate public funds that could be better directed for social or other economic use.
ASEAN Chairman’s statement:
The ASEAN-United Kingdom (UK) Open-Ended Troika Meeting was held on 8 April 2021 via videoconference to discuss the critical situation on the COVID-19 pandemic, initiatives to build a resilient and sustainable economic recovery, and efforts to address the adverse impact of climate change.
The Meeting was chaired by The Honourable Dato Erywan Pehin Yusof, Minister of Foreign Affairs II of Brunei Darussalam, in his capacity as the Chair of the ASEAN Foreign Ministers’ Meeting (AMM), and attended by His Excellency Prak Sokhonn, Deputy Prime Minister and Minister of Foreign Affairs and International Cooperation of the Kingdom of Cambodia, as the incoming Chair of the AMM, His Excellency Dato Lim Jock Hoi, Secretary-General of ASEAN, and The Right Honourable Dominic Raab MP, First Secretary of State and Secretary of State for Foreign, Commonwealth and Development Affairs of the UK. Other Foreign Ministers and high representatives of ASEAN Member States al
08 Apr 2021
Jenny Larsen,
Main picture by Juozas Šalna, licensed under CC BY 2.0
Fresh in collaboration with the World Bank provides concrete evidence that removing fossil fuel subsidies would not only make environmental sense but would also improve firms’ economic performance. New firm-level data from Oman show that higher fuel prices are not a drag on competitiveness. In fact, reducing subsidies and allowing fuel prices to rise could ultimately aid the post-COVID-19 recovery. This is because, according to the data studied, higher fuel prices drive business upgrading, leading to a boost in productivity. They could also encourage manufacturing companies to switch to the kind of long-term sustainable efficiency practices needed to stop climate change.
By the time of the 2015 Paris Climate Agreement, optimism was running high, with international co-operation encouraging everyone forward. The cost of solar and wind energy was tumbling, cities around the world were planning for cleaner forms of transport, and individual countries were setting out ambitious climate paths. But since then, the earth’s climate has continued to warm, adding extra urgency to meeting, if not beating, our globally agreed targets.
The 2020 UN Climate Change Conference, COP26, in Glascow in November offers a chance to lift momentum. It is time for our countries to get on track to meet their targets and deliver the zero-carbon future we all need and deserve.
ASEAN Chairman’s statement:
The ASEAN-United Kingdom (UK) Open-Ended Troika Meeting was held on 8 April 2021 via videoconference to discuss the critical situation on the COVID-19 pandemic, initiatives to build a resilient and sustainable economic recovery, and efforts to address the adverse impact of climate change.
The Meeting was chaired by The Honourable Dato Erywan Pehin Yusof, Minister of Foreign Affairs II of Brunei Darussalam, in his capacity as the Chair of the ASEAN Foreign Ministers’ Meeting (AMM), and attended by His Excellency Prak Sokhonn, Deputy Prime Minister and Minister of Foreign Affairs and International Cooperation of the Kingdom of Cambodia, as the incoming Chair of the AMM, His Excellency Dato Lim Jock Hoi, Secretary-General of ASEAN, and The Right Honourable Dominic Raab MP, First Secretary of State and Secretary of State for Foreign, Commonwealth and Development Affairs of the UK. Other Foreign Ministers and high representatives of ASEAN Member States al