Eliminating Fossil Fuel Subsidies
Climate change is an urgent threat to humanity and the environment, and it is caused by greenhouse gases released into the atmosphere through man-made activities. Recently, scientists have come to the conclusion that eliminating the subsidies which prop up the use of fossil fuels, by governments across the world, is a viable and necessary solution to tackling the negative effects of global warming.
In this article, we will explore in detail the arguments for eliminating fossil fuel subsidies, as well as consider some of the ways in which these subsidies could be phased out in order to gradually decrease our dependence on polluting energy sources.
What are Fossil Fuel Subsidies?
Fossil fuel subsidies are payments and other forms of financial aid, which are designed to reduce the cost of oil, gas and coal usage, and encourage the production, distribution, and consumption of these energy sources. Although these subsidies are intended to increase access to cheaper energy, the direct result is that carbon emissions from these sources are not adequately priced, and their usage tends to be taken for granted.
In 2018, the International Monetary Fund (IMF) estimated that global fossil fuel subsidies amounted to around $5.2 trillion. This is equivalent to six times the amount of money required to fund the United Nations Sustainable Development Goals, or 6 times the annual healthcare budget of the United States. It is also five times the amount spent on renewable sources of energy.
The Arguments for Eliminating Fossil Fuel Subsidies
The case for eliminating fossil fuel subsidies is compelling. Firstly, those consumers who are most dependent on these energy sources, such as the poorest in society, are being disproportionately affected by the economic impacts of global warming. This makes it more difficult for them to survive in an increasingly hostile and uncertain world.
Secondly, by subsidising and encouraging the over-usage of carbon-rich energy sources, governments are actually making it more difficult to shift away from their dependence on them, as alternative energy sources such as renewable energy become comparatively more expensive in comparison.
Finally, subsidising the production and usage of fossil fuels slows down the transition to renewable energy sources, making the pathways to a carbon-free society more difficult and more costly for governments, businesses and the public alike.
The Alternatives to Eliminating Fossil Fuel Subsidies
It might seem like a no-brainer to immediately scrap all subsidies related to fossil fuels, but this is not necessarily so. In fact, this can sometimes have unintended consequences.
For instance, completely removing subsidies might lead to increased fuel prices which could lead to fuel poverty, where households are unable to afford their energy bills. This would make it harder for the poorest in society to access heating and other services.
It is therefore important to consider alternative strategies to make fossil fuel usage less attractive and/or more financially costly. This might include creating financial disincentives for usage, rather than increasing the subsidies, such as taxes on carbon-rich fuels – thus making them more expensive for consumers and producers alike.
Additionally, creating incentives for businesses and governments to switch to renewable energy sources, such as providing grants for research into clean energy technology and increasing investment into the renewable energy industry, can be an effective way of reducing the appeal of fossil fuels.
Phasing out Fossil Fuel Subsidies
Clearly, there is an urgent need for governments to drastically reduce their reliance on subsidies related to fossil fuels. But this should not be done in a haphazard or overly-hasty manner. It is important to consider the potential social, economic and political impacts that a sudden removal of subsidies might have, particularly on the poorest in society.
Instead, governments should aim to gradually scale down the subsidies, while providing alternative sources of support to vulnerable groups, such as low-income or elderly households. Governments should also provide incentives and targets to businesses to switch over to renewable energy sources – such as offering loans, grants and other forms of financial assistance.
Additionally, governments should introduce financial measures targeted at reducing reliance on carbon-rich fuels, such as carbon taxes and emissions trading schemes. This would incentivise businesses and consumers to become more energy efficient and switch over to cleaner energy sources.
Climate change is an urgent and pressing issue, and drastic measures are needed in order to minimise it’s negative effects. In this respect, eliminating the subsidies which prop up fossil fuel usage is an important step in transitioning to a more sustainable and carbon-free society.
But this should not be done in a blanket fashion, and instead should be done gradually, with alternative financing sources being provided to those who are dependent on these energy sources. Additionally, financial measures such as carbon taxes and emissions trading schemes should be introduced in order to incentivise businesses and households to use renewable energy sources.
By doing this, it will eventually become financially favourable to switch to renewable energy sources and reduce our reliance on carbon-rich energy sources. This is the only way we can ensure a sustainable path to a carbon-free, climate-friendly future.