STATISTICAL STUDY ON THE IMPACT OF FOSSIL FUEL SUBSIDY ON GREENHOUSE GAS EMISSIONS

Abstract

Fossil fuel subsidies harm countries by emitting Greenhouse gases and artificially creating a price that is not a realistic price for their usage. They indirectly block the path for clean energy investments by making fossil fuel consumption more affordable and encouraging their wasteful consumption such as in large cars with lower mileage. Consequently, fossil fuel subsidies lead to climate change which in turn causes water pollution, air pollution, and biodiversity loss. They are also expensive and inefficient because adequate safeguards are not built by countries so that these subsidies go only to the economically weaker section but instead, these benefits go to the wealthy. Fossil fuel subsidy reform can substantially aid the fight for climate change because it will help reduce demand. Global aid was US$5.9 trillion in 2020, accounting for approximately 6.8% of GDP, and is expected to rise to 7.4% of GDP by 2025. Despite the high cost of fuel subsidies, it is possible to achieve significant results with financial reforms. Removing these subsidies is expected to lead to a reduction in global greenhouse gas emissions of approximately 32% below 2018 levels, in line with limiting world warming to 1.5 degrees Celsius by 2030. It is widely recognized that countries with high fossil fuel subsidies tend to have significantly higher greenhouse gas (GHG) emissions. Global estimations suggest that nations artificially lowering the cost of fossil fuels emit 11.4% more GHG emissions compared to those that do not adopt such practices. Despite this widely known issue, the overall extent of subsidies continues to remain at elevated levels. Initial small subsidies aimed at maintaining price stability can evolve into entrenched schemes. These subsidies draw in interest groups that advocate for increasing permanent subsidies, making it challenging to eliminate or redirect them. The issue with energy subsidies lies not in understanding their negative impact but in the complexities of political economy. v The Fossil Fuel Subsidy dataset has the latest data from 3 international databases, including organizations such as the OECD, the IEA, and the IMF. The inputs from the three organizations are based on two different approaches, which allow us to comprehend the output better.