Monday 18th November 2019
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Civil society asked to join in campaign to end fossil fuel subsidy

Civil Society Organisations (CSOs) have been called upon to engage in campaigns that expose all government subsidies to fossil fuel corporations, and work to end the policy.

fossil fuels subsidy

Phasing out of fossil fuel subsidies has generated numerous debates, such as those at the COP21 climate conference in Paris, where a communiqué outlined important messages on how the world can phase out fossil fuels

In the January 2018 Climate Scorecard Report No 16 made available to EnviroNews, CSOs were enjoined to contact policymakers at national, provincial, state and local levels of their government and urge them to take steps to comply with the call by the G7 and G20 countries to end all fossil fuel subsidies by the year 2025 – or sooner.

In the report titled: “Fossil fuel subsidies in leading greenhouse gas emitting countries”, Climate Scorecard, a not-for-profit group, summarises recent annual fossil fuel subsidies and policies of the 20 leading greenhouse gas emitting countries, including Nigeria ($160 million in 2017). They range in magnitude from $60.9 billion (Saudi Arabia) to $667 million (South Korea).

A subsidy is a sum of money granted by a government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive. In many countries, tax-payers’ money is given by governments as subsidies to fossil fuel corporations. These subsidies are used to help develop new sources of coal, oil and gas and to make energy from these sources less expensive to consumers.

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According to the journal World Development, fossil fuel subsidies were $4.9 trillion worldwide in 2013 and $5.3 trillion in 2015 (6.5% of global GDP in both years). Coal subsidies are said to account for about half of global subsidies.

Fossil fuel subsidies take many different forms including: direct support for both national and international exploration of new sources of oil, coal and natural gas; tax breaks and exemptions; concessional loans to fossil fuel producers; and subsidisation of consumer energy prices.

Subsidies, it was gathered, have the effect of artificially lowering the cost of fossil fuel energy, and giving fossil fuel companies a competitive advantage over renewable energy providers.

“They represent a drain on government revenue and a poor use of taxpayer money. Subsidies contribute to global warming caused by fossil fuel generated CO2 emissions, and to atmospheric pollution that has been linked to increases in respiratory illnesses and other diseases. There is now a worldwide movement to end fossil fuel subsidies,” the Climate Scorecard report says.

However, G7 countries (UK, US, Canada, France, Germany, Italy, Japan and the EU) have pledged to end fossil fuel subsidies by 2025. The G20 nations also have called for the termination of all such subsidies, though have yet to set a target date.

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The report adds: “These subsidies to fossil fuel corporations have helped to make these corporations among the wealthiest entities in the world with enormous annual profits going to many of the wealthiest individuals in the world. In addition, the oil industry is one of the most powerful players and influencers in the global economy. In most countries, fossil fuel corporate lobbyists press governments to continue and expand these very beneficial subsidies.”

Besides those of Nigeria, Saudi Arabia and South Korea, the report lists fossil fuel subsidies in other leading greenhouse gas emitting countries to include: Argentina ($13.6 billion in 2014 in consumption subsidies), Australia ($11 billion per annum from tax-based subsidies), Brazil ($59.3 billion per annum from subsidies to private companies), Canada ($46.4 billion per annum), China (partial estimate $15.42 billion; complete estimate unavailable), Germany ($40 billion fiscal support and public finance $2.88 billion per year, 2014-2016), India ($20.4 billion in 2016), Indonesia ($8 billion in 2015, $4 billion in 2016), Italy ($17.5 billion in 2016) and Japan ($376 million).

Others are: Mexico ($11 billion spent in subsidies in 2012, 1.4% of Mexico’s GDP), Russia ($14.4 billion in 2010), Spain ($1.4 billion between 2014 and 2016), Thailand ($.438 billion spent on fossil fuel subsidies in 2016), Turkey (estimated between $300 million and $1.6 billion), United Kingdon ($8 billion every year) and United States ($8.157 billion in 2015).

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Nigeria introduced petroleum subsidies in the 1960s with the aim of strengthening its local industry and improving product affordability and domestic consumption. A report published by the Council on Foreign Relations estimates that the Nigerian government spent about $20 billion on fuel subsidy in 2013.

The subsidy was removed in May 2016 amid falling crude oil price and an economic recession. However, more than $160 million was spent on subsidy in early 2017 as the national oil company absorbed costs due to an increase in crude oil price from about $20 per barrel in 2015 to about $50 per barrel for most of 2017.

Observers say that the short duration of the subsidy removal makes it difficult to assess its effect on carbon emissions reduction.

The collapse in crude oil price in recent times is said to be an important factor that led the Federal Government to remove fuel subsidies. It also was felt that an enduring global shift in focus from fossil fuels to renewables (available at an affordable price) would drive down petroleum prices and naturally incentivise the government to remove subsidies.

It is also felt that local production and supply of petroleum products by existing and new refineries would eliminate much of the costs subsidised by the government.

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