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After COP26, fossil fuel subsidies need to end

2021.11.16

After COP26, fossil fuel subsidies need to end

Social impact

Sustainability

Robert Falck, Founder and CEO

A month before fossil fuels became a headlining piece of the COP 26 agreement, the International Monetary Fund (IMF) published a working paper on explicit and implicit fossil fuel subsidies across the globe. They estimated that the fossil fuel subsidies reached $5.9 trillion in 2020, or 6.8 percent of the global GDP. 

This is equivalent to a staggering $11 million a minute or close to $16 billion per day.

As if this was not bad enough, the IMF expects global fossil fuel subsidies to continue to increase and reach 7.4 percent of GDP in 2025. If subsidies would be abolished and efficient fuel pricing would become reality in 2025, however, the IMF forecasts that global carbon dioxide emissions could fall to 36 percent below baseline levels – in alignment with keeping global warming to 1.5 degrees – and also prevent close to 1 million air pollution deaths per year.

Even though explicit fossil-fuel consumption subsidies were down in 2020, the UN Development Programme recently showed that four dollars are spent on fossil fuel subsidies that keep the climate crisis alive for every dollar pledged to tackle the climate crisis for the world's poor. 

Another way to put these numbers into perspective is that explicit subsidies could pay for COVID-19 vaccinations for every person in the world. Perhaps even more astounding, explicit subsidies could pay the annual amount needed to eradicate global extreme poverty three times over.

The conclusion that the UNDP draws is therefore loud and clear: “Removing fossil fuel subsidies is key to reduce greenhouse gas emissions and limit climate change.”

What did COP26 manage to achieve regarding fossil fuel subsidies?

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At COP26 in Glasgow, nearly 200 nations had a unique opportunity to deal with the fossil fuel subsidies head on.

John Kerry, the U.S. special envoy for climate change, described fossil fuel subsidies as the “definition of insanity.”

In a similar vein, EU climate policy chief Frans Timmermans emphasized the need to send a clear signal and to “halt fossil fuel subsidies.”

And for a short while, this much needed signal was actually part of the draft of the final text in terms of a call upon all parties “to accelerate the phasing-out of coal and subsidies for fossil fuel."

What started out as a clear signal, however, got progressively watered down under pressure from India, China, South Africa and Saudi Arabia. Instead of phase-out all fossil fuel subsidies, the final version of the Glasgow Climate Pact calls upon all parties to "accelerate efforts towards phase-out of unabated coal power and inefficient fossil fuel subsidies.”

What could have become a game changer – in a crucial point in time – was instead turned into a global disappointment almost as large as the subsidies themselves.

Einride at COP26: “Put an end to fossil fuel subsidies for good”

During the second week of COP26 in Glasgow, and during Transport Day, Einride presented what the electric and autonomous transportation system of tomorrow will look like. Electrification of transport can reduce emissions by 90% or more, and by combining electric transport with frontline autonomous technology, the future transportation system will not only be environmentally sustainable but will also become substantially safer. 

But to make the shift from a fossil fuel-based transportation system to a green and electric transportation system, one of the key decisions that the world urgently needs to make is to put an end to fossil fuel subsidies once and for all. This was also one of our key messages at COP26 that unfortunately did not become mirrored in the final text of the Glasgow Climate Pact.

The challenge to making the shift to a greener and safer transportation system is no longer related to technology. The innovations necessary to transform these systems already exist, and are on the market. Instead, it is about immediately stopping support for the transport system of the past. 

Despite COP26 being over, we will continue to push for an end to all fossil fuel subsidies with full force, and look forward to returning to the Conference of the Parties next year with the very same message. By putting a stop to “the definition of insanity,” we can instead turn our undivided attention to creating institutional frameworks to match new technology, and  to add momentum to the shift that is already taking place in the market.

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