Taxpayers across the world are subsidising fossil fuels with billions of dollars. Governments spent about half a trillion dollars last year, with the USA alone pumping $409billion into keeping the price of fuel artificially low, according to the Organisation for Economic Co-operation and Development (OECD) and the International Energy Agency (IEA).
This subsidy is a risky strategy in the current economic climate, said Maria van der Hoeven, IEA Executive Director: “In a period of persistently high energy prices, subsidies represent a significant economic liability.”
The two international bodies suggest that scrapping these “inefficient” subsidies would actually raise national revenues and cut greenhouse-gas emissions.
Angel Gurria, OECD’s Secretary-General said: “Both developing and developed countries need to phase out inefficient fossil fuel subsidies. As they look for policy responses to the worst economic crisis of our lifetimes, phasing out subsidies is an obvious way to help governments meet their economic, environmental and social goals.”
The OECD’s report, the Inventory of Estimated Budgetary Support and Tax Expenditures For Fossil Fuels, which covers 24 countries, found that over half of the financial support was for petroleum.
The IEA is due to publish its own report later this year detailing the economic and energy security benefits to be had from phasing out fossil fuels. Examples it will give include how Germany is set to have completely phased out its subsidies to hard-coal mining by 2018 from nearly €5billion in 1999.