Climate change has become a very important topic not only on an economic scale, but also in politics. One recent trend we are seeing would be the move towards reducing fossil fuel subsidies. Countries across the globe are putting plans in motion to aid in the climate change problem.
Fossil fuel subsidies are essentially anything that offers the fossil fuel production market an upper hand over other, cleaner, producers of energy. More specifically it is any government action that raises prices that are received by these energy producers, lowers the cost of fossil fuel production, or lowers the price that these consumers pay. The most common examples of these subsidies are tax giveaways, direct funding or even governments offering land and water to fossil fuel companies.
For the United States, direct subsidies to fossil fuels is estimated to be around $649 billion dollars a year. This includes federal subsidies up to $14.7 billion dollars, states subsidies up to around $5.8 billion dollars and externalities like health and environment. If these subsidies were to decrease or even be eliminated, it would result in saving taxpayer’s money and a decrease in greenhouse emissions.
President Biden made an executive order under the title Executive Order 14008. In this order, Biden has made it clear that his administration’s goal is to put the climate crisis at the center of focus by making it an essential element of foreign policy and national security. Under section 102 it states that the order will continue the previous actions of the administration. It further states that President Biden will host an early Leader’s Climate Summit in order to make a “positive contribution to the 26 United Nations Climate Change Conference of Parties”. Among other clauses of this section, Biden states that he has created a new Presidentially appointed position, the Special Presidential Envoy for Climate. This position aims to elevate the importance of climate change under the administration. The executive order also specifies their relationship with fossil fuels. Under it Biden calls for the elimination of fossil fuel subsidies under the FY2022 budget. In order to meet this goal, they aim to repeal thirteen fossil fuel tax preferences. This would make federal revenue increase by around $35 billion dollars over a 10 year span; along with $86 billion dollars that would be raised in the same time period by reforming the taxation pertaining to foreign fossil fuel income. The tax preferences that they are looking to reform encourage more investment in the fossil fuel market. The goal with the tax reform would be to decrease the amount of distortion they apply to the market.
The United States is not the only country looking to reduce fossil fuel subsidies. The European Union is looking to put stricter rules on fossil fuel subsidies. The Union noticed fifteen states that are a part of the European Union spent more money on fossil fuels than green energy in 2019, along with European Union countries providing $56 billion euros in fossil fuel subsidies. The Commission states that they are undergoing an adoption of new legislation in 2022 that will display how the member states have to report their progress in phasing out fossil fuels. In the European Union the subsidies for fossil fuels often have tax exemptions or tax cuts. This has resulted in many of the highly polluting energy fuels having lower rates and cleaner energies or electricity having higher rates. These high-pollutants face an advantage in taxes, which offers many of these industries or producers of these fuels an incentive to keep up with these fossil fuels.
Last year Brussels produced an idea to favor cleaner fuels over the popular dirty fuels. The idea is to take away the tax exemptions from these fossil fuels and other energies would rise. However, these tax changes need to be unanimously approved by the European Union governments. This factor of the process has been seen to be problematic since every government in the Union has the power of veto. A number of member countries have openly announced their hesitance to agree to these costs on the dirty fuels because of the potential social backlash they would face if they increase household bills. Auditors that are reviewing this problem say that a remedy of the future social fallout would be aided by exterminating other taxes or possibly using money that was raised to offer compensation to the affected households.
What the public is witnessing is a global effort to reduce the production and consumption of fossil fuels. With the climate crisis holding a place on the political stage we can expect to see many more policies aiming to control fossil fuel subsidies. This is, hopefully, going to result in a decrease in the dangerously high pollution these dirty fuels produce.
Needless to say, the depth that this topic holds is pivotal. You did a great job at comprising so much information; be it stats or even data that is relevant, in a short blogpost. Advocacy and climate education to me, has always been fascinating and something that is so powerful. I think your style of writing narrates a perfect guise to elaborate more on topics as such. Nicely done!
Thank you! I really believe that it is important to shed light on things that are viewed to the public to be more of a “boring” administrative matter. So, I am glad to hear that you liked the post because it very policy and administrative forward.