Despite the growing push towards a more sustainable future, including the signing of the Paris climate agreement last year, the subsidies for fossil fuels globally remains significant. Well, things might be about to change, as during the meeting taking place in Japan this week, the G7 countries have committed to ending fossil fuel subsidies within a decade. It is hoped that the ambitious plan may encourage other nations to follow suit.
The heads of state of the US, Canada, the UK, Japan, Germany, France, Italy and the EU, the nations that collectively make up the G7, have all agreed to end the majority of government subsidies paid out to the oil, gas, and coal industry by 2025. If they are able to pull through with this pledge, it could make a significant difference in the fight against climate change, and encourage a more sustainable energy market.
One of the many arguments against the renewable energy sector is the government subsidies that it will rely on. Yet this completely misses out the point that most energy sources, and none more so than the fossil fuel industry, relies heavily on subsidies. In fact, the oil, gas and coal sectors are thought to receive hundreds of billions of dollars' worth of subsidies every year, though this estimate does vary widely, mainly due to all the different types of subsidies handed out, from tax cuts to wage subsidies. What is known, however, is that they outweigh those going to renewables significantly.
“The time is ripe for countries to demonstrate they are serious about combating climate change, and reforming harmful fossil fuel support is a good place to start,” announced Angel Gurría, the Organisation for Economic Co-operation and Development (OECD) Secretary-General in a statement last year. “Governments are spending almost twice as much money supporting fossil fuels as is needed to meet the climate-finance objectives set by the international community, which calls for mobilizing 100 billion US dollars a year by 2020. We must change the course.”
In fact, the G7 countries first pledged to cut the subsidies way back in 2009, but this week marks the moment they set a firm target by which to eliminate most of them by. The official statement does not actually confirm what they mean by “subsidy,” but it is thought that it may include those that distort the energy markets. How this will manifest itself is still unknown. Historically, nations have been reluctant to make such cuts as it will initially inevitably lead to higher fuel costs for their citizens, but with a growing understanding of the need for sustainability, and renewables that are better able to compete with fossil fuels, the situation today might be different.