"Carbon Taxation & Potential Fund Utilization in G20's "

Introduction:

In a world grappling with the pressing need for climate action, recent revelations regarding the G20 countries' staggering $1.4 trillion support for fossil fuels in 2022 raise alarming concerns. This financial lifeline to the fossil fuel industry, as outlined in a report by the International Institute for Sustainable Development (IISD), not only perpetuates our dependence on fossil fuels but also poses significant threats to global climate goals and economic stability.

The Energy Price Crisis:

The catalyst for this unprecedented support was the energy price crisis triggered by Russia's invasion of Ukraine in February of the preceding year. In response, G20 governments deployed a multitude of tools, including subsidies, state-owned enterprise investments, and public financial institution lending, to cushion the fossil fuel industry and protect consumers.

Climate Goals in Jeopardy:

This financial aid not only undermines the transition to clean energy but also hampers progress toward climate objectives outlined in the Paris Agreement. By incentivizing greenhouse gas emissions and eroding the cost-competitiveness of clean energy, the G20's actions directly contradict their commitments made in 2009 and 2015.

A Misallocation of Resources:

A third of the $1.4 trillion went toward investing in new fossil fuel production, a stark contradiction to the G20's commitment to phase out inefficient fossil fuel subsidies while supporting the poorest. The focus on fossil fuels represents a missed opportunity to redirect resources toward sustainable support for social protection and the scaling-up of clean energy.

Consumer Subsidies:

A significant portion of the subsidies targeted consumers, particularly in emerging economies, where governments fixed retail fossil fuel prices below international market rates. While these measures aimed to alleviate energy costs, they created substantial budget deficits for governments and state-owned enterprises.

Developed Economies' Role:

Even developed G20 economies like Germany, France, and Italy provided substantial fossil fuel crisis support in 2022, totaling $213 billion. While some measures were temporary, the report recommends targeting welfare payments to ensure low-income consumers, workers, and communities are protected during the transition away from fossil fuel subsidies.

Justifiable Subsidies:

The researchers suggest reevaluating the term "inefficient" when considering subsidies and instead focusing on exceptional cases where subsidies are justifiable, such as ensuring access to energy for marginalized communities. The key lies in improving the targeting of these subsidies to reach those in genuine need.

Investment in Fossil Fuel Production:

State-owned fossil fuel producers and fossil-generated electricity providers invested a staggering $322 billion in new capital expenditure in 2022. This not only increases greenhouse gas emissions and pollution but also contradicts efforts to transition to cleaner energy sources.

International Public Finance:

G20 countries provided $50 billion per year for international public finance between 2019 and 2021, a stark contrast to the meager $13 billion per year for clean energy support. This imbalance must be addressed to align with global climate objectives.

Carbon Taxation & Potential Fund Utilization:

One potential solution could be the implementation of a minimum carbon taxation rate, $25-75 per tonne of carbon dioxide equivalent depending on its economy, generating an estimated $927 billion annually for the G20. These funds could be redirected toward critical global goals, including ending world hunger, universal access to clean energy, and bridging the investment gap in renewable energy generation.

Some of these funds could be channeled into $33 billion per year to end world hunger (SDG 2); $36 billion per year to achieve universal access to electricity and clean cooking in ways that align with net-zero emissions (SDG 7.1); $450 billion to fill the investment gap for renewable energy generation (SDG 7.2) and the $17 billion per year investment gap in developing country clean energy finance.

Conclusion:

The G20's staggering $1.4 trillion support for fossil fuels in the wake of the energy price crisis represents a significant setback in the fight against climate change. Urgent action is required to shift financial resources away from fossil fuels and toward sustainable alternatives. By reevaluating subsidies, targeting assistance effectively, and investing in clean energy, the G20 can align its actions with global climate goals and foster a more sustainable and secure future for all.

Author: M.K. Singh (Founder- Net Zero Think Private Limited)