Hydrocarbon subsidies increasing exponentially

2023-08-30 10:02:43

Hydrocarbon subsidies have exploded in 2022, confirm two recent reports. A surge in complete contradiction with the commitments made for years by the G20.

According to the International Monetary Fund (IMF) study, $1.3 trillion was spent last year to subsidize gas, oil and electricity consumption in 170 states. This is four times more than in 2020, the year in which the Fund conducted the same survey. Another report issued by the Canadian research institute, the International Institute for Sustainable Development (IISD), arrives at figures of the same order. Focusing on the G20 alone, he estimates that club spending reached $1 trillion, four times more than the previous year.

These two new studies update the already worrying forecasts made last February by the International Energy Agency and they are frightening. The big gap between reality and the ambitions displayed, removing subsidies that encourage the consumption of hydrocarbons, has suddenly widened in 2022, because of the energy crisis caused by the war against Ukraine.

Surge in gas, oil and electricity

The prices of gas, oil and electricity, often produced using hydrocarbons, have soared and governments have sought to protect the purchasing power of households. 97% of subsidies are for consumers. In Europe, for example, tariff shields have caused hydrocarbon subsidies to jump by 300% in 2022. The palm of the regions with the highest spending goes to Asia-Pacific. It is China, the largest supplier in the world of subsidies, which considerably increased the envelope of the region by distributing 270 billion dollars to reduce the energy bill. This is twice as much as Saudi Arabia, the second biggest spender on hydrocarbon subsidies. In terms of region, North Africa associated with the Gulf countries, come in second place. Sub-Saharan Africa, where many governments have waived subsidies this year to reduce public spending, often under pressure from donors, represents only a tiny share of total subsidies, less than 3%.

Studies published on the eve of the G20 and COP28

It is first at the G20 which will take place next week that the question should be addressed because the member countries have committed themselves in 2019 to eliminate these subsidies. The host country of the summit, India, is considered a good student in this area. Subsidies for polluting energies have fallen by 75% between 2014 and 2022, but their current amount, more than seven billion dollars, is still much higher than aid for electric cars and renewable energies.

Now that the pressure has subsided on the energy markets, governments are trying to pull out massive plans to support hydrocarbons. The return to the previous situation is smooth in the richest countries. In a context of market uncertainty on the eve of winter, the period of high consumption in the northern hemisphere. The Canadian institute calls for a deadline for the end of hydrocarbon subsidies, before 2030; the IMF insists above all on the benefits of their abolition: States would regain financial leeway to target aid to the most vulnerable households and to finance more clean energy.