IMF Head Advocates For End Of Fossil Fuel Subsidies At COP 28 Climate Summit – CleanTechnica

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As the Earth hurtles toward a full fledged climate catastrophe, is there anything dumber than governments giving subsidies to fossil fuel companies to produce more coal, oil, and methane? It’s like paying drug pushers to to sell more cocaine or heroin. We understand these companies are facing an existential crisis as demand for their products declines, but they are raking in record profits — and paying their executives record compensation — so why do they need to be propped up by governments?

All those right wing fanatics who sleep with a book by Ayn Rand next to them like to extol the virtues of the free market and rugged individualism, so why do they accept cash from taxpayers to fatten their bottom line? Is it because greed is stronger than their cherished principles? Hmmm…..perhaps.

Fossil Fuel Subsidies At COP 28

Monday, December 4, 2023 was finance and trade day at the COP 28 climate summit in Dubai, with governments, finance institutions and private sector investors discussing new initiatives to help find the trillions of dollars needed to shift the world to a low-carbon economy. Everyone agrees that a tax on carbon emissions is a non-starter. What? Make companies pay for the damage they do? That’s crazy talk! Such a tax would increase the price of….well….everything and place an intolerable burden on the poor.

That argument might make some sense if the fossil fuel companies actually cared a flying fig leaf about the poor, but since by their own admission they only exist to increase shareholder value (and pay their top executives billions), we can dismiss such protestations as Grade A horse puckey,

Kristalina Georgieva, the managing director of the IMF, told the COP 28 delegates on Monday that it was possible to make activities with high carbon emissions reflect their true costs to society by using regulation and by cutting the subsidies that encourage fossil fuel use. This past summer, the IMF calculated the direct and indirect subsidies that go towards fossil fuels — not counting proven impacts such as health costs — had reached more than $7 trillion after being driven to record levels by cost of living increases related to higher interest rates.

Diverting those trillions of dollars and putting an implicit price on carbon emissions would generate the vast amounts of cash needed to tackle the climate crisis, Georgieva said. “We have been slow on a very important policy thought, which is the incentive for investors by still tolerating high levels of fossil fuel subsidies,” she told The Guardian in an interview. “And [the world has made this worse] by being still fairly slow on introducing carbon pricing, and giving a trajectory for this carbon price upward.” Getting rid of those subsidies would allow that money to be used for promoting renewable energy and other low-carbon technologies, stimulating the market for “clean” growth, said Georgieva.

Putting Subsidies To A Higher Purpose

Studies by prominent economists have shown that trillions are needed around the world each year in investment in renewable energy and other low-carbon technology. Developing countries alone will need more than $2 trillion a year by 2030 to cut emissions and cope with the impact of extreme weather. These sums may seem huge, but they are relatively small in the context of a global economy that is valued at around $450 trillion.

Economists have argued for decades that pricing carbon is the most effective way to lead economies to a shift away from fossil fuels. “The evidence is, first it works,” said Georgieva, who was a former chief executive of the World Bank and a leading European commissioner before she took on her current role in 2019. “When you put a price on carbon, decarbonization accelerates. The Europeans introduced the emission trading scheme [in 2005] and [their economies have been growing] and yet emissions went down by 37%. You see the same thing in Canada with their carbon tax.”

Carbon taxes and emissions trading can also generate revenues for governments. “When we talk about the need to support the transition to the green economy — where the money could come from — here is the source,” she said. Pricing carbon was also fair, she said, as the more companies or individuals contribute to the climate crisis, the more they would pay.

However attractive a carbon price may be in economic theory, in practice governments are reluctant to impose such explicit prices and taxes because they can easily be attacked and because they hit poorer people hardest if poorly applied. The gilets jaunes protests in France were triggered by higher fuel taxes. Carbon pricing proposals in the US and Australia were abandoned after sustained attacks from the right wing.

Pricing Carbon

“It is not likely that we will go to pricing carbon everywhere immediately, because it is not so easy to identify the carbon content and then to put on an appropriate price,” Georgieva conceded. She added that governments could use regulation instead. Specifying minimum levels of efficiency, legislating to phase out high carbon goods, and forcing industries to adhere to higher standards by enforcing more stringent building regulations for new and refurbished homes are ways in which governments can make high carbon activities more expensive.

“When we talk about carbon prices, the perfect should not be an enemy of the good. Yes, the best way to introduce implement carbon prices [is] a carbon tax,” she said. “But it is not politically feasible in some countries. We can also use regulatory compliance in which standards lead to implicit prices on carbon.”

She said the IMF, World Bank, OECD, and World Trade Organization had set up a task force to examine the different carbon prices that are provided in countries around the world by their carbon policies and regulations. This could come prove useful if countries pursue “carbon border adjustment mechanisms” — as the EU is doing — which penalize imports from countries with lax environmental regulations. “[The task force will look at] how we can offer equivalency of these different ways in which to price carbon so there could be fairness and countries can accept that there is a level playing field,” she said.

The Takeaway

The gist of Kristalina Georgieva’s message at COP 28 is that we don’t have to wring our hands and fret about how expensive addressing the looming climate crisis will be. Instead, we can stop directing trillions of dollars to fossil fuel companies that don’t need support from taxpayers and put that money to better use promoting renewable energy strategies that would reduce greenhouse gas emissions so the Earth doesn’t turn into a baked potato that can’t support human life.

The choice is ours to make. A livable Earth or an unlivable Earth? That is the question.