As the G20 presiding nation, South Africa has an opportunity to champion issues relevant to emerging economies. One of these issues is government subsidisation of privately owned fossil fuel corporations.
Fossil fuel subsidies are paid when a government covers some of the costs involved in producing fossil fuel energy. This can be done by increasing the revenue received by oil, gas or coal companies, or lowering the price paid by consumers for fossil fuel based energy.
Fossil fuel subsidies may include tax breaks, low interest loans, and underpriced energy, all of which reduce costs for companies or consumers and encourage more fossil fuel use.
Some subsidies are explicit: when fuel is sold below its real supply cost or when producers receive financial support from the government. Others are implicit: when fuel prices don’t reflect the full environmental and health costs. For example, what the consumer pays for petrol excludes the cost of impacts like pollution.
Read more: Countries spend huge sums on fossil fuel subsidies – why they're so hard to eliminate
African countries such as South Africa, Ethiopia and Morocco all subsidise fossil fuel companies. This can mean taking on debt, raising taxes, or cutting public spending to free up money for the subsidies. This hits low-income households, which rely on public services the most.
South Africa’s fossil fuel subsidies tripled from R39 billion (US$2.05 billion) in 2018 to R118 billion (US$6.2 billion) in 2023. Fossil fuel subsidies can occur for many reasons, such as making fuel more affordable for low-income households, to promote economic competitiveness or to attract industry. Yet the country wants to move away from fossil fuels, which have damaged local communities and the environment.
Read more: Vast subsidies keeping the fossil fuel industry afloat should be put to better use
I am an environmental scientist who researches emerging risks from fossil fuel pollution and how industrial risks are governed. My research, as well as work by others, shows that fossil fuel subsidies are associated with greater greenhouse gas emissions. Now there’s an opportunity for South Africa to do something about it at scale.
South Africa has set four key priorities for its 2025 G20 presidency. These are: strengthening disaster resilience; keeping debt levels down; mobilising the finance needed to move to renewable energy; and setting up green industries.
South Africa, as G20 president, should push for fossil fuel subsidies to be shifted into funding cleaner energy and climate adaptation.
This should be paired with strong support for clean energy investments and measures to retrain fossil fuel workers for sustainable, green economy jobs.
The cost of fossil fuel subsidies
The G20 is made up of 19 of the world’s largest economies, spanning both developed and developing nations, along with two regional blocs: the European Union and the African Union. Collectively, its members represent 85% of global gross domestic product, over 75% of international trade, and approximately two-thirds of the world’s population.
Developed countries are the largest historical contributors to greenhouse gas emissions. They’ve built their industries using fossil fuels.
Globally, fossil fuel subsidies amount to US$11 million every minute. Despite a commitment in 2009 to scale back subsidies, the G20 nations spent over US$1 trillion on them in 2023.
Read more: Fossil fuel subsidies cost Canadians a lot more money than the carbon tax
That’s despite the damage these pollutants have caused to the environment and their contribution to climate change. There is clear scientific evidence that phasing out these subsidies would save millions of lives fast, through reduced air pollution. Over the long term, it would save lives of people who would otherwise die in extreme weather events.
The world’s 20 largest fossil fuel companies have contributed to 35% of global emissions since 1965. Yet many have avoided financial accountability for the environmental damage they have caused. Subsidising fossil fuel companies also makes unsubsidised renewable energy less affordable. Developing countries then become locked in to high carbon (fossil fuel-based) pathways.
South Africa has a deep dependence on fossil fuels. Eskom, the state-owned power utility, relies on burning coal to generate electricity, which causes over 99.8% of its greenhouse gas emissions. Despite ambitious renewable energy goals, the country struggles to secure sufficient investment in clean energy projects. By advocating for an end to fossil fuel subsidies at the G20 level, South Africa can help level the playing field for renewables and address its own energy security challenges.
A commitment yet to be fulfilled
Ending fossil fuel subsidies is not a new idea. The International Monetary Fund, the United Nations Environment Programme and the International Energy Agency, along with civil society advocacy groups, agree that phasing out these subsidies is essential.
The G20 nations pledged in 2009 to phase out fuel subsidies that encourage wasteful consumption and undermine efforts to tackle climate change. But progress has been slow because of political resistance and lobbying by the fossil fuel industry. The result is that many of the G20 nations have not invested enough in renewable energy. They have continued to heavily subsidise fossil fuels.
What South Africa can do as G20 president
Ending fossil fuel subsidies is not just about removing financial support. It is about using those resources better by redirecting the money to solar, wind and other renewable technologies.
As G20 president, South Africa should set up a working group or ministerial dialogue focused on subsidy reform. Forging coalitions with other emerging economies and civil society actors will build support.
Read more: Polluters must pay: how COP29 can make this a reality
South Africa can help reshape the global conversation to centre on economic justice and energy security.
As president it should encourage G20 members to adopt clear, actionable renewable energy transition plans that safeguard workers (like coal and oil workers) and communities who will be left worse off when fossil fuel subsidies end and their industries close down. This will ensure a just and inclusive move towards a cleaner energy future.
Llewellyn Leonard does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
This article was originally published on The Conversation. Read the original article.
