Redirecting the $577 billion in government subsidies for fossil fuels could unlock at least half a trillion dollars that could be put to more sustainable uses, the World Bank said in a new report.
The bank is calling for trillions of U.S. dollars stop being wasted on subsidies for agriculture, fisheries, and fossil fuels and be used to help address climate change instead of harming people and the planet.
The World Bank’s report, Detox Development: Repurposing Environmentally Harmful Subsidies, found that direct government subsidies for agriculture, fishing, and fossil fuels combined are around $1.25 trillion a year—around the size of a big economy such as Mexico.
Direct, or explicit subsidies, combined with implicit subsidies for fossil fuels, agriculture, and fisheries, exceed $7 trillion annually, which is around 8% of global gross domestic product (GDP), according to the report.
Implicit subsidies – a measure of the subsidies’ impact on people and the planet – amount to over $6 trillion a year and the burden fall mostly on the poor.
“To subsidize fossil fuel consumption, countries spend about six times what they pledged to mobilize annually under the Paris Agreement for renewable energies and low-carbon development,” the World Bank said.
The World Bank’s report says that government subsidies of $577 billion handed in 2021 to artificially lower the price of oil, gas, and coal, exacerbate climate change, and cause toxic air pollution, inequality, inefficiency, and mounting debt burdens.
“Redirecting these subsidies could unlock at least half a trillion dollars towards more productive and sustainable uses,” the bank says.
Axel van Trotsenburg, Senior Managing Director of the World Bank, commented, “People say that there isn’t money for climate but there is – it’s just in the wrong places.”
“If we could repurpose the trillions of dollars being spent on wasteful subsidies and put these to better, greener uses, we could together address many of the planet’s most pressing challenges.”