G20 could push for the funds to be shifted to cleaner energy

FOSSIL FUELS ARE STILL SUBSIDISED

- PROFESSOR LLEWELLYN LEONARD

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 under-priced 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.

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$2.05bn) in 2018 to R118bn (US$6.2bn) 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.