Developed Countries Spent More on Fossil Fuel Subsidies in 2023 Than on New Climate Finance Package

New Delhi: In 2023, developed countries spent USD 378 billion on fossil fuel subsidies, exceeding the USD 300 billion they pledged to annually provide to developing nations by 2035 for climate action, according to recent data.

An analysis by the International Institute for Sustainable Development (IISD) revealed that government support for fossil fuels totaled at least USD 1.5 trillion in 2023, marking the second-highest annual amount ever, following the record set in 2022 due to the Russia-Ukraine war's impact on global fossil fuel prices.

Russia, Germany, Iran, China, Japan, India, Saudi Arabia, the Netherlands, France, and Indonesia are the 10 largest subsidisers of fossil fuels in 2023.

The data revealed that 23 developed nations (Annex II countries) -- mandated under the UN climate convention to provide climate finance to the developing world -- spent USD 378 billion on fossil fuel subsidies.

At the UN climate conference in Baku, Azerbaijan, last month, these nations committed to providing USD 300 billion to developing countries by 2035 to help them tackle climate change -- a far cry from the USD 1.3 trillion that the Global South needs annually to cope with the rapidly warming world.

India, Bolivia, Nigeria, and Malawi, speaking on behalf of a group of 45 least developed countries (LDCs), severely criticised the new climate finance package for the developing world.

India argued that USD 300 billion is insufficient to implement ambitious national climate plans known as Nationally Determined Contributions (NDCs) and pointed out that when adjusted for inflation, it falls short of the previous USD 100 billion goal agreed in 2009.

IISD researchers said developed countries spending USD 378 billion on fossil fuel subsidies shows that public funds are available but are being "directed in the wrong direction". They suggested that fiscal space freed up through fossil fuel subsidy reforms could be redirected to meet climate finance commitments.

Fossil fuels -- coal, oil, and gas -- are the largest contributors to climate change, accounting for over 75 per cent of global greenhouse gas emissions and nearly 90 per cent of all carbon dioxide emissions.

Although many governments have taken steps to reduce the carbon intensity of their economies, certain policies still encourage fossil fuel production and consumption. Fossil fuel subsidies are a prime example of such policies.

A fossil fuel subsidy refers to a government intervention that provides benefits or preferences for fossil fuel production or consumption relative to alternatives.

(with agency inputs)