World Bank Decries Subsidies

EghtesadOnline: Trillions of dollars are wasted on subsidies for agriculture, fishing and fossil fuels that could be used to help address climate change instead of harming people and the planet, a World Bank report says.

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20 June 2023

Trillions of dollars are wasted on subsidies for agriculture, fishing and fossil fuels that could be used to help address climate change instead of harming people and the planet, a World Bank report says.

The report, Detox Development: Repurposing Environmentally Harmful Subsidies, says global direct government expenditures in the three sectors are $1.25 trillion a year, around the size of a big economy such as Mexico.

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.

“People say that there is not money for climate but there is – it is just in the wrong places,” said Axel van Trotsenburg, senior managing director of the World Bank.

“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.”

The report notes that government subsidies of $577 billion in 2021 to artificially lower the price of polluting fuels, such as 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 for more productive and sustainable uses.

The problem is bigger than direct government expenditures.

The report assesses the harmful impact of implicit subsidies, which amount to $6 trillion each year.

These represent the costs on people and the planet from pollution, greenhouse gas emissions, road congestion and the destruction of nature ultimately resulting from the subsidies.

In agriculture, direct subsidies of more than $635 billion a year are driving the excessive use of fertilizers that degrade soil and water, and harm human health.