Globally, countries spent USD 523 billion on fossil fuel consumption subsidies in 2011, presenting a major barrier for a paradigm shift away from fossil fuels. These numbers dwarf the climate finance pledges made by developed countries.
According to International Energy Agency (IEA) models, removing fossil fuel subsidies would drastically decrease global greenhouse gas (GHG) emissions. Removal of fossil fuel subsidies must be carefully designed in order to limit negative social and economic effects and gain public support.
Fossil fuel subsidies can constitute a major barrier for climate finance to actually reduce emissions. Besides that, a transition to lower subsidies or complete removal can create the “multiplier” effect that climate finance needs to fill the current gap in pledges.
As a staff member and shareholder of Climate Focus, I helped make a case for the use of climate finance mechanisms to support the abolishment of fossil fuel subsidies through a range of policies and programmes that limit negative effects, optimise co-benefits and help consumers adjust their fuel consumption to the new price levels.
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