Cutting Fossil Fuel Subsidies Could Be Even More Beneficial Than We Realised

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The world wastes trillions of dollars every year on fossil fuel direct and indirect subsidies. Trillions! The U.S. alone spends hundreds of billions of dollars on them, ten times as much as it spends on education.

That’s reason enough to shift priorities. But then there’s the climate, which would benefit if we burned less fossil fuels (or even better, none). Now, new research published in Nature shows that eliminating those huge sums would have significant consequences for the climate. The study contests previous research which found that subsidies don’t actually have that much impact on the world’s climate crisis.

“Fossil fuel producer subsidies delay a low-carbon transition in ways both material and political,” the authors of the new findings write.

The study challenges previous research published in 2018, which shows that removing fossil fuel subsidies would reduce global carbon emissions by 0.5 to 2 gigatons of carbon dioxide. That’s enough to knock them down a few percentage points by 2030, which may sound small. But the new findings put that in an important context, showing that it’s the equivalent of “roughly one quarter of the energy-related emission reductions pledged by all countries under the Paris Agreement.” Not bad.

“Any single policy approach that reduces global emissions by a few per cent is very substantial,” Peter Erickson, a senior scientist at the Stockholm Environment Institute and author of the new study, told Gizmodo in an email. “It is just the nature of the climate crisis that we need many individual solutions, so it is not particularly novel or helpful to call such a policy ‘small,’ as the authors we criticise did. Such a policy is only ‘small’ relative to the massive scale of the problem.”

What’s more, the emissions reductions resulting from slashing subsidies could be even greater than that because it could significantly change the oil industry. More of the world’s energy comes from oil than any other fuel, and the industry is still expanding quickly, in part because subsidies make exploration and expansion much cheaper. Without subsidies, corporations may not actually grow their drilling operations nearly as much because it would be too risky to invest that much of their own money or take out loans.

And that doesn’t even get into the potential social and political effects of removing fossil fuel subsidies, which could be huge. Subsidies aren’t only used for more drilling but also for advertising and lobbying (including some that may not be so, uh, truthful). If the fossil fuel industry couldn’t promote its interest through those channels, they might have a lot less ability to expand with impunity.

The findings also point out that the symbolic effects of cutting subsidies could also be significant. Subsidising a highly polluting industry gives it a veneer of normalcy and even puts fossil fuels in a positive light. After all, what else are subsidies for but uplift industries and practices that benefit society? The reality is anything but given the fact that burning fossil fuels is the root cause of the climate crisis. Removing subsidies could remove the oil and gas industries’ social licence, which could change social perceptions and undercut companies. That could result in a further dip in emissions, though it’s not clear exactly how much.

“It’s no simple task quantifying the sociopolitical impacts — the stigmatising effects — of something like ending fossil fuel subsidies, but we know the answer is substantially greater than zero, which is what most models assume right now,” Geoffery Supran, a research associate at Harvard University and study coauthor, told Gizmodo in an email.

A recent study supports that idea. It shows that at certain points, society can shift rapidly following relatively small changes such as removing fossil fuel subsidies and teaching people about the “moral implications of using fossil fuels. Crossing those societal tipping points can trigger “self-reinforcing positive-feedback mechanisms, that inevitably and often irreversibly lead to a qualitatively different state of the social system.”

Removing subsidies, Supran said, could send a public message similar to the ones sent by the fossil fuel divestment movement and youth climate strikes, which have made meaningful impacts. Dozens of politicians have committed to stop taking contributions from polluting companies, for instance, and many companies are at least nominally taking climate action.

“We’re already seeing these campaigns mobilise millions of people and billions of dollars of capital around the world,” Supran said. “Chip away enough, and you may create a social tipping point where the pillars suddenly crumble like a house of cards.”

Freeing up trillions of dollars worldwide could have other tangible effects, too. Imagine what all that money could fund. Countries could start subsidising renewable energy and public transit and other social programs that would lower carbon emissions and improve life. Even if cutting subsidies doesn’t solve the climate crisis alone, that doesn’t mean it’s not a good idea.

Gizmodo has reached out to the authors of the 2018 letter for comment and will update this story with their response.

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