Subsidies have always been controversial for economies around the world. Many preach its benefits while others say they are of the cause of stagnation in several aspects of development.

Over the last years several governments have tried to maintain the price of fuel inexpensive for citizens. It would appear those fossil fuel subsidies that reach about $490 billion every year a year, are harming the environment and actions must be taken.

Photo: Shutterstock.
Fossil fuels, subsidies, and its impacts on the environment have been discussed over the past few years. Photo: Shutterstock.

G20 reunion in 2009

The discussion became relevant when in 2009 the world’s largest economies gathered in Pittsburgh in order to conclude what medium term measures they had to take to oppose global warming. By that time $300 billion a year were spent worldwide to subside fuel prices, as Reuters stated.

All 20 countries, including India, China, and Russia agreed to eradicate subsidies by 2020, doing that could have instant consequences and greenhouses gas emissions would reduce by 10 percent by 2050, leaders said, referring to data from the International Energy Agency.

President Barack Obama said all nations had a responsibility to meet this challenge and they all together had taken a substantial step forward in meeting that responsibility. Ecological activists also applauded the movement, as they explained removing fossil fuel subsidies could be an important step toward cutting CO2 emissions.

Evolution of a sluggish process

Earlier December representatives from almost 200 countries met in Paris in order to argue about new methods for reducing emissions from fossil fuels and they supported the idea that had been developed by some nations since the G20 from 2009. Extended subsidies that stimulate the use of fossil fuels must be stopped.

The Energy Agency declared subsidies as the No. 1 public enemy of sustainable development, he stated eliminating them could be on the most effective strategies for reducing harming greenhouse gas emissions.

“The huge sums involved globally could be better spent on schools, health care, renewable energies and building resilient societies,” said Christiana Figueres, executive secretary of the United Nations Framework Convention on Climate Change.

It would seem that countries that produce oil are the ones that assign more money to subsidies. That being said, thousands of people, usually from the middle and rich class, are benefited and can even buy more expensive cars as they won’t expend so much money in gasoline.

Researches from the International Energy Agency would appear to show that $490 billion are estimated every year to global subsidies. On the other hand, the Oil Change International, calculated the expenses in $452 billion.

“We have to stop using government funds to support the industry that is causing the problem. That would seem to be the low-hanging fruit of solving climate change: When you’re in a hole, stop digging. And yet we really haven’t made much progress,” said ephen Kretzmann, executive director and founder of Oil Change International.

As Bill Hare, chief executive of Climate Analytics, stated, emissions could be reduced by up to 20 percent from what would otherwise occur if countries removed fossil fuel subsidies.

The world’s cheapest gasoline

Venezuela, oil producer from South America that owns the largest reserves of crude oil in the world, have subsidized gasoline for many years. A gallon of gasoline in the caribbean country costs about 0.2 U.S. cents –which is one-fifth of a penny.

According to their Minister for Petroleum and Mining they lose nearly 12.5 billion a year with the subside. A Venezuelan can obtain 482 gallons with just one dollar. However, its economy is in high risk as they will have an inflation rate of almost 300 percent by 2015.

The country is making parliamentary elections by December 6, where the two main political currents aim to get a place in the Congress to propose very different economic models for the country –which is second most violent in the world. The officialist current wants to maintain subsidies that will sustain the “socialist system”, the other current seeks to create a competitive market based on people’s work.

Source: The New York Times