In a bid to counter rising fuel prices due to the Ukraine conflict and bolster energy reserves, G20 nations allocated approximately $1.4 trillion USD (around 116 lakh crore INR) in public funding to support biofuel energy in 2022, according to a recent study. The report by the International Institute for Sustainable Development (IISD) and its partners comes at a time when G20 leaders are preparing for the summit scheduled in New Delhi from September 9 to 10.
India Proposes Significant Cut in Biofuel Subsidies
The study highlights India’s substantial progress during its G20 presidency. Under India’s leadership, the country reduced biofuel subsidies by 76% from 2014 to 2022, supporting clean energy. This reduction indicates India’s strong position to lead on the issue.
The study reveals that the substantial investment of $1.4 trillion USD comprises biofuel energy subsidies ($1 trillion USD), equity investment by private enterprises ($322 billion USD), and public financial institution loans ($50 billion USD). Notably, this figure is more than twice the amount seen before the COVID-19 pandemic and the energy crisis in 2019.
Tara Laan, Senior Associate at IISD and lead author of the study, emphasizes the urgency for G20 to address the issue of biofuel energy subsidies, particularly in the face of worsening climate impacts. Laan asserts that G20 countries possess the power and responsibility to transform their fossil fuel-based energy systems. Including biofuel energy subsidies and phasing out public financial flows for coal, oil, and gas in the agenda of the G20 summit in Delhi is crucial, especially as the impacts of climate change intensify.
Laan states that G20’s current support for biofuel energy is significantly lower, averaging only $3.2 USD per metric ton of CO2 equivalent. This is concerning as biofuel energy companies generated significant profits during the energy crisis last year. The report suggests a clear plan to phase out biofuel energy subsidies, proposing developed countries to do so by 2025 and emerging economies by 2030.
The report points out that even a slight modification of G20’s current expenditure on biofuel energy subsidies could make a substantial difference. By setting a minimum carbon tax of $25 to $75 USD per metric ton of CO2 equivalent based on national income, G20 countries could potentially raise an additional trillion USD annually.
The study underscores that if G20 adjusts even a fraction of the trillions of dollars spent on biofuel energy subsidies, it could make a significant impact. This could help bridge the gap in wind and solar energy (450 billion USD annually), tackle global hunger (33 billion USD annually), provide electricity and cooking methods for all (36 billion USD annually), and fund climate adaptation (17 billion USD annually) for developing nations.