
Can reducing fossil fuel subsidies advance global climate goals?
This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community.
Research from ZEW Manheim found that worldwide climate targets can be met by reducing subsidies for fossil fuels. The Paris Agreement aims to limit global warming to below 2°C to 1.5°C above pre-industrial levels.
Targets range from achieving net zero by 2035 to 2070 depending on the country, with most settling in the middle at 2050. The UK is aiming to become net zero by 2045 and pledged to reduce emissions by 69% by 2030.
What are fossil fuel subsidies?
Many governments have direct and indirect subsidies in fossil fuels – the former being direct payments, and the latter allowing significant tax breaks to allocated businesses and institutions.
In 2022, fossil fuels received $7 trillion in subsidies. Countries with the largest subsidies in fossil fuels are producers of oil, such as Saudi Arabia, Libya, Kazakhstan, Iran, and Algeria. Countries such as Venezuela, Finland, Australia, and Ireland also have large subsidies in fossil fuel industries, according to 2021 research from Our World in Data.
Governments fund subsidies as a privileged form of financial aid, to support sectors of a nation's economy with the ultimate goal of maximising profit and protecting domestic jobs. Other forms of government subsidies are individual subsidies, like student loans and unemployment benefits. In the US, subsidies have historically supported the agricultural, financial, oil, and utility industries – the motivations behind this can be political and economic. Some socioeconomic theories suggest certain industries require protection from global competition to ensure profitability.
There have been arguments against government subsidies that inspire a free economy vs. mixed economy debate; defenders of the free market argue that the free economy cannot exist with government intervention, whereas those who are pro-subsidies state that protecting certain industries allows people to thrive and jobs to remain intact.
'Many governments still help to keep fossil fuels cheap for consumers. For example, explicit subsidies are used to cover part of the supply cost, or external health costs associated with the use of fossil fuels are not included in prices because of implicit subsidies,' stated Professor Sebastian Rausch, head of the ZEW Research Unit 'Environmental and Climate Economics'.
How can reducing fossil fuel subsidies lead to achieving climate goals?
US subsidies in fossil fuels amounted to $757 billion in 2022, $3 billion in explicit subsidies, and $754 billion in implicit subsidies. Subsidies exceeded the federal government's tax revenues from natural gas and petroleum by $2.1 billion in 2022. Under former President Joe Biden, the US pledged to phase out from fossil fuel investments abroad by 2040. However, since then, the new US administration has pulled out of the Paris Climate Agreement and instated anti-ESG laws, allowing climate-killing fossil fuels to continue to thrive.
According to the IMF, reducing fossil fuel subsidies can promote economic growth by limiting uneven division of resources, reduce pollution and climate change, and encourage better social spending by reductions in taxes. The research from ZEW revealed that a third of all countries could meet their climate goals by reducing subsidies in coal, oil, and natural gas – which could lower carbon emissions enough to meet climate targets without additional policies.
The argument against fossil fuel subsidies is not a new one; discussions at 2021 and 2022 UN climate change conferences have been pushed for policies to retract tax privileges from oil and gas industries.
A report from the University of Cambridge published in May outlined that to reach the goals of the Paris Agreement, three climate actions are essential.
Reducing emissions by moving energy production away from fossil fuels that generate greenhouse gas emissions; Reduction of energy use in sectors to ensure greenhouse gas removal; and Optimising land management through solar radiation modification.
The removal of both implicit and explicit fossil fuel subsidies is essential. The report states: 'many countries continue to heavily subsidise fossil fuels, both explicitly (by undercharging supply costs) and implicitly (by failing to account for the non-market costs associated with local externalities of fossil fuel use).'
The figure below outlines the differences between explicit and implicit subsidies based on 2022 data from the IMF, and what approaches are being taken to reduce them.
Source: Our World in Data
Reducing all direct fossil fuel subsidies would not successfully tamp down on global emissions, however identifying hidden costs of fossil fuels in energy prices could cut down global emissions by 32%, whilst improving welfare in nations.
Tim Kalmey, researcher at ZEW and also co-author of the ZEW study, commented: 'Phasing out explicit subsidies, such as tax exemptions on kerosene or gas price ceilings, would only have a limited effect on CO2 emissions. It is crucial that also the local externalities of fossil fuels, i.e. the harmful effects on health caused by local air pollution, are factored in. We estimate that this would reduce global CO2 emissions by 32%.'
Only reducing explicit fossil fuels will not fulfil the climate goals outlined by the Paris Agreement, but eliminating implicit fossil fuel subsidies will allow one-third of countries to overachieve their climate targets. With effective energy pricing, the cost of achieving climate goals can be lowered for all countries, and adding effective energy pricing on top of carbon pricing to meet the Paris Agreement goals will increase welfare by 120%.
By retracting government intervention in gas and oil industries, not only will it protect the planet, but the welfare of individual nations that will take part. This new data is key for policymakers, who can use it to make real progress towards mitigating climate change.
Hashtags

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles


The Independent
21 minutes ago
- The Independent
England player ratings vs Italy as substitutes inspire the impossible once again
Your support helps us to tell the story Read more Support Now From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging. At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story. The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it. Your support makes all the difference. Read more England's substitutes inspired once again to complete an unbelievable turnaround against Italy and book their place in a third consecutive major final at Euro 2025. The Lionesses suffered another early setback when Barbara Bonansea punished sloppy defending in the first half and Le Azzurre held firm until the 96th minute in Geneva. A positive response in the second half, after Sarina Wiegman had screamed at her side to 'wake up!', saw Lauren Hemp miscue twice, before Wiegman sent on Beth Mead, Michelle Agyemang, Chloe Kelly and Aggie Beever-Jones in a desperate attempt to find an equaliser. But just as their luck appeared destined to run out, a chaotic penalty-area scramble saw Agyemang pounce with a slick, low finish to force extra-time. The game looked set for penalties, with Agyemang's outrageous lob coming off the bar in what seemed like the last big chance to win it in open play. That was until Beth Mead was dragged down to win England a late penalty, the rebound of which Chloe Kelly was able to convert in the 119th-minute, with Wiegman's side doing it the hard way once again to take their European title defence to the final day. Here are how the England players rated from their 2-1 semi-final win in Geneva: Hannah Hampton, 7 England's new No 1 did her job when called upon, aptly collecting crosses when Italy tried to threaten, while also passing out from the back with precision. Little she could do for the goal, which was more the fault of her back four - but still not a good look to concede your first shot on target. Dove out to collect a defence-splitting cross in the first minutes of the second period, before standing firm to spare Morgan's blushes. Then produced a huge double save at the death to keep England in the contest - a crucial intervention it proved. Lucy Bronze, 5 A bit hot and heavy to start, flying up the pitch to try and put pressure on the Italy defence but falling foul of diving in on a couple of occasions - perhaps lucky to escape an early caution. She nevertheless enjoyed the freedom to move forward down the right, linking up with James and Walsh when she can. But it's at the back where there's a lot to be desired for the goal, failing to read the delivery properly and allowing the ball to pass her and reach Bonansea, who does not need a second invitation to smash home from the edge of the six-yard box. Not much improved after the break, with attacking contributions often proving wasteful - a heavy touch in the box after linking up with Mead with particularly frustrating. Despite a poor performance, she nearly became the hero as she latches onto a corner at the back post - but her header was cleared off the line. Her experience came through in extra time as England turned it around. open image in gallery Lucy Bronze was at fault for Italy's first goal ( Getty Images ) Leah Williamson, 5 Helped prevent Italy from getting a touch in the England box for the first half an hour - but is also significantly at fault for the goal, completely misreading the cross and stepping too far up, allowing it to pass between her and Hampton and into the feet of Bonansea. Fought tooth and nail to chase down Cantore after Morgan was caught out, putting the Italian under pressure to force an imperfect shot. Still a bit shaky as the game continued. Subbed. Esme Morgan, 6 In the team in place of Carter, she quickly looked to prove her worth. She used her pace to get across to cover for Walsh, showing a burst of speed that has been lacking from this England back four this tournament. However, she's done by the one-two for the goal, caught out of position after Greenwood was beaten too easily from the throw. Later had her blushes spared by her keeper after allowing Sofia Cantore to run in on goal. Booked in second half stoppage time. open image in gallery Esme Morgan started in place of Jess Carter for England ( The FA via Getty Images ) Alex Greenwood, 5 Became targeted by Italy as Le Azzurre grew into the game and was beaten too easily down the left in the build-up to their opener. Far too close to her opponent, who quickly darts past her and suddenly gives the Italians a numerical advantage. Redeemed herself partially by dealing with an awkward bounce in the area on the brink of half-time, but a wild attempt from the edge of the box wastes a decent opportunity soon after the restart. Subbed. Ella Toone, 7 Started brightly, looking to connect defence to attack as England began to threaten. Influence waned, as it did with the entire midfield, after Italy took the lead, but she picked up a bit after the break, with a wonderful looping cross finding an unmarked Hemp at the back post - only for the Man City forward to head over. Nearly helped force an own goal in extra time, delivering towards Beever-Jones and nearly seeing the resulting ricochet off an Italian shin crawl across the line. A lot of running from the Manchester United star - she gave it her all. open image in gallery Ella Toone emptied the tank against Italy ( REUTERS ) Keira Walsh, 6 She tried to bend one in from the edge of the box, looking to produce a moment of magic to level things after being all but absent for the opening half. Distribution had a hell of a lot to be desired in that first 45, but was significantly better after the restart - going on a dazzling run through the Italian core and firing just wide of the post as she became the heart of England's attempted fightback. Evidently began to tire as the game entered its dying stages, though. Subbed. Georgia Stanway, 5 Overrun and bypassed by a stronger Italy midfield in the first half. Slightly improved after the restart but the least influential of the three. Finds space from 25 yards out with England entering into squeaky-bum time - we know how good she can be from range - but blazes wildly over. Subbed. Lauren James, 5 Had the first shot on target of the game as she latched onto a Hemp delivery - straight down the throat of Italy stopper Laura Giuliani - but often involved in build-up from deeper down that right-hand side. Then had a huge opportunity to strike England level just minutes after falling behind, but her effort from central lacked conviction as she tried to bend it round the Italy body, easily parried away. A real lack of clinical finishing when it mattered. Subbed, reappearing after half-time with ice around her ankle. open image in gallery Lauren James picked up an injury and was subbed at half-time ( REUTERS ) Alessia Russo, 5 First big chance of the evening fell to her feet as she twisted the Italy defence inside out with a nice half-turn in the box, before firing just wide. It was a solid early attempt, but her influence drastically waned as Italy grew in confidence. She became surrounded by two or three green shirts constantly, desperately defending their lead, and it meant her impact grew non-existent. Subbed. Lauren Hemp, 7 A useful outlet down the left early on as England started brightly. Whipped in a teasing cross for James, who managed to direct a deft effort goalwards in what was the first half-chance of the game. Linked up with the Chelsea winger once more after her team fell behind, slipping James in behind with a brilliant pass - all that was lacking was the finish. But as she took the role of finisher early in the second half, she failed to find her shooting boots - directing a simple header onto the roof of the net when unmarked at the back post, before dawdling over the ball when it fell to her in a dangerous position. It seemed her shortfalls into front of goal could prove detrimental for England - but as she delivered a dangerous cross to trouble the keeper in stoppage time, she sparked Agyemang's miraculous equaliser. A huge contribution to keep England in the tournament. open image in gallery Lauren Hemp peppered the Italy box with crosses but her finishing had a lot to be desired ( AFP via Getty Images ) Substitutes Beth Mead, 6 (45'): Her introduction offered something different to James down the right - bringing on a poacher and taking emphases away from pace. But she remained largely on the fringes for her entire hour-plus cameo... at least until she won the 117th-minute penalty! Chloe Kelly, 8 (78'): Huge reception to the introduction of England's super-sub, but was it too late from Wiegman? It seemed so, with the Arsenal star unable to make her trademark impact against this resilient Italy defence - at least in normal time. But she was given 30 more minutes to make an impact thanks to a certain teenage hero, and it had to be her, didn't it. She missed her penalty but was there to tuck in the rebound with seconds of extra time to go. Michelle Agyemang, 9 (84'): The teenage sensation, sent on to deliver England a miracle. AND SHE DOES IT! In the sixth minute of seven added on, she finds the composure to fire past Giuliani - elation for the Lionesses, absolute agony for Italy. Remained a problem for Le Azzurre throughout extra time, and came inches from bringing about one of the great England moments. Chasing down a ball over the top, she tried an outrageous lob on the volley from a tight angle, only to see her effort come back off the bar. That would've been some winner. A sublime cameo from the breakout star. Aggie Beever-Jones, 7 (84'): A live wire going forward, she could have won it at the death with an effort that flies just wide of Giuliani's goal as the late subs threatened to steal the show. Nearly forced an own goal in extra time. Grace Clinton, 6 (106'): Brought on to try and make the difference. Part of the team that turned it around in the end. Jess Carter (120+1'): Fantastic moment.


BBC News
22 minutes ago
- BBC News
What do we know about Donald Trump's visit to Scotland?
Donald Trump flies into Scotland on Friday for a four-day trip, his first visit to the UK since his US president is due to visit his golf resorts at Turnberry on the Ayrshire coast and Menie in White House has described the visit as a "private" trip and said he will meet Prime Minister Sir Keir Scottish government has confirmed that First Minister John Swinney will also meet the is due to return to the UK for an official state visit in have already been raised about the scale of the visit and the security implications, with police representatives raising concern about both the costs involved and the impact on staffing. Why is President Trump coming to Scotland? The fact this is not an official state visit means President Trump is largely free to set his own main purpose appears to be to visit his two golf courses - Trump International at Menie in Aberdeenshire and Trump Turnberry in South Ayrshire. Trump opened the former in 2012 and bought Turnberry two years has been a regular visitor to both courses over the years, the last time being in 2023 when he broke ground on a second course at the site in connections to Scotland are mother, Mary Anne MacLeod Trump, was born and raised just outside Stornoway in the Isle of Lewis. A native Gaelic speaker, she moved to New York aged 18, where she later married businessman Fred president has visited her former home in Tong more than once and has often spoken of his love of his mother's home investments have brought jobs to both his businesses in Scotland, though the scale of these have been clear, however, is that he retains a close interest in them, though serving presidents are meant - by convention - to step back from running any businesses while occupying the White House. When is President Trump coming to Scotland? The president is expected to arrive some time on Friday, and travel back to the US on Tuesday 29 schedule has not been made public but he is expected to split his time between his two Scottish bases at Turnberry and length of the trip and the relative lack of programmed meetings is a contrast to the forthcoming state visit, which will be a much more formal affair, from 17 to 19 that occasion, he and First Lady Melania Trump will stay at Windsor Castle as the guests of the King and Queen. Who is President Trump meeting in Scotland? Earlier this month, the president's press secretary told reporters at the White House that Trump would meet the prime minister in "Aberdeen" on Monday. Karoline Leavitt said the meeting with Starmer would "refine the great trade deal that was brokered between the United States and the United Kingdom".However, the Menie resort is about 10 miles (16km) north of the city and Downing Street has yet to confirm details of the proposed meeting, including where it will take place and what will be later said he had decided to meet the president on his trip because it was in Scotland's interests to do so. He said there were a number of domestic and international issues which were of interest to the people of Scotland including the Middle East, the war in Ukraine, and the imposition of tariffs on products such as Scotch whisky.A Scottish government spokesperson said the president's visit would be an opportunity to "promote the interests of Scotland".Swinney previously said he did not see how September's state visit could go ahead in the wake of President Trump's showdown with Ukraine's President Zelensky in the White House in Greens co-leader Patrick Harvie described John Swinney's decision to meet President Trump as "tragic".He said: "There can be no excuses for trying to cosy up to his increasingly fascist political agenda." What will President Trump's security be like? Presidential visits are enormous affairs and the security operation which will accompany Trump and his family is Force One - the president's jet - is a heavily-defended flying White House. The presidential motorcade, which includes two identical limousines and more than 20 other security and communications vehicles, is transported ahead of the visit by United States Air Force transport the ground, the president travels in Cadillac One - an armoured, high-powered enhanced limousine known as "The Beast". And there will have to be an enhanced police presence, taken from the ranks of the host country's own forces. For the last state visit in June 2019, more than 6,300 UK police officers were deployed at a cost to London's Metropolitan Police of £3.4m. A previous four-day working visit in 2018 cost more than £ 2018 trip to Scotland is thought to have seen more than 5,000 officers deployed, with the UK Treasury chipping in about £5m to help with the there are already concerns about how much this "private" trip will cost Scotland, especially against a backdrop of police complaints about spending on the Scottish Police Federation (SPF), which represents rank-and-file officers, has raised concerns about what the Trump visit will mean for its Scotland confirmed it was preparing for a presidential visit earlier this Scottish government said it had been working with the national force to put plans in place, with thousands of officers likely to be deployed as part of the security operation. Will there be protests against President Trump? President Trump is probably the most high-profile individual ever to visit Scotland. He's also at constant was an attempt on his life during the 2024 election and a man has been charged with attempting to assassinate the president after being found with a rifle at a golf course in Florida in September are at the higher end of the risks facing security teams guarding the most powerful man on of the coming visit's police resources will be taken up with balancing the right to democratic protest with the president and his entourage's ability to travel safely around last presidential visit made by Trump in 2018 required a major security operation, with thousands protesting in Glasgow, Edinburgh and was booed during an afternoon game of golf by demonstrators gathered along the the perimeter at Turnberry.A paraglider also flew over the hotel with a banner criticising the will undoubtedly be more protests this time around. Among those who have vowed to be out on the streets is Scottish Green leadership contender Ross Greer, who called the president a "dangerous extremist".He told the BBC that he would be protesting "in solidarity with the people in the US and across the world who are already suffering as a result of Donald Trump".Police Scotland have said they have the resources to deal with whatever the visit brings.


BBC News
22 minutes ago
- BBC News
M&S backs farmers over UK Labour ministers in inheritance tax row
A senior executive at major UK retailer Marks and Spencer has criticised planned changes to inheritance tax, warning they will put off young people from working in April 2026, inherited agricultural assets worth more than £1m will be taxed at a rate of 20%, half the usual McLean, M&S head of agriculture and fisheries, told BBC Wales the policy will "definitely" be a "deterrent for young people coming into the industry".A UK government spokesperson said the "reforms to agricultural and business property relief are vital to fix the public services we all rely on". Ministers insist "three quarters of estates will continue to pay no inheritance tax at all, while the remaining quarter will pay half the inheritance tax that most people pay, and payments can be spread over 10 years, interest-free".One farming union warned last month that Welsh family farms have been thrown into "turmoil" by the changes. Speaking at the Royal Welsh Show in Llanelwedd, Mr McLean, firmly backed the farmers in the argument. M&S, he said, was "very, very clear" that agriculture should be treated differently by the government."The whole taxation system was devised to recognise that the margins of profitability in agriculture weren't like other industries," he said."That's why you had a difference in how the inheritance tax approach was set up." Mr McLean warned the changes, announced by Chancellor Rachel Reeves last November, would "impact confidence"."They definitely will be a deterrent for young people coming into the industry, and we want to see a vibrant, viable farming structure where young people can come in and make a good living and be proud of what they do," he said. "So being able to give greater surety, greater security is going to be key to viable farming structure going forward."The UK government spokesperson added: "Our commitment to farming and food security is steadfast, which is why we've allocated a record £11.8bn to sustainable farming and food production over this parliament and appointed former NFU president Baroness Minette Batters to recommend new reforms to boost farmers profits."