Major economies still finance fossil fuels in poorer countries

| Updated: 09 April, 2024 1:31 pm IST

In a recent development that raises concerns about global climate change, the world’s largest economies are investing billions of dollars in fossil fuels in developing nations.

Despite international commitments to combat climate change and promote renewable energy, these countries continue to finance the exploration, extraction, and consumption of fossil fuels. This trend is particularly prevalent in poorer nations, where the transition to clean energy is often more challenging due to economic constraints.

Leading the pack is China, which stands as the largest subsidizing nation with an estimated USD 266 billion. Following closely is Saudi Arabia, ranking as the second-largest contributor with subsidies amounting to USD 129 billion. Indonesia secures the third spot, providing subsidies of USD 72 billion. Additionally, countries such as Canada, Japan, and South Korea have also been identified as substantial sources of finance for fossil fuel developments overseas.

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The investments come in various forms, including direct funding, subsidies, and loans provided by state-owned banks and financial institutions. These investments are driving the expansion of fossil fuel infrastructure, such as power plants, oil refineries, and gas pipelines, in these countries.

Fossil fuel investments encompass a diverse range of sectors and projects, each contributing to the extraction, production, and utilization of these energy sources. Key areas of investment include power generation, where funds are allocated for the establishment and operation of coal, oil, and natural gas power plants.

Additionally, investments are directed towards oil and gas exploration and production, covering activities such as exploration, drilling, and extraction. Infrastructure development also attracts investment, with projects including pipelines, refineries, and storage facilities that facilitate the transportation and processing of fossil fuels.

Coal mining operations receive a share of investments, as do certain manufacturing processes reliant on fossil fuels, such as cement, steel, and chemical production. Specific projects range from large-scale power plants to oil and gas exploration ventures, with examples like the Uthmaniyah Oil Field in Saudi Arabia representing significant fossil fuel extraction endeavours on a global scale.

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Critics argue that these investments are contradictory to the global efforts to reduce greenhouse gas emissions and limit global warming to 1.5 degrees Celsius above pre-industrial levels, a target set by the Paris Agreement.

Environmental activists and organizations are calling for an immediate end to these investments. They argue that the funds would be better spent on supporting the development and deployment of renewable energy technologies in these countries.

The situation highlights the complex challenges involved in transitioning to a clean energy future. It underscores the need for the world’s largest economies to align their overseas investments with their climate commitments.

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