193 countries plus the European Union signed the Paris Agreement in 2015, in which they pledged to reduce their greenhouse gas emissions over the coming decades to avoid committed to reduce their greenhouse gas emissions in the coming decades to avoid raising the planet's temperature this century beyond 2° Celsius. Under the agreement, virtually all the world's nations have established plans for meeting certain targets to achieve this goal. The drastic reduction of fossil energy consumption - responsible for 70% of GHG emissions - and its replacement by renewable energies are part of the backbone of these plans.

However, there is an obstacle to the world's decarbonization goals: fossil fuel subsidies. Do you know how much they add up to between 2020 and 2022? No less than US$1.3 trillion, equivalent to 1.3% of global GDP, according to Ruud de Mooij, deputy director of fiscal affairs at the International Monetary Fund. But that huge figure only takes into account direct subsidies. If we add indirect subsidies - the effects of global warming, pollution and damage to public health - the figure multiplies to the equivalent of 7% of global GDP. That is the average. According to Juan Carlos Vega, Minister of Economy and Finance of Ecuador and co-author of an article on the subject published by the Committee of Finance Ministers for Climate Action, in his country direct fuel subsidies amounted to 3% of GDP in 2023, more than the health budget and 70% of the education budget.

What to do in the face of this scenario? The most obvious thing to do is to reduce these subsidies. But this is a particularly complex task. Just look at the strong protests the Ecuadorian government is facing due to its plans to eliminate fuel subsidies. There is no magic solution to the issue, which must be tackled in a multifaceted way, as Vega and the other co-authors of the article, the finance ministers of the Netherlands, Uruguay and Denmark, point out. Some of the points proposed include gradual processes for reducing subsidies, establishing plans to help lower-income and energy-intensive sectors of the economy, regional coordination and effective communication plans.

A fundamental part of these strategies is to calculate the real price of carbon emissions, This scheme is currently in force in 47 countries, which cover approximately a quarter of GHG emissions, with an average value of US$22 per ton of CO2 equivalent. This average price harbors a subsidy over the value of US$85 per ton of CO2 that would be needed to limit the increase in global temperature beyond 2° Celsius this century, according to experts' calculations.

Undoubtedly, a long and difficult road. You can see the finance ministers' article at Countries' opportunities and challenges for reforming fossil fuel subsidy policies in the era of climate action | Coalition of Finance Ministers (financeministersforclimate.org)