The World Bank has called on Ghana and other countries across the world to consider redirecting the trillions of money spent on “inefficient subsidies” to climate action to help address the global climate crisis.
The bank made the call in a report dubbed “Detox Development: Repurposing Environmentally Harmful Subsidies”.
It indicated that the subsidies in agriculture, fishing and fuel were counterproductive as they contributed to environmental pollution.
The report examined how subsidy reform could help safeguard the world’s foundational natural assets, including clean air, land and oceans, which were critical for human health, nutrition and well-being of global economies.
Within the Ghanaian context, it said the government continued to spend more on subsidies on agriculture, fisheries and fuel.
For instance, since 2017 when the government implemented the Planting for Food and Jobs (PFJ) policy, a lot of money had been sunk into providing seedlings and fertilisers at subsidised prices.
Last year, the Minister of Finance, Ken Ofori-Atta, disclosed that the government spent GH¢2.47 billion on the PFJ programme between 2017 and 2021.
Thus, the GH¢614 million and GH¢660 million spent on the programme in 2022 and 2023 respectively, brings the total subsidy expenditure to GH₵3.74 billion.
Data from the National Petroleum Authority (NPA) also shows that the government spent GH¢1.4 billion to subsidise premix fuel between 2014 and 2022.
The World Bank report revealed that the trillions of dollars wasted on subsidies for agriculture, fishing and fossil fuels were counterproductive as they were driving the degradation of those assets and harming people, the planet and economies.
For instance, it indicated that agriculture subsidies were responsible for the loss of 2.2 million hectares of forest per year, translating into 14 per cent of global deforestation.
Again, it revealed that fuel usage, incentivised by subsidies, was a key driver of the seven million premature deaths each year due to air pollution.
“Repurposing these wasteful subsidies will help ensure a green and just transition that can provide jobs and opportunities for all,” the report said.
According to the report, subsidies for fossil fuels, agriculture and fisheries exceeded $7 trillion in explicit and implicit subsidies, which were around eight per cent of global gross domestic product (GDP).
It added that explicit subsidies, explained as direct government expenditures in agriculture, fishing and fossil fuels, totalled $1.25 trillion a year.
Similarly, implicit subsidies, which is a measure of the subsidies’ impact on people and the planet, amounted to over $6 trillion a year, with the burden falling mostly on the poor.
The World Bank report revealed that the amount countries spent to subsidise fossil fuel consumption was almost six times what they pledged to mobilise annually under the Paris Agreement for renewable energies and low-carbon development.
Even more worrying, the report stated that government subsidies of $577 billion in 2021 to artificially lower the price of polluting fuels such as oil, gas and coal exacerbated the climate crisis, “and caused toxic air pollution, inequality, inefficiency and mounting debt burdens.”
In the agriculture sector, the report said the direct subsidies of more than $635 billion a year were driving the excessive use of fertilisers that degraded soil and water and harmed human health.
“With more than one billion poor people obtaining most of their animal protein from fish, it is critical that the world’s fish stocks are restored to healthy status,” the report recommended.
With the global climate crisis biting hard and countries struggling for funds to tackle the menace, the World Bank stressed the need to redirect the colossal amount spent on subsidies for climate financing.
That, the bank stated, could unlock at least half a trillion dollars “towards more productive and sustainable uses,” particularly, climate financing.
The report stressed that the consequences of inaction was costly, especially so when the world was running out of time to deal with the climate crisis.
“In times of strained budgets, growing public debts, increasing inequalities, and worsening environmental degradation, governments should prioritise comprehensive subsidy reforms that build public acceptance, protect the vulnerable, and show how the money is being spent,” the report added.
A senior Managing Director of the World Bank, Axel van Trotsenburg, said the colossal amount wasted on subsidies defeated the general notion that there was no money for climate financing.
“People say that there is no money for the climate but there is; it is just in the wrong places,” he stressed.
The Chief Economist of the Sustainable Development Practice Group at the World Bank, Richard Damania, said with foresight and planning, repurposing subsidies could provide more resources to give people a better quality of life and ensure “a better future for our planet.”