IATA Warns Subsidies for Fossil Fuels Undermine Clean Energy

The International Air Transport Association (IATA) has raised concerns about a growing issue in the global energy market: substantial subsidies for fossil fuels are creating an uneven competitive environment for clean energy producers. Despite global commitments to reduce carbon emissions, financial support for the fossil fuel industry continues to surpass investments in renewable energy.

Countries within the Organisation for Economic Co-operation and Development (OECD) allocate US$40 billion annually in subsidies to support fossil fuel exports, mainly oil and gas. In comparison, support for clean energy exports totals less than US$10 billion per year.

In an effort to reduce these subsidies, several OECD countries, including the United Kingdom, Canada, and the European Union, proposed measures to end financial support for fossil fuel industries. These proposals aimed to eliminate, with some exceptions, export credits tied to the production, transport, storage, refining, and distribution of fossil fuels. However, a consensus was not reached, and most of the proposals were rejected, leaving the status quo largely unchanged.

The US$40 billion in fossil fuel subsidies could have been redirected to support the aviation sector’s transition to sustainable fuels, according to A21. The amount allocated to fossil fuel exports annually could cover 58% of the capital investment required to produce sustainable aviation fuels by 2030, potentially accelerating the aviation industry’s efforts to reduce its carbon footprint.

In recent years, capital has continued to flow predominantly to oil and gas companies, while clean energy investments have declined. For example, the S&P Global Oil Index has risen by more than 60% since 2021, while the S&P Global Clean Energy Index has lost nearly 60% of its value during the same period.