The world’s money is flowing in the wrong direction. The climate crisis is really about money: too much money is fuelling climate change, too little money is going to climate solutions, and extractive money flows are locking economies deeper into climate-destructive spirals that deepen inequality.
New ground-breaking ActionAid research examines the use of public funds in the Global South, and finds that the same industries that are fuelling the climate crisis are draining public funds from Global South governments.
ActionAid’s new analysis of global data looks into patterns of public financing and finds that:
- Corporate capture of public finance means that each year the climate-destructive fossil fuel and industrial agriculture sectors are getting US$ 677 billion in subsidies in the Global South. This amount could pay for primary school education for all sub-Saharan African children more than 3.5 times over.
- The industrial agriculture sector in the Global South has been receiving an annual average of US$ 238 billion in public subsidies every year, in the years between 2016 (when the Paris Agreement was signed) and 2021 (the most recent year with available data). In 2021 this figure came to US$ 276.4 billion.
- The fossil fuel sector has been receiving an even more shocking annual average of US$ 438.6 billion a year in publicly financed subsidies from Global South countries between 2016 and 2023. Fossil fuel subsidies have steadily risen over this period, and in 2023 this came to US$ 495.3 billion.
- Climate finance grants from the Global North for climate-hit countries are still grossly insufficient to support climate action and the necessary transitions. Climate finance grants amount to just 1/20th of the Global South public finance going to fossil fuels and industrial agriculture.
- The lack of real climate finance for solutions in the Global South means that renewable energy is receiving 40 times less public finance than the fossil fuel sector.
- Renewable energy public investment in the Global South comes to an annual average of just US$ 10.3 billion each year. Even more worryingly, renewable energy investment in the Global South has been on a downward trend, more than halving from US$ 15 billion in 2016 to US$ 7 billion in 2021, likely due to the growing number of countries facing debt distress.
- Governments in the Global North continue to disproportionately fuel the climate crisis. Even though the Global North has just one quarter of the world’s population, their annual average fossil fuel subsidies came to US$ 239.7 billion
These numbers illustrate a deeply worrying pattern about the state of the planet’s finance flows, and how corporate capture of public finance is actively undermining the interests of climate-vulnerable countries, as well as global climate commitments.
There is an urgent need for all governments to speed up the transition to green, resilient, democratic and people-led climate solutions for food and energy, such as renewable energy and agroecology. For Global South countries already experiencing the devastating consequences of climate change, the need for global transition is all the more urgent.
But the fossil fuel and industrial agriculture sectors are exerting an iron grip on the energy and agriculture policies and budgets of the same Global South countries that are bearing the worse climate impacts caused by these industries. This corporate capture of public finance is locking countries of the Global South into harmful development pathways that drive land grabs, pollute communities, undermine food sovereignty, threaten human rights, devastate ecosystems and compound the injustice of climate change.
While the use of public subsidies to strengthen communities’ access to food and energy can often be motivated in the public interest, the unquestioning public financing of climate-destructive fossil fuel and industrial agribusiness instead of people-centred climate solutions for food and energy, is short-sighted and self-defeating.
The accumulating planet-heating greenhouse gases, ecological destruction and land grabs caused by these industries threaten the climate stability, food security, livelihoods, access to water and rights of people – particularly of those already marginalised and living in poverty – in the immediate and mid-term, and are relentlessly pushing our planet to the brink of survival. It is therefore not in the interests of people or nations to use scarce public funds to fuel addiction to the industries that are doing them the most harm.
The fossil fuel and industrial agriculture sectors are extractive in all senses of the word. Not only do they extract fossil fuels from the ground and fertility from soils through monocultures and damaging chemicals, but they are successfully extracting massive amounts of public subsidies from Global South countries. The big corporations involved are simultaneously pushing countries deeper into climate crisis and poverty, while also paying little to no taxes thanks to global rules and tax havens facilitated by Global North governments.
In the meantime, the wealthy countries of the Global North who are most responsible for causing climate change are not only failing to take urgent action to adequately cut their emissions, but are also breaking their climate finance promises to the countries that are experiencing the brunt of climate impacts.
The debt crisis – exacerbated by the escalating costs of dealing with destructive climate change impacts – is also locking many Global South countries into fossil fuel and industrial agriculture pathways. Obligations to earn export dollars for debt repayment to the International Monetary Fund (IMF), and governments and banks based in the Global North, enables the fossil fuel and industrial agriculture sectors to tighten their grip on these economies, preventing climate-vulnerable countries from making rational choices that could otherwise address the climate crisis, and people’s food and energy needs.
The world’s finance flows are thus fuelling climate change and failing communities. They are preventing climate-vulnerable countries from making equitable and just transitions to democratic climate solutions that meet people’s needs. They are leaving communities, women and marginalised people at the continued mercy of the climate crisis.
Excerpt of: How the finance flows: corporate capture of public finance fuelling the climate crisis in the global south (ActionAid 2024)