Destructive industries nip climate-hit countries over $600bn, Report

A new report by ActionAid International reveals that climate-wrecking fossil fuel and industrial agriculture sectors are squeezing climate-hit countries for over US$600 billion in public subsidies every year.

The report released on Wednesday, which was done in partnership with an independent research organization Profundo, titled ‘How the Finance Flows: Corporate capture of public finance fueling climate crisis in the Global South,’ the second of ActionAid’s annual ‘How Finance Flows’ flagship report series, examines the use of public funds in the Global South.

It analyzes the public subsidy allocation to industrial agriculture of 45 countries, and fossil fuel subsidy allocation in 108 Global South countries, with a particular focus on the direct support provided to corporations and those directed at encouraging consumption.

Furthermore, it compares subsidy provision to fossil fuels with the scale of renewable energy public investment in selected countries, and look at the willingness of wealthy Global North countries to support climate action in climate-vulnerable countries, by comparing levels of grant-based climate financing with the scale of public subsidies that the fossil fuel and industrial agriculture sectors are receiving in the Global South.

According to the groundbreaking report, climate-destructive sectors are benefiting from subsidies amounting to an average of US$677 billion in the Global South every year, money that could pay for schooling for all Sub-Saharan African children 3.5 times over.

It also finds that climate finance grants from the Global North for climate-hit countries are still grossly insufficient to support climate action and the necessary transitions.

The report states that across the Global South countries, the fossil fuel sector has been receiving a shocking $438.6 billion in a year in publicly financed subsidies, between 2016, when the Paris Agreement was signed and 2023 while renewable energy receives 40 times less.

It further states that the industrial agriculture sector has benefited from publicly financed subsidies worth a staggering $238 billion a year on average, in the years between 2016 and 2021.

Multinationals benefiting from these subsides according to the report, include fossil fuel corporation Shell, and agribusiness giant Bayer, the parent company of Monsanto.

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 needs of climate vulnerable countries, as well as global commitments.

“It seems that money is the root of all climate upheaval. Climate-destructive industries are bleeding the Global South of the public funds they should be using to deal with the climate crisis. If these billions were directed to climate solutions, we could have been somewhere in terms of averting the climate crisis,” Teresa Anderson, one of the report’s authors said during a press conference.

“It is time for the Global South to stand up to the industries that are draining their finances and wrecking the climate. We need to fix the finance flows that are fueling the climate crisis,” Anderson said.

Meanwhile, the failure of Global North countries to provide adequate climate finance for climate transitions means that Global South countries are locked into harmful development pathways that destroy ecosystems, grab lands and compound the injustice of climate change.

“The report show us that money is there. What is needed is for this money to be redirected to climate solutions,” ActionAid Country Director for Zimbabwe Joy Mabenge, said.

The report recommends for public finance to be redirected to support just transitions from climate-destructive fossil fuels and industrial agriculture towards people-led climate solutions that safeguard people’s rights to food, energy and livelihoods, and scaling up of decentralized renewable energy systems to provide energy access, and gender-responsive agricultural extension services that offer training in agroecology and adaptation.

Additionally, it calls for wealthy countries to provide trillions of dollars in grant-based climate finance to Global South countries each year, including agreeing to ambitious new climate finance goal at COP29 that reflects this scale, and regulation of the banking and finance sectors to end destructive financing, and transformation of international financial institutions that are pushing climate-vulnerable countries into spiraling debt.

“This report exposes wealthy corporations’ parasitic behavior. They are draining the life out of the Global South by siphoning public funds and fueling the climate crisis,” Arthur Larok, ActionAid’s International Secretary General said.

“Sadly, the promises of climate finance by the Global North are as hollow as the empty rhetoric they have been uttering for decades. It is time for this circus to end, we need genuine commitments to ending the climate crisis,” he added.