A new study has found that if the subsidies given to fossil fuels were instead redirected to infrastructure development, it would free up enough funds to provide universal access to water, sanitation and electricity.
The study uses fossil fuel subsidies from 2011, which amounted to US $550 billion per year globally, as the standard based on which to make calculations. While evaluating the costs of providing universal access to water, sanitation, electricity, telecommunication and paved roads, researchers argue against the fear that removal of fossil fuel subsidies would worsen the living conditions of the poorest by making energy more expensive.
According to the study, “universal access to water for all people on the planet could be achieved by investing $190 billion, $370 billion could cover universal access to sanitation, and $430 billion could finance access to electricity”. If these costs are distributed over the next 15 years, they add up to just a fraction of the $8.2 trillion that would be allotted for fossil fuel subsidies in the same time period.
Researchers found that while universal access to water, sanitation and electricity through subsidies is relatively inexpensive to achieve, providing universal access to telecommunication and paved roads would be more complicated. For several countries that have large access gaps in telecommunication and paved roads, the required investment to provide universal access would exceed the savings achieved by fossil fuel subsidy reform.
With regard to India, researchers have noted that while providing access to the 370 million people that lack accessibility to electricity could be covered by investment that would be less than 6 per cent of the country’s fossil fuel subsidies, providing telecommunication services would require investments considerably higher than savings made through the phasing out of fossil fuel subsidies. About 18 per cent of the country’s fossil fuel subsidies would be able to provide for universal access to sanitation.
The study highlights that “redirecting fossil fuel subsidies to infrastructure investments could, at least for some countries, close a large share of current infrastructure access gaps, in addition to the indirect benefits of economic efficiency and environmental improvements”. But researchers have also sounded a note of caution that their analyses would only hold true if there was a gradual and natural decline of subsidies and simultaneous implementation of infrastructure-building initiatives at national levels. The absence of the latter could cause some people to be affected by higher energy prices while missing out on increased infrastructure access during the transitional period of infrastructure development.
The study comes only a couple of months before members of the UN assembly in New York deliberate over Sustainable Development Goals for the period 2015-2030. Earlier this month, world leaders and delegates met in Addis Ababa to discuss ways to finance projects covered under the Sustainable Development Goals programme.