Fossil fuels a major driver of cost-of-living crisis, stretching billions to breaking point

Over the last couple of years, inflation has caused a cost-of-living crisis across large parts of the world. Some fearmongers have used the hardship this has caused to spread rhetoric that climate change action is unaffordable and against the interests of ordinary people. Nothing could be further from the truth. 

Propagating a Green vs Poor narrative is divisive, and it is often used to mask short-term, profit-driven self-interest. The only stable, economically sustainable future is one of energy security, resilience to disasters, well-funded coordinated recovery from them, and ultimately a cap on temperature rise at 1.5°C.

Fossil fuels, including coal, oil, and gas are a major driver of the cost-of-living crisis, which is stretching billions of household budgets to breaking point. Prices have swung wildly, as they frequently do, driven higher by uncertainty and conflict.

In turn, this pushes up the costs of transport, food, electricity and basic household necessities. In some heavily fossil fuel-dependent countries, annual household bills rose as much as $1,000 (R18,660) in 2022 due to fossil fuel energy costs.

High energy prices also shrink profit margins for businesses, hurt economic growth, and impede the right to energy access across the world. Inflation hurts the poorest households the most and consumer costs will rise even further and economic growth will slow when climate impacts become more intense, according to economic authorities, such as the United States Treasury, the Reserve Bank of India and the European Central Bank.

Climate disasters are already getting worse across the world. This year will likely be the hottest for 125,000 years. More destructive storms, unpredictable rains and floods, heatwaves, and droughts are already causing massive economic damage and affecting hundreds of millions of people across the world, costing them their lives and livelihoods.

The fossil fuel taps can’t be turned off overnight but there are many opportunities for action not currently being taken. For example, in 2022, governments spent over $7-trillion in taxpayers’ money or borrowings on fossil fuel subsidies.

Read more in Daily Maverick: Spending on global fossil fuel subsidies in 2022 shattered all-time records – report

Subsidies fail to protect the real incomes of the poorest households and divert monies that are increasing developing country debt burdens, or could have been used to improve healthcare, build infrastructure — including renewable energy and grids — and expand social programmes to alleviate poverty. Done responsibly, a phase-out of such subsidies would actually help the poorest and improve the economies of the countries now dependent on them.

This year, at UN Climate Change, we conducted a global stocktake on climate action up to now. It has indicated clearly that progress is too slow. But it also revealed that there are many tools we have to speed up climate action now, which will simultaneously build stronger economies. We have the knowledge and tools to accelerate this transition while ensuring it is fair and just.

Billions of people need their governments to pick up this toolbox and put it to work. That includes switching billions of dollars from investments in new fossil fuel production to renewable energy that will provide stable, reliable and lower-priced energy to propel economic growth.

This is about both demand and supply. Those of us that demand energy to turn our lights on need to be provided with clean options to do it, and the fiscal space to invest in our communities and their ability to adapt to the changing world.

Read more in Daily Maverick: COP28 in Dubai must send signals of an urgent step-up in action on climate change

There is cause for optimism if governments come to COP28 in Dubai with a spirit of cooperation and a laser focus on solutions. At COP28 we can agree on tripling the world’s renewable energy capacity. We can double energy efficiency. We can show we are doubling finance to help countries adapt to climate impacts and centre it in national planning. We can make the climate loss and damage fund a reality that helps deliver climate justice. And we can deliver old promises on financing the transition, and outline how we are going to fund the next steps.

One moment, one meeting, won’t change everything. But we can capture the future in the directions that we set this year and provide the plan for how national commitments can deliver in 2025.

I refuse to let fearmongering pull the wool over my eyes, and you shouldn’t either. DM