A Fraction of What We Pay in Fossil Fuel Subsidies Could Fund a Just Transition

Phasing out fossil fuel subsidies must be tied to new subsidies that raise living standards for working and poor people.

The bad news on climate change is plentiful. For one, there is no sign of a decline in global carbon dioxide emissions and the Earth is getting hotter faster than ever before, despite constant pledges of government action. And now, of course, the second Trump administration is implementing policies that represent the biggest attack on nature, climate and people ever.

Yet, as world-renowned progressive political economist Robert Pollin shows in this exclusive interview with Truthout, there are also hopeful signs on the climate front. There is indeed an energy transition underway. Pollin also tackles the challenge that fracking represents, which is still widespread across the U.S. energy landscape, and the problem with the persistence of fossil fuel subsidies. In this context, he advances a concrete green transition program for phasing out fracking operations in the state of Pennsylvania and proposes alternative measures of support for working people and the poor to meet their energy needs.

Pollin is Distinguished University Professor of Economics and co-director of the Political Economy Research Institute (PERI) at the University of Massachusetts Amherst. He is the author of scores of books and academic articles, and was selected by Foreign Policy magazine as one of the “100 Leading Global Thinkers for 2013.” The interview that follows has been lightly edited for clarity and length.

C.J. Polychroniou: Global carbon dioxide (CO₂) emissions have increased by nearly 70 percent since 1990 and hit a record high of 37 billion tons in 2023. And now the Trump White House wants to increase oil and gas production, which is a further blow to the urgent task of rapidly reducing the flow of heat-trapping greenhouse gas emissions. Considering this, is it realistic to expect that CO₂ emissions can be reduced by 45 percent by 2030 and reach net zero by 2050?

Robert Pollin: The goals of reducing global CO₂ emissions by 45 percent relative to the 2010 level of about 33 billion tons and to achieve net zero emissions by 2050 was first advanced by the Intergovernmental Panel on Climate Change (IPCC) in a 2018 report called “Global Warming of 1.5⁰C.” The IPCC is a UN agency focused on advancing credible research on all aspects of climate change, including, in particular, what we need to accomplish to stop the ever-deepening calamities resulting from rising average global temperatures, such as what we saw only a few months ago with the devastating fires that devoured major sections of Los Angeles. In this 2018 report initially, and in several subsequent studies, the IPCC has been making the case that achieving their 2030 and 2050 CO₂ emission reduction targets was necessary to prevent the average global temperature from rising by more than 1.5⁰ Celsius than the global average between 1850 and 1900 — i.e., the pre-industrial level.

Given that global CO₂ emissions have not fallen at all since the 2018 IPCC report came out, it is clear that the world will not succeed in bringing emissions down from the current level of 37 billion to about 18 billion tons in the next 4.5 years. This was obvious even before Donald Trump returned to the White House in January and launched his campaign, as promised, to obliterate any and all policies, regulations or even any words in any federal government documents that in any way gesture toward a U.S. climate stabilization program. Thus, in February, The Guardian reported that, “The Trump administration is stripping away support for scientific research in the US and overseas that contains a word it finds particularly inconvenient: ‘climate.’” As just one follow-up in March, Lee Zeldin, Trump’s Environmental Protection Agency administrator, pronounced that, “Yesterday was the most consequential day of deregulation in American history. …Today marks the death of the Green New Scam.”

And yet, even in the face of these assaults from Trump and company, we can still point to some positive developments on which we build.

First, while it is true that global CO₂ emissions have not fallen since 2018, they also have risen only slightly since 2013, from 35 to 37 billion tons. This is while overall global economic activity — as measured by global GDP — has expanded by 31 percent. So there is some evidence emerging — absolutely too slowly to be sure, but emerging nonetheless — of global CO₂ emissions decoupling from overall economic activity.

Second, the average costs of generating electricity from solar and wind power have plummeted since 2010, making them the low-cost alternatives, without subsidies, relative to fossil fuel energy. Thus, on average, generating electricity from onshore wind sites was 23 percent more expensive than fossil fuel alternatives in 2010, but was 67 percent cheaper in 2023. Electricity from solar panels was, on average, 414 percent more expensive than fossil fuel alternatives in 2010, but was 56 percent cheaper in 2023.

Moreover, global investments in renewable energy reached about $2 trillion in 2024. This was about equal to 2 percent of 2024 global GDP. According to my own estimates, and those of other researchers, we need to reach an annual clean energy investment level of about 2.5 percent of GDP per year, every year, to achieve a zero-emissions global economy by 2050. So, at least as of this past year, we have started to approach that necessary investment scale.

One of the most important components of this overall renewable investment expansion is that small-scale solar electricity installations — i.e., mini-grids — are growing rapidly in rural sub-Saharan Africa. This is where, at present, roughly 80 percent of the 680 million people throughout the globe still have no access to electricity.

Finally, within the U.S., clean energy investments were expanding rapidly while Joe Biden was still in office, induced in large part by the Biden-era programs such as the Inflation Reduction Act. Thus, even in West Virginia, a state that is very poor, still dependent on its fossil fuel industry, and deep red in its politics (Trump won West Virginia in 2024 with 70 percent of the vote), $5.3 billion had been committed by the time Biden left office to build a low-emissions steel mill; a battery storage equipment manufacturing facility; a renewable energy microgrid industrial site; a hybrid vehicle transaxle manufacturing plant; and multiple solar farms. Trumpite bluster aside, I am guessing that the people of West Virgina are not inclined to chase these projects out of the state, even allowing that the word “climate” is likely to slip into some of the documents supporting them.

Many countries across Europe have banned fracking, but hydraulic fracturing remains at the heart of the U.S. energy landscape. Even Kamala Harris opposed a fracking ban during her 2024 presidential campaign, after having supported a ban during her brief initial presidential run in 2019. How do we move away from fracking without disrupting the economies of those states that rely heavily on fracking operations?

Fracking is a technology used to extract oil and natural gas from underground rock formations, such as sandstone, limestone, or shale rock deposits. This technology is employed as a means of increasing the rate at which oil and gas can be extracted profitably from such rock formations. But fracking operations also generate severe environmental and health impacts through water and soil contamination as well as noise pollution. This is why five U.S. states have banned fracking (California, New York, Washington, Maryland and Vermont). But within the U.S., fracking operations continue in up to 30 other states, and are most extensive in Texas, Pennsylvania and North Dakota. In political terms, the case of Pennsylvania was most important for the 2024 election, since it was the largest and most important swing state over which Trump and Harris were competing for votes. The Harris campaign had obviously calculated that supporting a fracking ban was a strategic nonstarter, since they believed that a fracking ban would inflict major damage to Pennsylvania’s economy.

In fact, the Pennsylvania economy would experience a major hit if fracking were banned and no large-scale alternative economic activities were introduced to substitute for the jobs and incomes that would be lost through shutting down fracking. But a fracking ban should not be understood as an isolated, one-off policy measure. It should rather be recognized as one component of a much larger green transition program, in Pennsylvania and everywhere else.

My own research with co-authors on this specific question of comparing the economic impacts of continuing with fracking versus advancing a green transition project in Pennsylvania produced the following major results:

1. A green transition program capable of bringing CO₂ emissions in Pennsylvania down to zero by 2050 would generate approximately 160,000 jobs in the state. These would be jobs resulting from investments in building a high-efficiency, renewable energy-dominant energy infrastructure in the state. Meanwhile phasing out fracking and all other fossil fuel activities in Pennsylvania will entail job losses in the range of 1,700 per year — that is, a little more than one one-hundredth of the total number of jobs that will get created through clean energy investments.
2. Policies will certainly need to be enacted to provide robust transition support for these 1,700 displaced fossil fuel industry workers per year — what the late, great U.S. labor leader and environmentalist Tony Mazzocchi first termed “just transition” policies. One critical point that flows from Mazzocchi’s idea is that providing generous adjustment assistance to today’s fossil fuel industry workers will represent a major contribution toward making a zero-emissions climate stabilization project politically viable. Without such adjustment assistance programs operating at a major scale, the workers and communities facing retrenchment will, predictably and understandably, fight to defend their communities and livelihoods.
3. The specific transition support program that I developed with co-workers for Pennsylvania includes three major elements: 1) pension guarantees; 2) guarantees of new jobs at pay levels comparable to what they had been receiving in the fossil fuel industry; and 3) generous retraining and relocation support for the workers who will need these. We estimated that providing these forms of support for all displaced fossil fuel industry workers in Pennsylvania would cost the state an average of about $167,000 per worker, totaling up to about $240 million per year. This is real money, to be sure. But it also amounts to about 0.02 percent of Pennsylvania’s current GDP. From this perspective, it is a tiny price to pay for establishing a just transition for fossil fuel industry-dependent workers and communities as a fundamental principle of any green transition program worthy of our support.

Governments across the world continue to subsidize the production and consumption of fossil fuels, as you and co-authors show in a new extensive study. How large are global fossil fuel subsidies, and how should we understand the political economy of fossil fuel subsidies, given that there are obvious benefits in removing them?

Fossil fuel subsidies constitute a massive obstacle to advancing a viable climate stabilization path, i.e., to reach zero global emissions by 2050. This is because they create perverse incentives, making it cheaper for consumers to continue purchasing oil, coal and natural gas to meet their energy needs and for producers to continue profiting off of selling the stuff. At the same time, fossil fuel subsidies represent a huge financial resource that could be mobilized to help pay for the transition to a global clean energy-dominant infrastructure. As of the most recent 2023 figures, global fossil fuel subsidies amounted to $1.1 trillion, equal to about 1 percent of global GDP. To put this figure in perspective, as noted above, I estimate that we need approximately 2.5 percent of global GDP per year devoted to clean energy investments to build a 100 percent clean energy, zero-emissions global economy by 2050. So, if we could transfer this 1 percent of global GDP out of subsidizing fossil fuels and into building a clean energy economy, those funds alone would cover roughly 40 percent of the entire funding level that is needed.

And yet, unfortunately, matters aren’t quite so straightforward. In fact, it would be both undesirable and unrealistic to move all $1.1 trillion out of fossil fuel subsidies and into clean energy investments. This is because, in many countries, fossil fuel subsides provide critical support to low-income and working-class people, by reducing the costs these people must pay to meet their energy needs. As such, any workable program to phase out fossil fuel subsidies must also be committed to enacting alternative measures to maintain support for working people and the poor. Such alternative forms of support could include food, housing or cash subsidies. These alternative subsidies would have to be generous enough and maintained over time, so that, at a minimum, the overall living standards of working people and the poor would be defended when the fossil fuel subsidies are eliminated. Better still would be to make the alternative subsidies generous enough so that the living standards for working people and the poor would rise through the substitution of the alternative subsidies for fossil fuel subsidies.

In fact, in terms of providing the necessary money to support generous alternative subsidy measures, eliminating fossil fuel subsidies can release formidable levels of funds to both deliver generous alternative subsidies for working people and the poor, and to still provide large-scale funding for clean energy investments. This is because, by far, the largest beneficiaries of fossil fuel subsidies are high-income households and the fossil fuel corporations themselves — two groups who don’t need or deserve such subsidy support but are nevertheless happy to pocket the money if governments continue to hand it to them.

I can illustrate this point by considering the case of Indonesia, which is one of the case studies we review in our study. As of the most recent 2023 data, total fossil fuel subsidies in Indonesia — including the funds received by both consumers and fossil fuel corporations — amounted to about $35 billion. This was equal to about 2.5 percent of Indonesia’s 2023 GDP. Of the $35 billion total, we estimate that the poorest 10 percent of Indonesian households received an average of $110 in subsidies while the richest 10 percent received $1,248. That is, the richest 10 percent of Indonesian households received 11 times more support than the poorest 10 percent through the country’s fossil fuel subsidy program. This massive disparity resulted because rich households spend much more money buying oil, coal, or natural gas than poor households, but all households — rich, poor, and those in between — are able to purchase all of their fossil fuel energy at reduced costs due to the country’s subsidy program.

What if, as an alternative, all Indonesian households, at all income levels, received a cash, food or housing subsidy equal to what had been the fossil fuel subsidy amount received by the country’s middle-income households? In that scenario, all Indonesian households would have received about $380. Subsidies for the poorest 10 percent of households would then have increased more than 300 percent. At the same time, under this alternative subsidy plan, Indonesia would still have freed up about $8 billion in funds that could then be channeled into building the country’s clean energy infrastructure. This level of clean energy investments would amount to about a 500 percent increase over Indonesia’s clean energy investment spending level for 2023.

The overall points that emerge from this Indonesia case are basically the same as with the program to eliminate fracking in Pennsylvania and establish a just transition program for the state’s fossil fuel industry-dependent workers and communities. That is: 1) phasing out fossil fuel subsidies is an absolute imperative that must be accomplished as one centerpiece of a global climate stabilization program; and 2) for the fossil fuel phase-out to be accomplished according to any reasonable standard of social and economic justice, the overall project must include robust measures to defend and improve the living standards of working people and the poor.

C.J. Polychroniou is a political scientist/political economist, author and journalist who has taught and worked in numerous universities and research centers in Europe and the United States. Currently, his main research interests are in U.S. politics and the political economy of the United States, European economic integration, globalization, climate change and environmental economics, and the deconstruction of neoliberalism’s politico-economic project. He is a columnist for Global Policy Journal and a regular contributor to Truthout. He has published scores of books, including Marxist Perspectives on Imperialism: A Theoretical Analysis; Perspectives and Issues in International Political Economy (ed.); and Socialism: Crisis and Renewal (ed.), and over 1,000 articles which have appeared in a variety of journals, magazines, newspapers and popular news websites. Many of his publications have been translated into a multitude of languages, including Arabic, Chinese, Croatian, Dutch, French, German, Greek, Italian, Japanese, Portuguese, Russian, Spanish and Turkish. His latest books are Climate Crisis and the Global Green New Deal: The Political Economy of Saving the Planet (with Noam Chomsky and Robert Pollin as primary authors, 2020); The Precipice: Neoliberalism, the Pandemic, and the Urgent Need for Radical Change (an anthology of interviews with Noam Chomsky, 2021); Economics and the Left: Interviews with Progressive Economists (2021); Illegitimate Authority: Facing the Challenges of Our Time (an anthology of interviews with Noam Chomsky, 2023); and A Livable Future Is Possible: Confronting the Threats to Our Survival (an anthology of interviews with Noam Chomsky, 2024).

This first appeared on TruthOut.

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