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Will The Funding of Fossil Fuels Able to be Stopped?

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What are Fossil Fuels? And How Do They Affect Our Planet?

Fossil fuels are some of the most important materials in our daily lives that are composed of only two elements: hydrogen and carbon, or better known as hydrocarbons. They can be found in Earth’s crust from the decomposed plants and animals from millions of years ago. They are used to generate energy by burning processes, whether in the home to generate heat or in large power plants to generate electricity. They are also used to power engines. Some examples of fossil fuels are coal, oil, and natural gas. They are non-renewable resources, which means that their supply is limited and it will take millions of years for new coal, oil, and natural gas deposits to form [1][2].

Fossil fuels combustion produce carbon emission that will cause global warming

Source: Britannica [11]

As significant as the role of fossil fuels may look, their impacts on the environment are truly harmful. According to the Intergovernmental Panel on Climate Change (IPCC), emissions from fossil fuels are the primary cause of global warming. In 2018, fossil fuels and industry accounted for 89 percent of global CO2 emissions. Already, the average global temperature has risen by 1 degree Celsius. Warming above 1.5°C will threaten the world by increasing sea-level rise, extreme weather, biodiversity loss, and species extinction, as well as food scarcity, worsening health, and poverty for millions of people around the world [3].

Funding of Fossil Fuels

Though it is very clear that fossil fuels are harmful to our planet, projects of expanding this field of work and their funding seem still far away from slowing down in terms of their pace. This is due to their high and quick profit and is very safe and low in risks of loss. This attracts many stakeholders to put their investment in that area, even the government.

Governments around the world provide at least $775 billion to $1 trillion in subsidies each year for fossil fuels, not including the other costs of fossil fuels such as climate change, environmental impacts, military conflicts and spending, and health impacts. This figure varies year to year depending on oil prices, but it is always in the hundreds of billions of dollars. When externalities are considered, as in a 2015 study by the International Monetary Fund, the unpaid costs of fossil fuels exceed $5.3 trillion per year – a staggering $10 million per minute [4]. Banks are also bodies that cannot be excluded from fossil fuels investment. According to a report by a coalition of non-governmental organizations, the world's top 60 banks have provided $3.8 trillion in financing to fossil fuel companies since the Paris climate agreement in 2015 [5].

How About in Indonesia?

Things did not go any better in Indonesia. Despite the commitment to increase climate action and achieve the Paris Agreement target of keeping the earth's temperature below 1.5 degrees Celsius, Indonesia is still providing significant fossil energy subsidies [6]. Based on a report from the International Institute for Sustainable Development's Global Subsidies Initiative (GSI), of the Rp108.5 trillion fiscal stimulus provided to Indonesia's energy sector in the National Economic Recovery (PEN) program, Rp95.3 trillion of which was given to State-Owned Enterprises (BUMN) that use fossil fuels intensively [7]. According to IISD specialists, current energy subsidies not only encourage wasteful consumption but also disproportionately benefit the wealthy, with detrimental social, economic, environmental, and health consequences [8].

This is quite contradictory to the country’s ambition to achieve net zero-emission. The government of the Republic of Indonesia keeps subsidizing fossil fuels even though they try to reduce greenhouse gasses and embrace the use of renewable energy. According to Climate Transparency 2021 data, Indonesia spent USD 8.6 billion on fossil fuel subsidies in 2019, with petroleum accounting for 21.96 percent and electricity accounting for 38.48 percent [9].

In 2014-2017, Indonesia was successful in reforming fuel and electricity subsidies, although it still allocated a sizable fossil energy subsidy. But subsidies for energy increased by 27% between 2017 and 2019. "The provision of fossil energy subsidies do not only hampers plans and efforts to cut greenhouse gas emissions and decarbonization, but also results in inefficiency in energy use, and creates waste due to untargeted subsidies, and makes renewable energy difficult to compete with," said Fabby Tumiwa, Executive Director IESR [10].

Indonesian people voice out their concern about climate change

Source: CNBC Indonesia [12]

What Could be Done?

The fossil fuel problem is a complex issue that cannot be solved only by one or two parties, rather it requires collective action from people all over the world and all of the stakeholders. Many parties are involved in creating this problem where each party has its own role in maintaining the stability of the business. Seeing how fast and big the profit is, of course, they will not let go of this business easily, thus, an organized and well-planned action must be done step by step if we want to overthrow fossil fuels. Old habits can also be a factor that holds us back from transitioning to renewables.

As regular citizens, we can play our role in the transition of fossil fuels to renewables by starting to invest in renewable energy generators such as solar panels, wind turbines, hydroelectric systems, and so on if it is possible. We can also voice out our demand by signing a petition relating to the ending of fossil fuels or we can use our voice in governmental elections to choose a candidate that has a clear and precise agenda in supporting the transition from dirty to clean energy. From there, we can increase the demand for renewable energy and eventually will attract various parties. Stakeholders and investors will start to see the business of renewable energy as profitable, or even more profitable than fossil fuels. This of course will also make the government put more focus on renewables or clean energy, and make them put their funding on renewables without hesitation. In this scenario, the funding of fossil fuel will eventually become something that no longer be put into consideration, which means that the funding of fossil fuels can be stopped, if we all work together on it.




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