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Study finds Germany could achieve a third of its climate goals through cutting fossil fuel subsidies

A German research institute stated on Thursday that reducing fossil fuel subsidies could help Germany achieve around one-third of its climate goals without having to rely on other tools, such as carbon pricing.

In a recent study, the Center for European Economic Research in Mannheim (ZEW), also noted that one third of countries could achieve their climate goals by simply cutting subsidies for fossil-fuels like coal, oil and gas.

According to the EU’s Environment Agency, Germany will continue to be the biggest subsidiser of fossil energy in the European Union. In 2023, the German government will provide about 41 billion euro ($48.33billion) in subsidies for coal, oil, and gas. This is more than 60% of the total EU amount that year.

Environmental groups have criticized the government's plan to use Germany’s Climate and Transformation Fund to lower gas costs. The fund is funded primarily through CO2 emission trading.

ZEW stated that cutting subsidies would also help boost the public finances. It said that by accounting for hidden costs associated with fossil fuels such as environmental and health damage, governments can collect additional tax revenue equal to almost 5% of the total consumption.

The study found that reducing subsidies could help to avoid major costs associated with climate change and offset the impact of rising energy prices.

Indirect subsidies such as pollution and health damages that are not included in energy costs, make up another 5.8% of global economic output.

ZEW, citing the International Monetary Fund, said that they totaled nearly $6 trillion worldwide.

(source: Reuters)