A new ActionAid report has exposed the alarming financial drain on the Global South, as climate-wrecking industries like fossil fuels and industrial agriculture receive over US$600 billion annually in public subsidies. The report, "How the Finance Flows: Corporate Capture of Public Finance Fuelling the Climate Crisis in the Global South", reveals that an average of US$677 billion in public finance is directed toward climate-destructive sectors each year, depriving crucial social sectors such as education.
The amount could fund schooling for all sub-Saharan African children 3.5 times over. The report highlights the stark contrast between public finance for harmful industries and the insufficient climate finance grants from the Global North, which are a mere fraction of the funds required to support much-needed climate transitions. Global South countries allocate 40 times more public finance to fossil fuel sectors than to renewable energy, despite needing trillions of dollars to address the growing climate crisis.
From 2016 to 2023, the fossil fuel sector alone received an annual average of US$438.6 billion in public subsidies, while industrial agriculture benefited from US$238 billion per year from 2016 to 2021. This corporate capture of public finance by multinational corporations such as Shell and Bayer is perpetuating environmental degradation, economic inequality, and social injustice.
Sandeep Chachra, Executive Director of ActionAid Association, said:"This report shows how the Global South continues to suffer from what is clearly a form of neocolonial exploitation, where multinational corporations and wealthy nations extract resources under unfair terms, leading to environmental harm, economic inequality, and displacement. These practices, reinforced by unequal trade and debt dependency, deepen poverty while eroding sovereignty, trapping local economies in low-value production."
"We must adopt a multi-faceted approach to ensure that fossil fuel industries do not drain public funds, which are crucial for sustainable development. By joining forces, countries of the Global South can prevent harmful practices such as tax avoidance and redirect public finance towards renewable energy and sustainable infrastructure."
The report calls for significant reforms, including redirecting public finance from fossil fuels to people-led climate solutions, scaling up decentralized renewable energy systems, and demanding trillions in climate finance from the Global North. These efforts are vital to supporting just transitions in climate-vulnerable countries and ending the destructive financial flows that worsen the climate crisis.
Arthur Larok, Secretary General of ActionAid International, stated:"This report exposes wealthy corporations’ parasitic behavior. They are draining the life out of the Global South by siphoning public funds and fueling the climate crisis."
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*Freelance writer. Click here for the full report
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