Industries fueling the climate crisis and draining public funds in the Global South: ActionAid

By our representative

A new report from ActionAid has revealed the alarming financial drain on countries in the Global South as climate-damaging industries such as fossil fuels and industrial agriculture receive more than $600 billion in public subsidies annually. The report, titled “How the Finance Flows: Corporate Capture of Public Finance Fuelling the Climate Crisis in the Global South,” shows that each year, an average of $677 billion in public finances is directed to sectors with destructive climate impacts, depriving key social sectors such as as education.

Between 2016 and 2023, the fossil fuel sector alone received an average of $438.6 billion a year in public subsidies, while industrial agriculture benefited with $238 billion a year between 2016 and 2021. This corporate takeover of public finances by multinational corporations such as Shell and Bayer perpetuates environmental degradation, economic inequality and social injustice.

Sandeep Chachra, executive director of the ActionAid Association, said: “This report shows how the Global South continues to suffer from what is clearly a form of neo-colonial exploitation in which multinational corporations and wealthy countries extract resources on unfair terms, leading to environmental damage, economic damage, inequality and displacement. “These practices, reinforced by unequal trade and debt dependence, deepen poverty while undermining sovereignty, trapping local economies in low-value production.”

Chachra emphasized the need for greater corporate and government accountability:

“We must take a multi-faceted approach to ensure that the fossil fuel industry does not waste public funds that are crucial to sustainable development. By joining forces, countries in the Global South can prevent harmful practices such as tax avoidance and redirect public finances towards renewable energy and sustainable infrastructure.”

The report calls for significant reforms, including redirecting public finances 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 crucial to supporting a just transition in climate-vulnerable countries and ending the devastating financial flows that deepen the climate crisis.

Arthur Larok, Secretary General of ActionAid International, said: “This report exposes the parasitic behavior of wealthy corporations. They are sucking the life out of the Global South, draining public funds and fueling the climate crisis.”

—