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16th November 2015

G20 governments spend $452 billion a year subsidising fossil fuel production

A report by the Overseas Development Institute (ODI) and Oil Change International reveals that G20 governments are spending $452 billion annually to subsidise the production of oil, gas and coal – despite promising in 2009 to phase out these subsidies.

 

 

 

G20 governments are handing out $452 billion a year to prop up the production of fossil fuels – despite repeated pledges to phase out subsidies and prevent catastrophic climate change. A new report by the Overseas Development Institute (ODI) and Oil Change International has, for the first time, gathered detailed information on G20 subsidies to oil, gas and coal production.

In the report, "Empty Promises: G20 subsidies to oil, gas and coal production", researchers found G20 support to fossil fuel production alone ($452 billion) was almost four times the entire global subsidies for renewable energy ($121 billion). This support comes despite the declining returns in coal and new hard-to-reach oil and gas reserves, while ignoring scientific evidence that says three-quarters of proven fossil fuel reserves must be kept in the ground.

Report author Shelagh Whitley, from the ODI, said: "G20 governments are paying fossil fuel producers to undermine their own policies on climate change. Scrapping these subsidies would rebalance energy markets and allow a level playing field for clean and efficient alternatives."

 

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The report, published ahead of the G20 summit in Antalya, Turkey (15–16 November), examines three types of G20 government support in 2013 and 2014 – the most recent years with comparable data. It looks at national subsidies extended through direct spending and tax breaks; investment by state-owned enterprises both domestically and internationally; and public finance extended through – for example – loans from government-owned banks and financial institutions.

The report's other key findings are:

  • G20 governments provided almost $78bn a year in national subsidies for fossil fuel production; G20 state-owned enterprises invested $286bn, and public finance was estimated to average a further $88bn a year in 2013 and 2014

  • China's investment in fossil fuel production at home and abroad, through its state-owned enterprises, far exceeded any other G20 country, amounting to almost $77bn annually

  • The United States provided more than $20bn in national subsidies alone, despite calls from President Obama to scrap support to oil, gas and coal. Certain tax breaks in Alaska are so significant that, in the case of one production tax, the state is handing out more to companies than the tax generates in revenue for the state

  • The United Kingdom stands out as the only G7 nation dramatically ramping up its support for the fossil fuel industry, with even more tax breaks and industry support handed out to companies operating in the North Sea during 2015. Recent changes to the tax regime (which are protected from future policy changes) now mean that UK taxpayers are effectively footing the bill for as much as half the costs of decommissioning rigs. Support is likely to increase through a legal obligation for the Secretary of State for Energy and Climate Change to "maximise economic recovery" of oil and gas. These new subsidies come despite diminishing budgetary revenues from the sector

At the end of September 2015, the U.S. and China jointly prioritised the establishment of a concrete deadline for the phase-out of fossil fuel subsidies as a key task during China's G20 presidency in 2016. In line with this momentum, the report recommends G20 governments adopt strict timelines for the phase out of fossil fuel production subsidies, increase transparency through improved reporting of fossil fuel subsidies, and transfer government support to wider public goods including low-carbon development and universal energy access.

Stephen Kretzmann, director of Oil Change International, said: "Continuing to fund the fossil fuel industry today is like accelerating towards a wall that we can clearly see. G20 leaders need to slow down and turn us around before we hit climate disaster."

In order to have a 50% or better chance of staying below the 2°C limit, the share of renewables must increase to between 65% and 80% of global electricity production by 2050, the report states.

 

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