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Loadsamoney !!! For the fossil fuel industry, that is. Renewables are left out in the cold. Photo: Helen Keegan via Flickr (CC BY-NC-SA).
Loadsamoney !!! For the fossil fuel industry, that is. Renewables are left out in the cold. Photo: Helen Keegan via Flickr (CC BY-NC-SA).
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UK's £10 billion a year fossil fuel subsidies - and rising!

The Ecologist

12th November 2015

In 2009 G20 nations pledged to eliminate fossil fuel subsidies. But they are still supporting them with $452 billion a year. Worst offenders include the UK, the only G7 country that's ramping up its fossil fuel spending; and Turkey, host of tomorrow's G20 summit, which plans to double its CO2 emissions with a huge new fleet of coal power plants.

The UK stands out as the only G7 nation significantly 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 in 2015.

The UK Government is spending almost £6 billion ($9bn) a year propping up the uneconomic production of fossil fuels at home - despite promising with other G20 nations to phase out subsidies six years ago.

A new report by the Overseas Development Institute and Oil Change International for the first time gathers detailed information on G20 government subsidies for oil, gas and coal production.

The United Kingdom stands out as the only G7 nation significantly 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 in 2015.

In total G20 governments are handing out approximately $452 billion a year to prop up the fossil fuel production - almost four times the entire global subsidies for renewable energy ($121 billion).

This support defies pledges made in 2009 to phase out subsidies and prevent catastrophic climate change, and despite the global imperatives to keep three quarters of current fossil fuel reserves in the ground and declining returns in coal and new hard-to-reach oil and gas reserves.

The report, 'Empty Promises: G20 subsidies to oil, gas and coal production', examines three types of G20 government support in 2013 and 2014 - the most recent years with comparable data: national subsidies through direct spending and tax breaks; investment by state-owned enterprises; and public finance from government-owned banks and financial institutions.

Another £3.6 billion of UK money for fossil fuel production abroad

As well as spending an average of £5.9bn ($9bn) a year in UK production subsidies in 2013 and 2014, the UK provided a further £3.6bn ($5.5bn) in public finance, most of which went to prop up fossil fuel production overseas overseas. Beneficiary countries include Russia, Saudi Arabia and China.

That makes almost £10 billion in UK fossil fuel subsidies a year in all. More recent support handed out for oil and gas development in the North Sea, is expected to cost tax payers a further £1.7bn ($2.7bn) up to 2020 - even though the region's fields are in decline and have falling returns.

The report also details how companies benefitting from UK government support include foreign-owned multi-nationals. This includes generous tax breaks for North Sea exploration worth £551m ($838m) to the French company Total, £131m ($200m) to the US-based Apache and £267 ($407m) to Norway's government owned Statoil (in between 2009 and 2014).

Shelagh Whitley, of the Overseas Development Institute, said: "The UK has been cutting back support for solar power and energy efficiency, arguing that the burden was too high.

"Our figures reveal that in spite of supposed budget constraints the government is giving ever increasing hand-outs to oil and gas majors, most of which are not British companies. Scrapping fossil fuel subsidies would rebalance energy markets and allow a level playing field for clean and efficient alternatives."

Turkey's shameful plan to double its CO2 emissions

Published ahead of the G20 summit in Antalya, which begins tomorrow, the report makes embarrassing reading for host nation Turkey, which is giving tax breaks to support its programme of building more coal plants than any other OECD country potentially raising its own greenhouse gas emissions by 94% over the next 15 years.

Other key findings include:

  • 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

  • Japan provided more public finance for fossil fuel production in 2013 and 2014 than any other G20 country, averaging $19bn per year, with $2.8bn per year in coal finance alone

  • 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

  • Australia and Brazil both provided approximately $5bn in national subsidies, including for development of fossil fuel resources in increasingly remote and challenging areas

  • Russia provided almost $23bn in national subsidies, the highest of all G20 countries

  • 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

  • Investment by G20 state-owned enterprises in fossil fuel production is highly significant. G20 governments have a tremendous opportunity to meet the climate challenge by shifting the investment of state-owned enterprises away from fossil fuel production, toward clean energy

Shelagh Whitley, of the Overseas Development Institute, 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.

"By providing subsidies for fossil fuel production, the G20 countries are creating a 'lose-lose' scenario. They are directing large volumes of finance into high-carbon assets that cannot be exploited without catastrophic climate effects. This diverts investment from economic low-carbon alternatives such as solar, wind and hydro-power.

"In addition, the scale of G20 fossil fuel production subsidies calls into question the commitment of governments to an ambitious deal on climate change."

Signs of progress - US and China

At the end of September 2015, the US and China jointly prioritized 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.

But prospects for action in the G20 summit look poor. The 'key messages' page on the G20 meeting's subsite does not mention the word 'climate' once. 'Growth' occurs 16 times, 'investment' ten times and 'economy' nine times.

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."

 


 

The report: 'Empty Promises: G20 subsidies to oil, gas and coal production' is published by the Overseas Development Institute & Oil Change International.

Action: Civil society organizations representing millions of supporters are organizing a Global Day of Action to Stop Funding Fossils on November 14.

 

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