G20 countries have cut fossil fuel subsidies by 10% in the last four years — but they have still given the industry more than $3.3 trillion since the Paris Agreement in 2015.
According to a new report, eight member nations — Argentina, Germany, Italy, Saudi Arabia, South Africa, South Korea, Turkey, and the U.K. — reduced their subsidies.
However, seven countries increased their support for fossil fuel industries during the same timeframe, most notably Australia (+48%), Canada (+40%), and the United States (+37%).
The greatest subsidies by value came from China, Saudi Arabia, Russia, and India. Together, these four countries accounted for about half of all the $3.3 trillion invested.
Report Authors Criticize G20 Countries
The report was released by BloombergNEF, a strategic research provider covering global commodity markets, and Bloomberg Philanthropies. The group estimated that the subsidy money could have funded 4,232GW in new solar power plants, more than 3.5 times the size of the U.S. electricity grid.
Victoria Cuming is head of global policy at BloombergNEF and the lead author of the findings. She said: “Given that the G-20 accounts for nearly three-quarters of global emissions, progress from those governments in these three areas would mark a huge step forward toward tackling climate change. So far, they have yet to step up to the plate.”
Oil, Gas, and Coal Are the Big Subsidy Winners
G20 countries account for almost three-quarters of the global carbon emissions that drive climate change. According to the report’s authors, there is a risk of creating carbon “lock-in” by encouraging fossil fuel use and production. Carbon lock-in means investments made today support high-emissions industries for many decades to come.
Between 2015-2019, the coal industry increased its share of fossil fuel subsidies from 4-8% of the total pot. Oil and gas remain the biggest recipients, boosting their take from 73 to 82% of the funding.
Coal is rising like a phoenix from the furnace and may scoop more state-backed financial incentives as more coal-fired power plants come online. G20 countries have at least 395 GW of capacity from coal-fired power plants under construction, announced, or permitted. China plans for 247 GW from new coal power plants, India 66 GW, Indonesia 33 GW, and Turkey has 20 GW in the coming years.
Post-COVID Recovery Not as Green as Promised
The much-vaunted post-COVID green recovery is hard to see among the report’s findings. G20 countries have committed $363 billion in economic stimulus packages that cut emissions or aid climate adaptation.
But carbon-intensive industries like aviation and construction will receive more than four times as much, with up to $1,217 billion pledged. The report also found that 60% of the fossil fuel subsidies went to companies producing fossil fuels and 38% to reducing bills for consumers.
Action Required Now to Cut Carbon Emissions
BloombergNEF makes several suggestions as to how the G20 can change course. Immediate changes include:
- Ending fossil fuel subsidies
- Charging companies for carbon emissions
- Making companies disclose the risks posed by climate change to their businesses
A stumbling block is that each country records its energy, emissions, and climate data differently. Reporting is voluntary, and among the G-20, only the U.K. plans to enforce climate-risk reporting. Also, the EU and U.K. are the only governments that have implemented climate-risk policies to date.
The International Institute for Sustainable Development (IISD) claims reforming fossil fuel subsidies in 32 countries could save governments $3 trillion by 2030.
The IISD model phases out all fossil fuel subsidies by 2030 alongside the gradual introduction of a 10% fossil fuel tax. The savings and revenues would be reinvested in renewable energy sources and energy efficiency measures.
Its estimates predict around 5.5 billion tonnes of CO2 emissions — equivalent to about 1,000 coal-fired power stations — would be prevented from entering the atmosphere through this fossil fuel subsidy reform.
Jonas Kuehl is an IISD policy analyst and lead author of the report. He said: “As governments urgently look for ways to ramp up ambition on climate action and green recovery, fossil fuel subsidy reform is a powerful tool that can both lower emissions and help finance the energy transition. So is the taxation of fossil energy. Yet only a handful of countries are taking advantage of these options.”
Opinion writer: Tom Shearman
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