G20 nations must end harmful fossil fuel subsidies
Kevin Watkins calls on G20 governments to stop supporting the carbon industry and the exploration of reserves through subsidies, as it undermines their pledge to curb emissions
The number of chances that the world will have to address climate change is dwindling. One of them comes with this week’s G20 summit in Brisbane, Australia, where leaders of the world’s advanced and major emerging economies can signal serious intent by cutting the fossil fuel subsidies that fuel global warming.
Five years ago, the G20 pledged to phase out “inefficient fossil fuel subsidies” as part of a wider strategy for combating climate change. Yet the subsidies have continued to grow. Globally, some US$600 billion is spent to support carbon-intensive energy, compared to just US$90 billion for clean energy.
That makes no sense. Fossil fuel subsidies encourage investors to put resources into the fuels that drive climate change. They generate the terrible pollution that blights cities in China and India. And most of the benefits of the subsidies are captured by the middle class, not the poor.
Subsidies directed towards discovering and exploiting new fossil fuel reserves are among the most wasteful – and the most damaging. Along with the rest of the international community, G20 governments are committed to the target of limiting global warming to less than 2 degrees Celsius above the planet’s pre-industrial level. According to the International Energy Agency, no more than one-third of known reserves can be exploited if this goal is to be achieved.
So why throw public finance at discovering more unburnable carbon? That is a question that G20 taxpayers might want to ask their political leaders.
The Overseas Development Institute and Oil Change International have provided the first financial audit of subsidies allocated specifically to the discovery of new fossil fuel reserves by G20 countries. Their report, published this week, identifies around US$88 billion in public financial support provided through an assortment of tax breaks, spending by state-owned enterprises and transfers mediated through financial institutions such as the World Bank.
Every G20 country is participating in the exploration subsidy fest. The host government for the Brisbane summit spends some US$3 billion annually. The US has doubled funding for fossil fuel exploration – to more than US$5 billion – since 2009. Britain provides around US$1.2 billion, principally in the form of tax breaks for North Sea oil exploration, generating windfall transfers for companies like Total and Chevron.