Some of the world’s largest economies are spending billions each year to find new regions to drill, frack and mine for fossil fuels, according to a new report.
The report, published Tuesday by Oil Change International and British think tank Overseas Development Institute (ODI), found that G20 nations — a group of major developed and developing economies that includes the U.S., China, India and the E.U. — are spending $88 billion annually on fossil fuel exploration. That’s more than double the $37 billion spent on fossil fuel exploration — a term that includes finding new reserves of fossil fuels as well as expanding existing drilling and mining sites — by the world’s largest 20 oil and gas companies in 2013. It’s also almost double the investment that the International Energy Agency says is needed to power the world by 2030.
And, the report notes, this type of investment is unwise if the world wants to keep warming to 2°C, a target that will require leaving at least two-thirds of untapped fossil fuel reserves in the ground.
“By providing subsidies for fossil-fuel exploration, the G20 countries are creating a ‘triple-lose’ scenario,” the report’s authors write. “They are directing large volumes of finance into high-carbon assets that cannot be exploited without catastrophic climate effects. They are diverting investment from economic low-carbon alternatives such as solar, wind and hydro-power. And they are undermining the prospects for an ambitious climate deal in 2015.”
CREDIT: Oil Change International
According to the report, this level of spending on fossil fuel exploration would be considered un-economically sound if it weren’t for the public subsidies, falling coal and oil prices and rising costs for hard-to-reach fossil fuel reserves that make finding new sources of fossil fuels enticing for countries. These federal investments in fossil fuel exploration are in turn helping to prop up the fossil fuel industry at a time when countries should be looking to invest in renewable energy — especially G20 nations, which pledged in 2009 to start phasing out fossil fuel subsidies.
“Without government support for exploration and wider fossil-fuel subsidies, large swathes of today’s fossil-fuel development would be unprofitable,” the report states. “Directing public finance and consumer spending towards a sector that is uneconomic, as well as unsustainable, represents a double folly.”
The U.S. is among the top funders of fossil fuel exploration in the G20, providing $5.1 billion to the effort in 2013 — nearly double the amount the country spent in 2013. The report notes that efforts to cut fossil fuel subsidies have been made in the U.S., but none have gotten off the ground: Sen. Robert Menendez (D-NJ) introduced legislation in 2012 that would have eliminated tax breaks for five major oil companies, but the bill was defeated. President Obama has also proposed cutting certain fossil fuel subsidies in budgets he’s submitted to Congress, but none have been voted on.
While the U.S. gambles big on fossil fuels, it spends less on energy research than many experts say is necessary to find new ways to tackle climate change. And according to the report, the U.S. should be spending more on renewable energy if it wants to attract more investment: every dollar of renewable energy subsidies in the U.S. attracts $2.5 in investment, compared to the $1.3 of investment every dollar of fossil fuel subsidies draws.
ODI has documented the world’s investment in fossil fuels before. Last year, the think tank found that governments around the world spent $500 billion on fossil fuel subsidies in 2011.
This year’s report calls on countries to put a price on carbon and “immediately phase out” spending on fossil fuel exploration — and, eventually, fossil fuel subsidies in general. Removing subsidies for the fossil fuel industry would “begin to create a level playing field between renewables and fossil fuel energy,” said report author Shelagh Whitley of ODI. The report recommends that countries take the money they were spending on exploration subsidies and use it instead on spending that will help facilitate a transition to low-carbon energy sources.