The world’s 20 top economies spend more than $400 billion dollars each year propping up fossil fuel production, a practice that threatens to seriously undermine the world’s mitigation of climate change, according to a new report by the environmental advocacy group Oil Change International.
Despite pledging to end fossil fuel subsidies in 2009, G20 countries spent a combined average of $452 billion on fossil fuels in 2013 and 2014, through a mix of direct spending, tax breaks, investments by majority-state owned companies, and public finance from government-owned banks and financial institutions. According to the report, that’s more than four times the amount given to renewables in 2013.
“I think it’s gross hypocrisy for countries to be handing out billions to fossil fuel companies at the same time they are pledging to reduce emissions,” Alex Doukas, senior campaigner with Oil Change International and co-author of the study, told ThinkProgress. “We can’t tackle the climate change problem if we are propping up the production of fossil fuels.”
CREDIT: Dylan Petrohilos/ThinkProgress
Since 2009, G20 countries have reaffirmed their promise to cut fossil fuel each year — but in most cases there has been little progress, with some countries actually increasing their fossil fuel subsidies over the past six years. The United States, for instance, has increased its fossil fuel subsidies 35 percent since 2009, which has mirrored an increase in domestic fossil fuel production as part of the Obama administration’s “all of the above” energy policy. The Obama administration has attempted to reign in fossil fuel subsidies by proposing cuts in every budget that the administration has sent to Congress, but that strategy has been met with opposition from lawmakers.
“Some credit should go to the Obama administration for trying to send budgets to Congress that would eliminate or reform fossil fuel subsidies, but it hasn’t resulted in much,” Doukas said.
Annually, the United States government gives out $20.5 billion to support the production of oil, coal, and gas, with $17.2 billion of that coming at the federal level and $3.3 billion coming at the state level.
A large percentage of the subsidies that fossil fuel companies receive in the United States comes in the form of tax breaks. Oil companies, for instance, are able to claim costs associated with cleaning up after an oil spill as a standard business expense. That means that of the when the U.S. attorney general fined BP with a $20.8 billion dollar settlement in October for its role in the Deepwater Horizon disaster, BP can legally claim a large portion of that settlement as a tax deductible business expense — only $5.5 billion of the fine cannot be classified as such.
Coal subsidies — though not as common as oil and gas subsidies — also help incentivize the production of fossil fuels in the United States. The Powder River Basin, the largest coal reserve in the United States, is not actually designated as a coal-producing region, allowing coal companies to lease federal lands at a lower cost than if the lands were designated as coal-producing. That means that federal leases for the Powder River Basin are a really good deal for coal companies, saving them the equivalent of a $1 billion subsidy each year. Recent studies have argued that ending federal coal subsidies for the Power River Basin would significantly decrease production of coal in the region, as well as greenhouse gas emissions.
Government subsidies that support fossil fuel production make it more difficult to keep the fuels in the ground, Doukas said. As the report notes, both the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA) have warned that three-quarters of existing fossil fuel reserves must stay in the ground if the world is to avoid more than 2°C of warming.
In terms of national subsidies for fossil fuels, only Russia spends more money — $22.8 billion each year. Other countries, like Japan, China, and South Korea, dole out subsidies largely in the form of international public financing for fossil fuels — $19 billion, $17 billion, and $10 billion, respectively.
The report highlights some leaders in the movement to cut fossil fuel subsidies, including Germany, which has pledged to end coal subsidies by 2018, and Canada, which is currently phasing out several subsidies to oil, gas, and mining, including targeted support for the country’s tar sands industry. Other countries, like the United Kingdom, appear to be ramping up their support for fossil fuel subsidies, introducing a set of tax breaks for oil and gas companies in 2015 that are estimated to cost U.K. taxpayers more than $2 billion through 2020.
The report comes just weeks before more than 140 countries are set to convene in Paris for the U.N. climate conference.
“With Paris around the corner, it doesn’t make a lot of sense for G20 countries to be subsidizing fossil fuel production,” Doukas said. “Fossil fuel subsidies are something that we need to address, and right now they are not being addressed.”