At the U.N. summit on climate change held in Paris soon, world leaders will join in an attempt to curb their emissions in order to avoid warming by more than 2 degrees Celsius past the industrial age. We’re already 0.9 degrees warmer and by the looks of the pledges filed by member states ahead of the talks, a more realistic target seems like 3 degrees. In other words, the framework – which will not be legally binding – will only have moderate effects, when more ambitious action is required. One big part of the problem is fossil fuel subsidies, which last year amounted to $452 bn. in total for all G20 member states. Oppositely, renewable energy – a field which actually deserves to be subsidizes since it isn’t mature yet – was subsidized by only $121 bn. or four times less.
The reminder that we’ve still subsidizing an industry that’s well over a century old came from independent think tank Overseas Development Institute (ODI) and campaign group Oil Change International, which authored the report. In 2013, the big five oil companies — BP, Chevron, ConocoPhillips, Exxon Mobil, and Shell — reported $93 bn. in profits. Considering where the oil market sits at today, these profits will be considerably smaller for 2015, but still bountiful. Year in, year out. Remind me again why they need subsidized aid?
“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.”
The report’s findings echo those made public by the IMF earlier this year which found worldwide fossil fuels are subsidized by $14.5 bn per day! People are generally in favor of using fossil fuel energy because it’s cheap. This is a myth. Even if we don’t consider the impact on the climate and human health, fossil fuels don’t live up to the hype. It’s cheap because we’re throwing huge cash in the industry’s vault.
Though the Obama administration attempted to lower subsidies, these efforts proved fruitless. In fact, since 2009 spending on fossil fuel subsidies has increased by 35% as a result of increased domestic production, Think Progress reports. Each year, the United States government hands out $20.5 billion to support oil and gas, but most of subsidies come in the form of tax breaks. Only Russia spends more in terms of national subsidies, at $22.8 billion annually. Japan, China and South Korea follow with $19 billion, $17 billion, and $10 billion, respectively.
It isn’t all bleak news, though. The authors report some countries have been making progress in phasing out subsidies. Germany will eliminate coal subsidies by 2018, while Canada is reducing its oil, gas and coal government level support. Of all countries, the United Kingdom seems to be doing the most poorly. Instead of phasing fossil subsidies and supporting renewable energy, the UK government is doing the exact opposite. It’s the only G7 country which announced more subsidies for the fossil fuel industry in the form of new tax breaks, a bit that will cost UK taxpayers $2 bn. by 2020. Meanwhile, the short-sighted UK parliament voted in favor of slashing renewable energy subsidies.
