Rich countries are effectively giving oil, gas and coal companies $88 bn a year to explore new reserves, despite clear evidence that those industries are causing global warming.
From a climate change perspective, it would be best to leave those reserves in the ground and focus on renewable energy, but despite a huge growth, renewable energy is not yet able to compensate for oil and gas; one of the main arguments is that renewable energy is often times more expensive than conventional energy… but then again, these subsidies are working against renewables, making oil, gas and coal cheaper.
The most detailed breakdown yet of global fossil fuel subsidies has shown that the US provides companies with $5.2bn for fossil fuel exploration in 2013, Australia spent $3.5bn, Russia $2.4bn and the UK $1.2bn. These are public money going to new fossil fuels explorations in the form of tax cuts and subsidies. Also, the report highlights that the money went to major multinationals, and not smaller companies.
“The evidence points to a publicly financed bail-out for carbon-intensive companies, and support for uneconomic investments that could drive the planet far beyond the internationally agreed target of limiting global temperature increases to no more than 2C,” say the report’s authors.
Britain was especially generous. In 2010-2014, it gave $4.5bn to French, US, Middle Eastern and north American companies to explore the North Sea for fast-declining oil and gas reserves. The majority of the money went to two French companies, GDF Suez and Total.
There’s nothing wrong per se with subsidizing industry – but the thing is that now, unlike in previous decades, we understand the impact we are having on the planet’s climate. Well, we don’t understand it fully, but we know that we are causing global warming, and that fossil fuels are the main driver for this change. So if we look at the big picture, we’re financing our own future problems.
“The IPCC [UN climate science panel] is quite clear about the need to leave the vast majority of already proven reserves in the ground, if we are to meet the 2C goal. The fact that despite this science, governments are spending billions of tax dollars each year to find more fossil fuels that we cannot ever afford to burn, reveals the extent of climate denial still ongoing within the G20,” said Oil Change International director Steve Kretzman.
But even thinking locally, there are objections to these policies. There are arguments that it doesn’t make economic sense to invest in what should already be a declining industry – all the more so one which is causing environmental damage. If anything, we should be implementing taxes on these industries, not tax cuts. Also, it makes much more sense to invest these subsidies in renewable energy.
“This is real money which could be put into schools or hospitals. It is simply not economic to invest like this. This is the insanity of the situation. 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 UN climate deal in 2015,” said Kevin Watkins, director of the ODI.
To put things into perspective, rich countries gave $88 bn to explore new oil, gas and coal reserves, and four times less in developing new renewable energy technologies. The authors of the report expressed their surprise to this fact.
“In parallel with the rising costs of fossil-fuel exploration and production, the costs of renewable-energy technologies continue to fall rapidly, and the speed of growth in installed capacity of renewables has outperformed predictions since 2000,” said the report.
Here is an interactive map showing how the G20 countries are giving fossil fuel companies subsidies and tax cuts.