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G20 Governments are Spending $88B Each Year to Explore for New Fossil Fuels. Imagine if Those Subsidies Went to Renewable Energy?

Rich G20 nations are spending about $88 billion (USD) each year to find new coal, oil and gas reserves even though most reserves can never be developed if the world is to avoid catastrophic climate change, according to a new report.

Generous government subsidies are actually propping up fossil fuel exploration which would otherwise be deemed uneconomic, states the report, “The fossil fuel bail-out: G20 subsidies for oil, gas and coal exploration.”

Produced by the London-based Overseas Development Institute and the Washington-based Oil Change International the 73-page analysis also noted the costs of renewables is falling and the investment returns are better than fossil fuels.  

“Every U.S. dollar in renewable energy subsidies attracts $2.5 in investment, whilst a dollar in fossil fuels subsidies only draws $1.3 of investment,” said the report released Tuesday, just days ahead of the G20 leaders meeting in Brisbane, Australia.

The report also notes the G20 nations are creating a ‘triple-lose’ scenario by providing subsidies for fossil-fuel exploration.

“They are directing large volumes of finance into high-carbon assets that cannot be exploited without catastrophic climate effects,” the report said. “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.”

Noting that leaders of the G20 countries, which produce about 80 per cent of global carbon emissions, pledged in 2009 to phase out ‘inefficient’ fossil-fuel subsidies, the report says there is a large gap between G20 commitment and action.

So who is paying for this exploration?

According to the report $49 billion of these subsidies occurred through state-owned enterprises, $23 billion from national subsidies delivered through direct spending and tax breaks and $16 billion from public finance from banks and financial institutions.

During the same period, the report said, the top 20 private oil and gas companies, globally, invested just $37 billion in exploration – less than half of what is provided annually by G20 governments – suggesting their exploration activities are highly dependent on public finance.  

The report added global fossil fuel subsidies — of which exploration is just one portion — are estimated to be $775 billion a year. 

Key findings in the report show that the U.S. provided some $5.1 billion in national subsidies to fossil fuel exploration in 2013 – almost double the level in 2009.

Australia, meanwhile, is providing $3.5 billion for the development of offshore and inland fossil-fuel resources and Russia is provides $2.4 billion in national subsidies for fossil fuel exploration.

The report noted the Canadian government offers a wide array of national subsidies that total a minimum of $928 million annually to encourage fossil fuel exploration, including tax benefits for nearly all exploration activities.  

“Despite the widespread perception that renewables are costly, our research reveals that finding new fossil fuel reserves is costing nearly $88 billion in exploration subsidies across the G20,” the Overseas Development Institute’s Shelagh Whitley said. “Scrapping these subsidies would begin to create a level playing field between renewables and fossil fuel energy.”  

Oil Change International’s director Stephen Kretzmann said “five years ago, G20 governments pledged to both phase out fossil fuel subsidies and take action to limit climate change. Immediately ending exploration subsidies is the clearest next step on both fronts.”

The report recommended governments should price carbon to reflect the social, economic and environmental damage associated with climate change, and reduce emissions to levels compatible with the globally agreed 2oC target.

It also recommended that G20 nations should immediately phase out exploration subsidies as a first step towards a wider fossil-fuel subsidy phase out and reform.

In addition, it said governments should transfer subsidies from exploration and other fossil-fuel subsidies to support for the transition to low-carbon development and universal energy access.

On the same day the report was published, a number of high-profile economists said in a letter to a number of newspapers that governments should end fossil fuel subsidies and galvanize international action on climate change.

“Given that two-thirds of currently known reserves cannot be exploited if the world is to remain within the internationally agreed 2º Centigrade threshold, this is a bad investment for tax-payers and the planet,” said the economists. “Fossil fuel subsidies turn upside down the logic of effective action on climate.”  


Religious leaders in Australia, according to a story published Wednesday, said “world leaders must move towards a renewable energy future or there will be human suffering on an unthinkable scale.”  

Anglican Church Bishop Professor Stephen Pickard was quoted as saying there is overwhelming scientific evidence about the impact of unchecked climate change.

“To our very great shame, unthinking economic growth has become the great treasure,” Pickard said. “It has captured our hearts. It has captured our pockets. It has blinded us to the wellbeing of the planet.”

Under Prime Minister Tony Abbott, coal-rich Australia, described as “being the developed world’s worst polluter per head of population,” repealed the nation’s carbon tax earlier this year.

Image Credit: Stop sign in the oilsands region. Photo by Kris Krug.

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