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 newย report.
Generous government subsidies are actually propping up fossil fuel exploration which would otherwise be deemed uneconomic, states the report, โThe fossil fuel bail-out: G20 subsidies for oil, gas and coal exploration.โ
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.ย ย
โEvery 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,โ said the report released Tuesday, just days ahead of the G20 leaders meeting in Brisbane,ย Australia.
The report also notes the G20 nations are creating a โtriple-loseโ scenario by providing subsidies for fossil-fuelย exploration.
โThey are directing large volumes of finance into high-carbon assets that cannot be exploited without catastrophic climate effects,โ the report said. โThey 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 inย 2015.โ
Noting that leaders of the G20 countries, which produce about 80 per cent of global carbon emissions, pledged in 2009 to phase out โinefficientโ fossil-fuel subsidies, the report says there is a large gap between G20 commitment andย action.
So who is paying for thisย 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 financialย institutions.
During the same period, the report said, the top 20 private oil and gas companies, globally, invested just $37 billion in exploration โ less than half of what is provided annually by G20 governments โ suggesting their exploration activities are highly dependent on public finance.ย ย
The report added global fossil fuel subsidies โ of which exploration is just one portion โ are estimated to be $775 billion aย year.ย
Key findings in the report show that the U.S. provided some $5.1 billion in national subsidies to fossil fuel exploration in 2013 โ almost double the level inย 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 fuelย 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.ย ย
โDespite 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,โ the Overseas Development Instituteโs Shelagh Whitley said. โScrapping these subsidies would begin to create a level playing field between renewables and fossil fuel energy.โย ย
Oil Change Internationalโs director Stephen Kretzmann said โfive 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 bothย fronts.โ
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 2oCย 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 andย 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 energyย 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 climateย change.
โGiven that two-thirds of currently known reserves cannot be exploited if the world is to remain within the internationally agreed 2ยบ Centigrade threshold, this is a bad investment for tax-payers and the planet,โ said the economists. โFossil fuel subsidies turn upside down the logic of effective action on climate.โย ย โจ
Religious leaders in Australia, according to a story published Wednesday, said โworld leaders must move towards a renewable energy future or there will be human suffering on an unthinkable scale.โย ย
Anglican Church Bishop Professor Stephen Pickard was quoted as saying there is overwhelming scientific evidence about the impact of unchecked climateย change.
โTo our very great shame, unthinking economic growth has become the great treasure,โ Pickard said. โIt has captured our hearts. It has captured our pockets. It has blinded us to the wellbeing of theย planet.โ
Under Prime Minister Tony Abbott, coal-rich Australia, described as โbeing the developed worldโs worst polluter per head of population,โ repealed the nationโs carbon tax earlier thisย year.
Image Credit: Stop sign in the oilsands region. Photo by Krisย Krug.
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