11 November 2014: The Overseas Development Network (ODI) and Oil Change International have published a report, titled ‘The Fossil Fuel Bailout: G20 Subsidies for Oil, Gas and Coal Exploration,’ which discusses the scale and structure of fossil fuel exploration subsidies.

The report states that subsidies for fossil-fuel exploration by G20 countries are creating a ‘triple-lose’ scenario by: directing large volumes of finance into high-carbon assets that cannot be exploited without catastrophic climate effects; diverting investment from economic low-carbon alternatives, such as solar, wind and hydropower; and undermining prospects for an ambitious climate deal in 2015.

Pointing to the US$88 billion a year of subsidies offered by governments to fossil fuel companies for the exploration of new oil, gas and coal reserves, the report concludes that without these subsidies, much of current fossil fuel development would be unprofitable. Such support to renewables would provide almost double the returns achieved with the same support for fossil fuels.

However, the report stresses that subsidies for exploration are only part of a bigger picture of fossil fuel subsidies. In 2012, the International Energy Agency (IEA) estimated global fossil-fuel consumption subsidies at US$544 billion, and a 2013 International Monetary Fund (IMF) report approximated that when considering the negative effects of burning fossil fuels, subsidies totaled as much as US$1.9 trillion in 2011. The 2013 UNEP Emissions Gap Report also included fossil fuel subsidy reform as an area “ripe for international cooperation initiatives.” While G20 countries committed to phasing out inefficient and wasteful fossil fuel subsidies five years ago, and the Asian Pacific Economic Cooperation (APEC) countries followed suit with similar pledges, the report points to large gaps between pledges made and actions taken.

The report recommends that governments price carbon to reflect the social, economic and environmental damage associated with climate change, and to reduce emissions to levels compatible with the 2ºC target. The report also calls for: immediate phasing-out of fossil-fuel subsidies for exploration, as a first step towards wider fossil fuel subsidy phase out and reform; eliminating bilateral and multilateral finance for fossil-fuel exploration; introducing greater transparency in budget reporting so citizens and legislative bodies are aware of spending on fossil-fuel subsidies; working through the OECD, the UNFCCC and other bodies to identify and remove government incentives for fossil fuel production; and transferring fossil fuel subsidies to support the transition to low-carbon development and universal energy access. [Publication: The Fossil Fuel Bailout: G20 Subsidies for Oil, Gas and Coal Exploration] [Publication Website] [UNFCCC Press Release] [ODI Website] [Oil Change International Website]