G20 Continues to Subsidise Fossil Fuel Exploration

G20 Continues to Subsidise Fossil Fuel Exploration
Five years ago, the G20 announced plans to phase out massive subsidies for fossil fuel exploration. According to Shelagh Whitley, a research fellow by the Overseas Development Agency, a think tank based in London, this has not happened as planned.

A report issued by the Overseas Development Agency, an independent think tank based in London, governments are actively subsidising fossil fuel exploration to the tune of $88 billion a year. Without this money, it is argued, fossil fuel exploration would be uneconomic. One of the main problems is that once started, subsidies are very difficult to stop, and create an almost self-perpetuating system. Shillelagh Whitley elaborates on this problem and offers a plan of how to move forward from here.

Why do governments keep supporting fossil fuel exploration and exploitation?

Shelagh Whitley: That’s a very good question. I think the finding that we need to keep two thirds of fossil fuels in the ground to avoid dangerous climate change is a relatively new finding. This has been announced by the international agencies last year, and then repeated in the last few weeks by the intergovernmental panel on climate change. So, I think this knowledge is relatively new to governments and it is particularly new to the public. I don’t think they understand how important it is to not only stop using fossil fuels, but to stop looking for them.

Why didn’t the G20’s plans to end such subsidies happen?

Shelagh Whitley: The G20 pledged to phase out inefficient fossil fuel subsidies in 2009. And since that time there has been a relatively limited progress in subsidy reform. There’s been a reform in a couple of countries and in other countries the subsidies to fossil fuels have actually increased. So, what we find is that, although the G20 are saying that they are looking to address the climate change and move to the clean energy sources, and phase out the fossil fuel subsidy, they are actually doing the opposite with the subsidies increasing year on year.

Is this a global problem?

Shelagh Whitley: I do think there already is a global movement. There is hope for the new international agreement on climate change. I think what we see though is that countries are moving already, for multiple reasons. As you’ve mentioned at the beginning of the program, a number of these fossil fuel exploration and production activities are becoming less and less economic, for a number of reasons. In part, because the prices of the fuels are dropping. So, a lot of the exploration opportunities are no longer economically viable. But I think also countries really see the costs of using these high-carbon and high-polluting sources. We see huge amounts of air pollution in China and other countries. We also know that countries are experiencing the significant impacts of climate change. We see dangerous typhoons in the Philippines, typhoon Haiyan. We see the droughts that are happening at the US, in California. We see flooding in major cities, like the New York City. And I think the governments realize that the cost of climate change is too high, and also the impacts of pollution are too costly, and they need to look for alternatives. And they are each looking for these alternatives in their own way, I would say, whether there is a global international agreement or not.

Should governments create a stepped transitional system of weaning their countries off fossil fuels?

Shelagh Whitley: Yes, there already are organizations working on the subsidy reform toolkit. So, this is the information that can be provided to governments on how to engage in, as you say, a gradual process of subsidy reform, because that is what is needed. I think also, we will have the international meeting on climate change happening in Lima in a couple of weeks, and also the big meeting next year in Paris to agree a new international agreement. We think it is really important that subsidy phase out is part of this agreement. And so, we think there is actually a more pressing milestone, where resources and activities can be brought to bear on phasing out these subsidies.

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