The annual G20 Brown to green report released this week shows that G20 countries’ energy-related CO2 emissions rose for a second year running in 2018. Driven by stronger economic performance and an ever-greater fossil fuel energy supply, emissions have increased by nearly 2%.
Despite finally waking up to the climate agency, why can’t we break our reliance on fossil fuels?
The biggest reason is the financing provided by governments, which continues to prop up these risky and outdated energy sources. Our research for the Brown to green report finds that $127 billion of subsidies per year is provided by G20 governments for the production and consumption of coal, oil, and natural gas. Previous ODI research, also featured in the report, shows that G20’s public finance institutions provide an additional $17 billion per year domestically through loans, credits, and insurance, and $11 billion per year abroad for coal and coal-fired power.
Alternatives to fossil fuels are available – and viable. The cost of renewable energy is falling year after year and its use is becoming more widespread. Renewables, together with new technologies enabling smarter energy consumption, are already stepping in to meet the world’s energy needs. But continued government subsidies to fossil fuels simply hinder their progress.
So, is it impossible to break this addiction to fossil fuels?
No, of course it isn’t! There’s been significant progress on coal in recent years. The UK, which has been leading the Powering Past Coal Alliance together with Canada, has reduced its electricity generation from coal from 40% to 7% in just five years, and even achieved two weeks of coal-free electricity earlier this year.
EU member states have also made commitments to end subsidies for coal, and as a result, eight countries have pledged to phase out coal-fired power by 2030. This shows how critical government leadership is for concrete action. Countries in other parts of the world are following suit, often driven by concerns around air pollution. But governments are in denial when it comes to oil and gas.
G20 leaders cannot safeguard financial stability without stronger climate action
Extreme weather events lead to around 16,000 deaths and economic losses of $142 billion in G20 countries every year, according to the Brown to green report. Such losses will continue in coming years due to increasing physical costs of damage from extreme weather events. But additional costs will be borne as fossil fuel assets propped up by government subsidies become redundant and uneconomical before the end of their life, due to lower-cost clean technologies.
We know that to avoid further warming and the ever-mounting dangers of climate change, we need a rapid phase out of fossil fuels.
Three ways G20 governments can finally phase out fossil fuels
They must bring an end to the billions of dollars of subsidies for fossil fuel production and consumption through budget allocations and tax exemptions. This shift will have to be well managed, making sure both businesses and workers – and vulnerable consumers – involved are supported through the transition.
They must put in place strong measures and policies to phase out the use of taxpayers’ money for oil and gas investments. These are often provided by government-led finance organisations, such as national and multilateral development banks.
They must make sure climate change risks are reflected and managed across the entire financial system. Central banks and financial regulators are finally taking note and setting up policies such as climate risk disclosure requirements that will incentivise climate-compatible investments, and limit high-carbon ones. But the pace has been slow. Many of these are currently voluntary and must be made mandatory and comprehensive to drive real change.
G20 leaders must take their heads out of the sand and make bold decisions to end financing for fossil fuels immediately to avoid facing a climate reality that is beyond what the world can cope with.