G20 Backtracks on Fossil Fuel Funding Phase-Out in COVID-19 Recovery

10 November 2020

G20 governments still spending more than half a trillion USD on oil, gas, and coal each year, new study reveals.

Despite repeated pledges to end inefficient fossil fuel subsidies, G20 governments’ support to fossil fuels has dropped by only 9% since 2014–2016, hitting USD 584 billion (£457 billion) annually over the last three years, according to the report Doubling Back and Doubling Down: G20 Scorecard on Fossil Fuel Funding, released today by the International Institute for Sustainable Development (IISD), the Overseas Development Institute (ODI), and Oil Change International (OCI). This marginal progress will likely be undone this year by billions of dollars committed to fossil fuels in response to COVID-19, researchers say.

According to the latest data from the Energy Policy Tracker, G20 governments have given at least USD 233 billion in additional support through recovery measures to fossil fuel-intensive industries since the pandemic began. In Doubling Back and Doubling Down, researchers considered recent COVID-19 recovery commitments as well as pre-pandemic policies to rank G20 countries' progress in phasing out support to fossil fuels.

Anna Geddes of IISD, says:

“G20 governments were already not on track to meet their Paris Agreement commitments on ending public support for fossil fuels before COVID-19. Now, disappointingly, they are moving in the opposite direction. G20 funds for fossil fuels are likely on course to remain constant or even trend upwards again in 2020 compared to the last few years where we’ve seen a slight drop in support.”

United Kingdom

The UK scored equal last out of the eleven G20 OECD member countries. It lacks transparency, denying that it provides any fossil fuel subsidies based on its own narrow definition, whilst still providing a total of USD 16.4 billion (£12.8 billion) of government support to fossil fuels annually. This includes USD 9.2 billion (£7.2 billion) provided annually in tax breaks for fossil fuel use.

Whilst overall UK support to fossil fuels reduced by 21% over the last three years compared to 2014-2016, support for coal production increased by 86%. A significant red flag is that the UK increased its public finance support to fossil fuels by 96% relative to its 2014-2016 average, to USD 1.7 billion (£1.3 billion).

UK Export Finance (UKEF), the UK’s export credit agency, provided USD 970 million (£760 million) to fossil fuels in 2019-2020 and early indicators for 2020-2021 suggest that fossil fuel support will increase, with UKEF recently signing off USD 1.27 billion (£994 million) towards a gas pipeline project in Mozambique. The UK Prime Minister is expected to phase out fossil fuel support from UKEF but no announcement has yet been made.

Sir Suma Chakrabarti, Chair of ODI Board of Trustees, former DFID Permanent Secretary and EBRD President, says:

“The UK government has provided global leadership on commitments to combat climate change. Yet beyond the targets and policy announcements, its own agencies have continued to plough public funds into fossil fuels. Greater transparency is needed to shift the UK's ambitions for carbon neutrality and a green recovery from rhetoric to reality. As the host of COP26 the UK should be setting a level of ambition to phase out all fossil fuel subsidies.”

G20 Rankings

Among the G20 Organisation for Economic Co-operation and Development (OECD) members, Germany performed best overall in terms of phasing out fossil fuel funding, while Mexico, Turkey, and the United Kingdom ranked equally lowest. Out of the non-OECD G20 countries, Brazil scored highest while Saudi Arabia came in last.

Angela Picciariello, Senior Research Officer at ODI, says:

“No G20 country is performing as it should, but there are some examples that could be followed. A true leader would mirror Germany’s transparency and strong pledges and go a step further than Italy with a plan to rapidly phase out not only support for coal but also oil and gas. To be in line with 1.5°C and avoid the worst of the climate crisis, G20 governments should rule out any continued fossil fuel support, in recovery spending or otherwise."

Top scorer Germany got points for transparency, strong commitments, and relatively lower support for oil and gas production and fossil fuel use. The country’s overall support to fossil fuels dropped 35% relative to 2014–2016. Brazil’s relatively good performance was tied to low support for coal production, fossil fuel-based power and consumption, and a reduction in state-owned enterprise investment in fossils. However, “new measures under consideration could soon reverse this progress", researchers say.

On the other end of the spectrum, the United Kingdom and Turkey rank poorly due to a lack of transparency and large subsidies for fossil fuel use, while Mexico was docked for heavy support for oil and gas production and fossil fuel-based power. Saudi Arabia also continues to heavily support oil and gas production and fossil fuel-based power, mostly through large state-owned enterprise expenditures and low consumer energy prices, researchers report.

Although this report and other recent data on public COVID-19 commitments indicate that the already slow progress on phasing out fossil fuel funding has now been thrown into reverse, researchers say there are upcoming opportunities for governments to turn the tide.

“Governments are in the midst of rolling out historic levels of public finance in response to the pandemic. Instead of bankrolling another major crisis—climate change—our governments should invest in a resilient future,” says Bronwen Tucker of OCI. “We are in a critical window for governments to shift the support currently going to fossil fuels towards public health, social supports, and a just transition to renewable energy.”

“China's recently announced net-zero emissions plan and the EU's Green Deal initiative indicate that there is momentum to increase ambition and demonstrate a commitment to climate action,” says Anna Geddes. “The current Finance in Common summit, the G20 summit on November 28 and the Paris Agreement’s fifth anniversary in December are chances to build on these. Although the last three years have shown a lack of progress from governments, we can make the next three years a turning point.”

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For further information or to interview the researchers please contact Charlotte Howes at ODI on +44 7808 791 265 or at [email protected].