G7 governments provide $100 billion each year to support oil, coal and gas despite pledging to end fossil fuel subsidies – new report

4 June 2018

G7 governments continue to provide at least US$100 billion each year to support the production and consumption of oil, gas and coal despite repeated pledges to end fossil fuel subsidies by 2025, new research has found.

In a major new study, published ahead of the G7 Summit in Canada, researchers from the Overseas Development Institute (ODI), Oil Change International (OCI), the International Institute for Sustainable Development (IISD), and the Natural Resources Defense Council (NRDC) have for the first time ranked each G7 country on their transparency, commitments and progress made on ending support for the production and use of oil, gas and coal.

The United States ranked lowest due to its continued support for fossil fuel exploration and production, as well as backtracking on previous pledges to end support to fossil fuels. France was the highest ranked country, due to its progress in phasing out support to fossil fuel production and power.

Canada, which holds the G7 presidency this year, scored highly on ending support to coal mining, fossil fuel-based power and fossil fuel use, but had the worst ranking on support for oil and gas production.

The United Kingdom scored lowest on transparency, with the government denying it provides any fossil fuel subsidies, under its own definition, despite making commitments to end subsidies.

Overall, the paper finds G7 governments are still dedicating vast public resources to finding, extracting and using fossil fuels, and are at serious risk of not delivering their commitment to phase-out subsidies by 2025.

Lead author Shelagh Whitley, head of the Climate and Energy Programme at ODI, said: ‘Despite repeated pledges to eliminate fossil fuel subsides G7 countries are continuing to subsidise oil, gas and coal, fuelling dangerous climate change with tax-payers’ money.

‘This scorecard addresses the current gap in accountability and, for the first time, tracks progress by each of the G7 countries in phasing out fossil fuel subsidies. While some progress has been made in recent years, overall it is a grim picture with not one country scoring highly.’

Report co-author Alex Doukas, Stop Funding Fossils Program Director at OCI, said: 'Last December, the World Bank committed to ending its finance for oil and gas extraction. G7 governments need to follow suit and rapidly phase out their public finance for oil, gas, and coal projects around the world.'

Report co-author Ivetta Gerasimchuk, from the Global Subsidies Initiative at IISD, said: ‘G7 governments committed to phase-out fossil fuel subsidies back in 2009, but since then have made very little progress. At the same time, less wealthy countries with similar commitments made under the G20, such as India and Indonesia, have reduced subsidies by billions of dollars. The richest countries must demonstrate leadership in ending handouts to fossil fuels.’

Report co-author Han Chen, of the Natural Resources Defense Council, said: ‘Compared to other G7 countries, it’s absurd how much taxpayer money Japan continues to waste building highly polluting coal plants in some of the most climate-vulnerable countries overseas. And with the outrageous amount the US spends subsidizing oil and gas production, it’s no surprise that the US and Japan are the worst-ranked countries when it comes to subsidy reform.’

Researchers used seven indicators to track G7 progress towards the phase out of subsidies and public finance for fossil fuels and ranked each country on the findings.

The key findings of the report include:

  • All G7 governments have provided new public finance for oil and gas exploration and production since 2016 when the Paris Agreement came into force
  • In 2015 and 2016 G7 governments provided at least US$81bn in fiscal support and US$20bn in public finance for production and consumption of oil, gas and coal at home and abroad
  • 64% of this fiscal support was for use in transport, households, industry and other sectors. This runs contrary to the widely held view that consumption subsidies are only a challenge for emerging markets and developing countries.

To meet their 2025 deadline, researchers have called on the G7 to:

  • Publish comprehensive fossil fuel subsidy peer-reviews no later than 2019
  • Establish country-level plans for phasing out fossil fuel subsidies, starting with subsidies that have negative social and environmental impacts
  • Ensure subsidies for green energy transition do not support fossil fuels, and any remaining support prioritises vulnerable communities and households.

ENDS

Notes to editors

  • The G7 2018 Summit will be held in Charlevoix, Quebec, from June 8 to 9
  • The scorecard (Figure 1) uses seven indicators (based on 38 sub-indicators) to track G7 progress towards the phase out of fossil fuel subsidies:
    • Indicator 1: Transparency
    • Indicator 2: Pledges and commitments
    • Indicators 3-7: Progress in ending support for: fossil fuel exploration; coal mining; oil and gas production; fossil fuel-based power; and fossil fuel use
  • Each indicator was then scored out of 100 and each country ranked based on these scores
  • The report found that in 2015 and 2016 G7 governments provided at least US$80.62bn in fiscal support and US$19.54bn in public finance
  • The G7 and G20 have committed to phase out fossil fuel subsidies every year since 2009. At the 2016 Leader’s Summit in Japan a 2025 deadline was set for meeting this target
  • The report tracks fossil fuel production and consumption subsidies referencing the World Trade Organization’s (WTO) definition of a subsidy which includes: 1) fiscal support (budgetary transfers and tax expenditures), and 2) public finance (grants, loans, equity infusions and guarantees).

For more information or to arrange an interview please contact James Rush on [email protected] or +44 (0)7808 791265