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November 12, 2014
Despite Pledges, G20 Subsidies of Fossil Fuel Exploration Continue
    by Robert Kropp

Oil Change International co-authors a study which reveals that the Group of 20 governments spend $88 billion a year subsidizing exploration of fossil fuel reserves that cannot be burned if worst effects of climate change are to be averted.


In September, 2009, leaders of the Group of 20 (G20) nations agreed to eliminate fossil fuel subsidies as part of an international strategy to combat climate change.

“All nations have a responsibility to meet this challenge, and together we have taken a substantial step forward in meeting that responsibility,” President Barack Obama said at the time.

Since then, Obama has submitted federal budgets featuring cuts in fossil fuel subsidies at least three times, most recently earlier this year. Every time, Congress has declined to act on the President's proposal.

“The US Federal Government provides $5.1 billion each year in national subsidies for exploration, mostly through tax deductions for exploration expenditures and drilling and investment costs,” a recent
report co-authored by Oil Change International (OCI) and the Overseas Development Institute (ODI) states. “Although President Obama has pledged to eliminate fossil fuel subsidies, his attempts to repeal of some of the most egregious tax breaks in every annual budget proposal submitted since he took office have been rejected by Congress.”

As the report further reveals, the US is hardly the only G20 government that has failed to act on the 2009 pledge to phase out fossil fuel subsidies. “Governments across the G20 countries are estimated to be spending $88 billion every year subsidizing exploration for fossil fuels,” OCI states. “The evidence points to a publicly financed bailout for carbon-intensive companies, and support for uneconomic investments that could drive the planet far beyond the internationally agreed target of limiting global temperature increases to no more than 2ºC.”

The figure of $88 billion represents the estimated government support for exploration only; overall, global “subsidies for the production and use of fossil fuels were estimated at $775 billion in 2012.” But the smaller figure is of outsized importance because an estimated 80% of reserves already on the books of fossil fuel companies will have to stay in the ground if any hope remains of limiting global warming to 2ºC.

"There are more fossil fuels listed on the world's capital markets than we can afford to burn if we are to prevent dangerous climate change," Carbon Tracker first reported in 2011.

“Governments should price carbon to reflect the social, economic and environmental damage associated with climate change, and to reduce emissions to levels compatible with the globally agreed 2ºC target,” the new report states. Its recommendations include:
1. immediately phase out exploration subsidies as a first step towards wider fossil fuel subsidy phase out and reform;
2. eliminate bilateral and multilateral finance for fossil fuel exploration;
3. introduce greater transparency in budget reporting so that citizens and legislative bodies are aware of real spending on fossil fuel subsidies;
4. identify and remove government incentives for fossil fuel production; and
5. transfer subsidies from exploration and other fossil fuel subsidies to support for the transition to low-carbon development and universal energy access.

 

 
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