G20 governments are spending approximately $ 88 billion a year on finding new oil, gas and coal reserves – despite clear evidence that the majority of existing reserves need to be left in the ground if the world is to avoid dangerous climate change.
The report from the Overseas Development Institute (ODI) and Oil Change International (OCI) contains the first detailed breakdown of fossil fuel exploration subsidies by all G20 countries. It shows that with rising costs for hard-to-reach reserves, and falling coal and oil prices, generous public subsidies are propping up fossil fuel exploration which would otherwise be deemed uneconomic.
By contrast, the report, “The Fossil Fuel Bail-Out: G20 Subsidies for Oil, Gas and Coal Exploration”, says that the costs of renewables is falling, and the returns are better. Every US dollar in renewable energy subsidies attracts $2.5 in investment, whilst a dollar in fossil fuels subsidies only draws $1.3 of investment.
The Overseas Development Institute’s Shelagh Whitley says, “Despite the wide-spread perception that renewables are costly, our research reveals that finding new fossil fuel reserves is costing nearly $ 88 billion in exploration subsidies across the G20. Scrapping these subsidies would begin to create a level playing field between renewables and fossil fuel energy.”
Oil Change International’s Director Stephen Kretzmann says, “Five years ago, G20 governments pledged to both phase out fossil fuel subsidies and take action to limit climate change. Immediately ending exploration subsidies is the clearest next step on both fronts.”
Key findings in the report include:
- The top 20 private oil and gas companies, globally, invested just $ 37 billion in exploration in 2013 – less than half of that being ploughed in annually by G20 governments – suggesting their exploration activities are highly dependent on public finance.
- The United States provided some $ 5.1 billion annually in national subsidies for fossil fuel exploration in 2013 – almost double the level in 2009. Congress has failed to pass subsidy cuts proposed by the President in a series of budgets.
- Australia is providing $ 3.5 billion a year for the development of offshore and inland fossil fuel resources.
- Russia provides $ 2.4 billion in national subsidies for fossil fuel exploration annually, including on the Prirazlomnoe site in the Arctic, which has ‘dubious commercial viability’.
- The United Kingdom has introduced national subsidies for exploration valued up to $ 1.2 billion a year. These include generous tax breaks for North Sea exploration, worth $ 838 million to Total (HQ France), $ 407 million to Statoil (Norway), $ 229 million to Centrica (UK) and $ 72 million to Chevron (US) between 2009 and 2014.
The authors also map where G20 governments are funding fossil fuel exploration overseas, for example:
- The UK is spending $ 663 million annually in public finance for overseas exploration including in Siberia in Russia, Brazil, India, Indonesia, Nigeria, Guinea and Ghana.
- USA is spending $ 1.4 billion annually in public finance for overseas exploration in Colombia, Mexico, Nigeria and Russia.
- Russia is subsidising exploration in countries including Brazil, China, United Kingdom, Indonesia and Venezuela.
- China is subsidising exploration in countries including Australia, Brazil, Canada, Mexico, Russia and the US.
- Brazil is subsidising exploration in Angola, Benin, Columbia, Gabon, Namibia, Nigeria, Peru, Portugal, Tanzania, US, Uruguay.
The report also highlights US $ 521 million in public finance is being channelled into fossil fuel exploration by the G20 through multilateral development banks, of which the World Bank Group is responsible for two-thirds. The authors call for these transfers to be stopped, saying they run counter to the Bank’s stated goal of driving low carbon development.