climate change energy politics

The triple loss of fossil fuel exploration subsidies

In 2009, the G20 group of countries agreed to phase out fossil fuel subsidies. To give their own reasons, “inefficient fossil fuel subsidies encourage wasteful consumption, reduce our energy security, impede investment in clean energy sources and undermine efforts to deal with the threat of climate change.”

No deadline was given for this phase out, just that it would happen in the ‘medium term’. Five years on, every country in the G20 continues to subsidise fossil fuels exploration, according to the Overseas Development Institute.  Exploration is the focus of their latest report on subsidies, and they argue that when governments fund exploration for new sources of fossil fuels, it represents a lose-lose-lose scenario:

  • They are directing large volumes of finance into high-carbon assets that cannot be exploited without catastrophic climate effects.
  • They are diverting investment from economic low-carbon alternatives such as solar, wind and hydro-power.
  • And they are undermining the prospects for an ambitious climate deal in 2015.

When it comes to exploration, governments are putting in more than companies – $88 billion to the $37 billion invested by the top 20 oil and gas producers. It’s a huge amount of public money. If it were redirected to those who need it most, the ODI estimates that it would be more than enough to provide electricity for all 1.3 billion people who don’t have it yet.


Britain’s slice of that $88 billion is fairly modest at $1.2 billion a year. However, “the UK stands out as a major industrialised economy that, despite the G20 pledge, has expanded the scope of its oil and gas exploration subsidies dramatically, in particular for shale gas and offshore resources.” We all know how desperately the current government wants a shale gas boom, however unlikely it may be in reality.

The US government spends $5.1 billion a year supporting exploration. President Obama had pledged to phase out fossil fuel subsidies unilaterally. The repeal of key tax breaks has been included in every budget since he took office, and rejected by Congress every time.

Of all the perverse behaviour in the face of climate change, subsidising fossil fuel exploration is the most egregious. Step one in halting dangerous global warming is to stop making it worse. The stock of fossil fuels is plenty large enough to destabilise the climate as it is. It already represents a vast carbon bubble. Throwing public money at inflating it further is profoundly short-sighted.

I’d really like to conclude this post with some sort of action point. I’m not sure I’ve got one that will satisfy. You can go and find out more about how countries support fossil fuels by reading ODI’s full report here. Oil Change, who partnered on the report, have a US based petition you can sign, but given Congress’ failure it doesn’t seem to make much sense to target the petition at the president. If anyone knows of a UK based campaign on subsidies, let me know.


    1. Yes, if you open it up to all support, and not just that for exploration, it starts to add up. And some of the biggest subsidizers aren’t in the G20 either. The global totals are dizzying.

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