G20 fossil fuel support reaches highest levels since 2014
G20 nations are slowing progress on reaching the Paris Agreement after providing $693bn of fossil fuel support in 2021, the highest levels recorded since 2014, according to new research which calls for nations to implement carbon prices and climate risk analysis to better inform spending.
New research released by Bloomberg Philanthropies and BloombergNEF (BNEF) found that G20 nations provided $693bn in fossil fuel support in 2021, with spending support for producers and utilities surging by 16% year-on-year as a result.
The report notes that the spike in spending isn’t merely due to economic recovery and higher energy usage following the pandemic, but rather that more finance was being used to support fossil-fuel producers and utilities.
These “distorted prices” are putting the objectives of the Paris Agreement at reach, despite support for coal shrinking from 4.1% in 2016 to 2.9% in 2021. However, coal still attracted a total of $20bn of government support in 2021.
Michael R. Bloomberg, UN Secretary-General’s Special Envoy on Climate Ambition and Solutions and founder of Bloomberg LP and Bloomberg Philanthropies, said: “Governments continue to subsidize fossil fuels – undermining the pledges they’ve made, harming public health, and shrinking our chances of avoiding the worst impacts of climate change.
“We need to dramatically speed up the shift to clean energy and away from coal and other fossil fuels, and this report highlights some of the most important steps governments can take.”
China accounted for the largest share of the support at 26%, but is well below other G20 nations on a per-capita basis at $111 compared to Saudi Arabia ($1,433), Argentina ($734) and Canada ($512). China also scaled back overall support spending by 12% compared to 2016 levels.
G20 member countries collectively allocated subsidies topping $3.3trn to the oil, coal, gas and fossil-fuelled electricity generation sectors between 2015 and 2019 – a level incompatible with the Paris Agreement.
The $3.3trn, BNEF states, could have funded the creation of 4,232GW of new solar power plants — a capacity of more than 3.5 times the size of the US grid.
The G20 agreed in 2009 to phase out “inefficient” fossil fuel subsidies, but no binding date was set and green groups have accused the group of failing to properly define the term.
Last year’s G7 meeting saw members agreeing to end direct government support for new thermal coal generation capacity without co-located carbon capture and storage (CCS) technologies by the end of this year. All other “inefficient” fossil fuel subsidies will then be phased out by 2025. However, Canada did not sign the final communique from the summit in Carbis Bay, Cornwall.
Separate analysis from the World Benchmarking Alliance (WBA), CDP and ADEME revealed that the oil and gas sector is set to burn through some 80% of the total global carbon budget the world will need to stick to if the Paris Agreement’s 1.5C trajectory is to be realised by 2050. That study covered state-owned fossil fuel companies as well as the private sector.
BNEF is calling on G20 nations to rectify spending by introducing national mechanisms that account for cost and risk.
The report calls for the introduction of a “meaningful carbon price”. However, only 12 of the G20 have a nationwide carbon price in place and these tend to be at around $8 per tonne. In contrast, the World Bank estimates that the price range needs to be $40-80 per metric ton by 2020 and $50-100 by 2030.
BNEF has also called for the nations to introduce new laws and reporting requirements to improve climate-related disclosure to help inform investor decisions. To date, only the EU and UK have passed laws or regulations to mandate climate disclosure while the US has introduced a proposal.