G20 funds fossil fuel exploration despite ‘better returns from renewables’
An estimated $88bn per year is being spent by G20 governments on locating oil, gas and coal reserves, despite evidence that most existing reserves must be left alone to avoid dangerous climate change.
That is according to a report from the Overseas Development Institute (ODI) and Oil Change International (OCI) – The fossil fuel bail-out: G20 subsidies for oil, gas and coal exploration – which reveals that, with rising costs for non-renewable reserves and falling coal and oil prices, public subsidies are keeping fossil fuel exploration afloat when it would otherwise be considered unprofitable. (Scroll down for report summary)
Parallel to these findings, the cost of renewables is falling and the returns are better with every $1 in renewable energy subsidies attracting a $2.5 investment, while $1 in fossil fuels subsidies only draws $1.3 of investment.
ODI climate and environment researcher Shelagh Whitley said: “Despite the widespread 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.”
OCI director Stephen Kretzmann said: “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.”
Funding fossil fuels
The top 20 private global oil and gas companies only invested $37bn in exploration in 2013 – less than half of that being ploughed in annually by G20 governments.
This suggests their exploration activities are greatly reliant on public financing, including $521m through multilateral development banks of which the World Bank Group is responsible for two thirds.
INFOGRAPHIC: The fossil fuel bailout: G20 subsidies for oil,gas and coal exploration
The US provided $5.1bn annually in national subsidies for fossil fuel exploration in 2013 – almost double the level in 2009 and the UK has introduced national subsidies for exploration valued up to $1.2bn a year.
Also disclosed is where G20 governments are funding fossil fuel exploration overseas. The UK is spending $663m annually in public finance for overseas exploration including in Siberia in Russia, Brazil, India, Indonesia, Nigeria, Guinea and Ghana, and the US is spending $1.4bn annually in public finance for overseas exploration in Colombia, Mexico, Nigeria and Russia.
This report closely follows research by the UK Energy Research Centre (UKERC) suggesting that investment in renewables and energy efficiency can create up to 10 times as many jobs per unit of electricity as investment in fossil fuels.
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