A new report from Oil Change International (US) and the Overseas Development Institute (UK) has highlighted the perverse incentives given to fossil fuel companies, with G20 governments spending US $88 billion a year searching for new oil, gas, and coal reserves. The US leads the way with $5.1 billion, followed closely by Australia with $3.5 billion, Russia at $2.4 billion and the UK’s $1.2 billion spend.
Oil Change International Director Stephen Kretzmann said: "Five years ago, Australia and other 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."
This skewed support for fossil fuels is a direct threat to the global carbon budget, which states that at least two thirds of known fossil fuel reserves have to stay in the ground if the world is to have a good chance of keeping global average warming below 2 Degrees Celsius. The report warns that globally, governments subsidized the production and use of fossil fuels to the tune of $775 billion in 2012, while spending, by comparison, a tiny $101 billion on renewable energy in 2013.
Governments give as much money to companies searching for new fossil fuel sources as they do supporting renewable energy, perversely skewing the playing field in favor of dirty energy sources.
Kevin Watkins, director of the Overseas Development Institute said: "This is real money which could be put into schools or hospitals. It is simply not economic to invest like this. This is the insanity of the situation. 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 UN climate deal in 2015."
The amount given to oil, coal and gas exploration by governments is also more than double the $37 billion the top 20 private oil and gas companies invest in exploration, demonstrating how dependent the fossil fuel industry has become on public money to find and exploit hard-to-reach reserves.
With falling coal and oil prices, such generous public subsidies are essentially propping up fossil fuel that would otherwise be deemed uneconomic. Meanwhile the price of renewable energy continues to fall. According to Rystad Energy, oil and gas exploration expenditure in G20 countries (public and private).
While fossil fuel companies like Peabody Energy are quick to use poor people as a reason to burn more dirty fuel like coal, governments give dirty energy companies vastly more money than it would take to provide power to every person on earth, according to the new research.
The US $88 billion spent on fossil fuel exploration is almost double what the International Energy Agency estimates is needed annually to provide electricity and heat for all by 2030, which makes the “coal is good for humanity” argument seem all the more self serving.
Renewable subsidies made up US $101 billion in 2013, almost as much as the $88 billion spent by the G20 on fossil fuel exploration subsidies, and a fraction of the almost $1 trillion that goes into fossil fuel subsidies in total globally. The report urges G20 leaders to phase out these dirty, inefficient exploration subsidies as a first step to meeting existing commitments to avoid harmful climate change.