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G20 Fossil Fuels Subsidies

G20 Fossil Fuels Subsidies


Written by: Andra Vitola Koranteng

G20 countries supposedly are encouraged to pay attention to their internal policies and measures in a systemic way as well experts are supposed to help with learning from the previous lessons so that countries can achieve efficient awareness about the environmental, social, and economic impact of their fiscal policy. [1] 

However, gradually eliminating fossil fuel subsidies have been one of the hardest things to do. Since 2009, G20 countries have continuously agreed over and over to pledge to reduce fossil fuel at every summit. Yet, in reality, progress has been very little, or it has backslid. A recent report shows that G20 countries provided $147 billion in subsidies to coal, oil, and gas in 2016. [2] 

Fossil fuel subsidies benefit wealthier households that use more fuel and energy, but it's unproductive to support low-income households. Instead of spending money to support coal, oil, and gas, this money can be used to invest in sustainable energy infrastructure, research, and job training. 

OECD did an analysis of budgetary transfers, tax breaks, and spending programmes associated with the production and use of coal, oil, gas, and other petroleum products in 44 OECD and G20 countries. Overall, fossil fuel support rose by 10% to USD 178 billion in 2019. [3]

Currently, none of the G20 NDC (nationally determined contributions) targets for 2030 is in line with the Paris Agreement. Based on the current policies Argentina, Brazil, Canada, Mexico, South Korea, Turkey, and the United States are most likely to miss their NDC (nationally determined contributions) targets. As for China, the European Union, Indonesia, Japan, Russia, and Saudi Arabia, although they are more likely to achieve or even overachieve their current target, it's mostly due to the fact that their NDCs have a low level of ambition. 

When it comes to the G20 energy supply, on average, 82% is from fossil fuels. Energy from the fossil fuels between 2012 and 2017 notably increased in Canada, India, and Indonesia. Zero-carbon technologies, including hydro, nuclear, and new renewables, contribute 14% of this 5% account for renewable energy such as solar, wind, geothermal, and biomass, excluding traditional biomass in residential. And 3% of the average G20 energy supply is from solid fuel biomass for residential use. 

On the bright side, several G20 countries have made announcements that have a significant impact on climate policy. Argentina invested US$ 5.7 billion to push renewable energies, and India released the draft 'Cooling Action Plan' with the aim of decrees demand cooling by 20% to 25% by 2037. 

Unfortunately, some actions aim in the wrong direction. The UK canceled climate polices (Zero Carbon Homes, Feed-in-Tariffs, energy efficiency measures in buildings) and Brazil's new subsidy to diesel consumption provided in 2018. Saudi Arabia (total amount of subsidies US$30 billion), Italy (US$14 billion), Australia (US$7 billion), and Brazil (US$16 billion) are the countries from G20 that provide the highest amount of fossil fuel subsidies per unit of GDP. 

On average, for fossil fuel power projects (coal, oil, and gas projects and associated infrastructure), G20 countries from 2013 to 2015 provided US$91.4 billion a year. And South Korea, Japan, and Russia provided the most substantial amounts compared to their GDP. [4] 

Due to Covid19 between the beginning of the year and July 3, 2020, G20 countries have committed at least US$135 billion to fossil fuels and only US$ 68 billion to clean energy, and US$26 billion committed to "other energy." Money generally channeled through direct budgetary transfers, tax expenditure, loans, loan guarantees, transfers induced by government regulations, and various hybrid mechanisms. [5] 

Reviewed by: Abraham Sumalinog

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