'The G20 has failed to deliver': Study slams continued increase in fossil fuel subsidies

by John Stapel

G20 government support for producing and consuming fossil fuels reached a record high in 2021, despite public commitments to end inefficient fossil fuel subsidies and accelerate the clean energy transition.

That is the stark conclusion of the latest annual report from Climate Transparency, an international partnership of 16 research organizations and NGOs that track progress against global climate goals.

The report cites data from the Organisation of Economic Co-operation and Development (OECD) showing that fossil fuel subsidies across the G20 had fallen to $147bn in 2020, but then rose again by 29 percent to $190bn in 2021.

The study warned subsidies have continued to rise into 2022, in large part due to Russia's invasion of Ukraine and subsequent hikes in energy prices that have prompted governments to come forward with sweeping energy price support packages at the same time as profits for energy companies have been "supercharged".

The countries found to have the highest total fossil fuel subsidies were China, Indonesia and the UK, which the report found to be backing the production and consumption of fossil fuels which will drive global temperatures to well above the 1.5 degrees Celsius warming limit agreed globally in the Paris Agreement and reaffirmed last year at the COP26 Climate Summit in Glasgow.

The countries found to have the highest total fossil fuel subsidies were China, Indonesia and the UK.

"Too much public finance for energy in the G20 is still skewed towards the fossil fuel industry. Sixty-three percent of G20's public finance for energy went to fossil fuels in 2019-2020," said Ipek Gençsü, senior research fellow at ODI and finance lead of the report.

"Last year, the G20 reaffirmed its 2009 commitment to 'phase out and rationalize, over the medium term, inefficient fossil fuel subsidies', but I think we can safely say we are now in that 'medium term' and it's clear the G20 has failed to deliver, instead continuing to use public funds to distort the market in favor of fossil fuels."

The Climate Transparency report also found that energy emissions rebounded across G20 countries by 5.9 percent in 2021, reaching pre-pandemic levels, despite warnings from the Intergovernmental Panel on Climate Change (IPCC) that the world must halve emissions by 2030 in order to keep alive hopes of delivering on the 1.5C warming limit enshrined in the Paris Agreement.

Emissions in the power and buildings sector rose in 2021 to higher than pre-pandemic levels, and the report also found that per capita emissions in China and Turkey are now higher than 2019.

The G20 is responsible for three-quarters of the world's emissions.

"The G20 is responsible for three-quarters of the world's emissions," said Bill Hare, chief executive officer of Climate Analytics, one of the organizations leading the analysis in the report. "These are the world's biggest economies, many of them home to the finance and technologies needed to tackle the climate crisis.

"We are now in a moment where geopolitics and energy security issues are combining to really hammer home the benefits of cheap renewables, yet we are still seeing many of these governments turning to fossil fuels as the solution. Gas and coal can be the most expensive, highest emitting, and least secure options for energy, but they still will receive the highest levels of government support."

The report did highlight some more positive trends, detailing how the share of renewables in the power generation mix increased in all G20 countries between 2016 and 2021, with the strongest increase being found in the UK with a 67 percent greater share in renewables, followed by Japan with 48 percent, and Mexico with 40 percent.

The lowest increases, as well as below the five-year G20 average of 22.5 percent, were witnessed in Russia - which saw a 16 percent increase - followed by Italy, with 14 percent. In these locations, the report found that despite the longer-term growth, the share of renewables did not increase between 2020-21.

Rising temperatures have brought income losses in services, manufacturing, agriculture and construction sectors, with India, Indonesia and Saudi Arabia being the most affected countries.

The report also examined some of the ways in which climate change is already having an impact on G20 economies, including record-breaking flooding, fires, droughts and storms, causing damages worth billions of dollars.

"Rising temperatures have brought income losses in services, manufacturing, agriculture and construction sectors, with India, Indonesia and Saudi Arabia being the most affected countries," said Sebastian Wegner from the Berlin Governance Platform, one of the report's main authors. "The respective income losses are estimated at 5.4 percent, 1.6 percent and 1 percent of GDP."

With increasing temperatures, the report warns that the impacts of climate change are only likely to become more severe.

For example, the report estimated that in Brazil and India, 10 percent of the current population will likely be affected by dangerous heatwaves. At 3C of warming, the report estimated that this could increase to more than 20 percent in Brazil as well as almost 30 percent in India.

The report came on the same day as a separate study from the International Energy Agency (IEA) detailed how the carbon intensity of the global energy system is set to fall this year, as the rollout of renewables continues to chip away at the dominance of fossil fuel generation.