Doubling Back and Doubling Down: G20 scorecard on fossil fuel funding
Despite various commitments since 2009 to end government support for fossil fuels and make “finance flows consistent with a pathway toward low greenhouse gas emissions and climate resilient development” (United Nations, 2015a, Article 2.1c), G20 governments continued to provide significant support to fossil fuels in 2017–2019. Recent estimates of public money commitments for fossil fuels in response to the COVID-19 crisis indicate that G20 countries are moving in the wrong direction and are not likely to meet their phase-out commitments.
This report aims to track each of the G20 countries’ progress in phasing out government support to fossil fuels. It does so by reviewing progress in ending direct budgetary transfers and tax expenditures, price support, public finance, and investments by stateowned enterprises (SOEs) for fossil fuels. It complements this review with an analysis of public money commitments for fossil fuel production and consumption in response to the COVID-19 crisis up to August 12, 2020.
- G20 governments provided $584 billion1 annually (2017–2019 average) via direct budgetary transfers and tax expenditure, price support, public finance, and SOE investment for the production and consumption of fossil fuels at home and abroad. Governments provided more support to oil and gas production than any other stage of fossil fuel-related activity, at $277 billion (47% of the total support to fossil fuels).
- G20 government support has seen a 9% drop relative to the annual 2014–2016 average, indicating some progress has been made, although around a third of this decrease can be attributed to an average decrease in oil prices. The drop in support does not represent a consistent decline across G20 countries over time. Seven of the G20 countries increased their fossil fuel support: Australia, Canada, China, France, India, Russia, and South Africa. Progress made between 2014 and 2019 was insufficient: more needs to be done.
- G20 countries allocated some $170 billion in public money commitments to fossil fuel-intensive sectors in response to the COVID-19 crisis between January 1 and August 12, 2020. This is likely an underestimate due to the dynamic nature of government responses to the COVID-19 crisis and a lack of transparency that doesn’t allow for the quantification of many announced policies. Readers can refer to the most up-to-date information at the Energy Policy Tracker (www.energypolicytracker.org). The support for fossil fuels in response to the COVID-19 crisis indicates that G20 governments are moving in the wrong direction and are likely to undo the little progress made between 2014 and 2019.
- In tracking G20 countries’ progress toward phasing out government support for fossil fuels, our scorecards identified leaders and laggards across seven indicators but found that no G20 country scores exceptionally well: Germany had the top score of 71/100. Every G20 country is at risk of not delivering on its fossil fuel subsidy phaseout commitment.
- Among the Organisation for Economic Co-operation and Development (OECD) member countries of the G20, Germany scored highest while Turkey, Mexico, and the United Kingdom scored lowest. The United Kingdom lacks transparency about government support and continues to provide support for consumers of fossil fuel by foregoing tax revenue and supplying direct budgetary transfers. Mexico continues to provide significant support for oil and gas production and fossil fuel-based power, especially through SOE investment. Turkey also lacks transparency and continues to provide support for coal production and fossil fuel use, predominantly by foregoing tax revenue and providing SOE investment.
- Among the non-OECD member countries of the G20, Brazil scored the highest while Saudi Arabia scored the lowest. Saudi Arabia continues its support for oil and gas production and fossil fuel-based power, predominantly due to large capital expenditure from its SOEs and support for fossil fuel use via low energy prices.
We recommend that G20 countries develop strategies to end government support for fossil fuels that include these recommended next steps:
- Now is the chance to redirect G20 government support away from fossil fuels to other more sustainable areas like health, social support, and the clean energy transition.
- Any public money commitments for fossil fuels in response to the COVID-19 crisis should have green conditions attached. G20 governments plan to spend trillions of dollars to counteract the impacts of the COVID-19 crisis, and how they do this will shape the global economy for many years to come.
- All G20 governments should focus phase-out efforts on reducing support for oil and gas exploration, production, refining, and transportation. This stage of fossil fuel activity received the largest share of G20 government support in 2017–2019.
- As SOE investment accounts for the largest type of G20 government support measure, and considering the key role that SOEs play in many countries’ energy systems, governments need to encourage an SOE transition, triggering their diversification away from fossil fuels.
- All G20 public finance institutions must stop financing oil, gas, and coal projects across the supply chain. They should also halt indirect support through related infrastructure, advisory services, technical assistance, or financial intermediaries.
- All G20 governments, especially OECD members, should charge the full rate of tax on producers and users of fossil fuels: $79 billion annually (2017–2019 average) of revenue foregone through tax expenditure could be directed toward urgent COVID-19 recovery needs.
- All G20 governments should remove energy subsidies on fossil fuel use and ensure poor and vulnerable consumers can still access and afford energy as subsidies are reduced— where necessary, implementing targeted support for those most in need. Targeting consumer support will be crucial for G20 governments in the short- and medium-term as more households and businesses experience energy access issues due to the COVID-19 crisis.
- Countries that have not yet done so should commit to conducting peer reviews of all forms of government support to fossil fuels to increase transparency, encourage reporting and quantification of government support, and further facilitate the sharing of experience between G20 countries. Doing this is particularly important for Australia, Japan, the Republic of Korea, Turkey, the United Kingdom, Russia, Brazil, Saudi Arabia, and South Africa. Countries that have committed to but not concluded peer reviews should prioritize them for fast-tracking. That includes Argentina, Canada, France, and India.
- All G20 countries should publicly quantify and report upon all government support measures for fossil fuels in a regular and comprehensive way in order to better track progress in ending support for fossil fuels. This is complementary to countries’ upcoming SDG reporting requirements.
Download the report below.