It’s past last call: We need immediate action to end subsidies and make polluters pay

We are calling on global leaders to end all fossil fuel handouts

G20 governments committed to phasing out inefficient subsidies in 2009, and they have repeated this commitment every year. This is not a radical ask. In fact, it’s demanded by science. The Paris Agreement in December 2015 was a watershed moment illustrating just how foolish these subsidies really are. Over 190 countries reiterated their commitment to limiting global warming to a maximum of two degrees Celsius, and to aim even lower.

In 2016, G7 leaders urged all countries to phase out fossil fuel subsidies by 2025. This was a welcome step forward, and as major and largely wealthy economies, the G7 and G20 will have to act even earlier than 2025 if all countries are expected to end fossil fuel subsidies by that date. Fossil fuels have no place in a safe future, which is why continuing to prop up the fossil fuel industry with our public money is an irresponsible waste.

What is a Fossil Fuel Subsidy?

A fossil fuel subsidy is any government action that lowers the cost of fossil fuel energy production, raises the price received by oil, gas or coal companies, or lowers the price paid by fossil fuel  consumers. Essentially, it’s anything that rigs the game in favor of fossil fuels compared to other energy sources.

The most obvious subsidies are direct funding and tax giveaways, but there are many activities that count as subsidies – loans and guarantees at favorable rates, governments providing resources like land and water to fossil fuel companies at below-market rates, research and development funding including for carbon capture and storage (CCS) fossil hydrogen and other dangerous distractions, clean up of abondoned oil and gas wells, oil spills etc., police budgets for protest repression of fossil fuel infrastructure and more.

What’s Wrong with Fossil Fuel Subsidies?

One of the most urgent reasons to eliminate fossil fuel subsidies is the rapidly dwindling carbon budget – the remaining amount of greenhouse gases we are able to emit while having a hope of staying below the temperature warming limits agreed to by world leaders. There is far more carbon in the fossiln fuel resources already under development globally to surpass those limits. 

OCI analysis Sky’s Limit found that as of 2023 the majority of the fossil fuel reserves within active fields and mines must now stay in the ground if we hope to stay on target and keep a liveable planet in reach. In this context, we cannot afford to put any new money towards funding and burning more fossil fuels. This is especially true for public money, which should be going to fund the clean energy solutions we need. 

Support for fossil fuel production also adds to the risks of “carbon lock-in”. Capital-intensive infrastructure last for decades, and investment in this infrastructure can mean that fossil fuel dependence – and the carbon emissions that come with it – get “locked in.” This makes the urgently-needed transition to climate-compatible energy pathways much more difficult. 

Subsidies to fossil fuels support an industry that drives negative public health impacts, local environmental pollution from fossil fuel extraction and infrastructure, and climate change impacts and costs. These impacts are disproportionately landing onto Global South communities, Indigenous Peoples, People of Color, and low-income people around the world. Fossil fuel subsidies also take public money away from other uses. Public money going to fossil fuels could instead go to social spending, health and development, clean energy, energy access for the poor, or other areas important to the public.

How Much Money Do Governments Provide to Support the Oil, Gas, and Coal Industries Internationally?

Total estimates are staggeringly high. Internationally, in 2022 governments provided an estimated USD 1.4 trillion in subsidies. This figure varies each year based on oil prices, but it is consistently in the hundreds of billions of dollars. Greater transparency in reporting would allow for more precise figures.

This also does not include costs of fossil fuels related to climate disasters, environmental impacts, military conflicts and spending and health impacts. When externalities are included, a study by the International Monetary Fund (IMF) found the costs to $7 trillion annually. This works out to a staggering $13 million per minute.

In 2022 the estimated total for fossil fuel production subsidies (including exploration, extraction and fossil fuel development) of G20 governments was $54 billion. This total is also underestimated as it does not include CCS subsidies. Oil Change International’s recent report Planet Wreckers: How 20 countries’ oil and gas extraction plans risk locking in climate chaos finds that just five countries: the United States, Canada, Australia, Norway and the United Kindgom are responsible for 51% percent of planned expansion for new oil and gas fields. 

Oil Change International’s Public Finance for Energy Database tracks one form of government support for fossil fuels, the international public finance of G20 governments as well as the major Multilateral Development Banks. The Public Finance for Energy Database is the only resource tracking these flows across more than one institution. The data shows that these governments are providing on average $47 billion in finance for fossil fuels each year. His finance plays an outsized role in shaping energy systems. These loans, grants, equity, and guarantees still lower risk for other investors when there is no below-market component because they are government-backed. Public finance institutions often further influence the energy landscape by signalling government priorities and adding research and advisory capacity. These all help leverage additional investment for proposed projects.  

How Much Money Does the Government of the United States Provide to Support the Oil, Gas, and Coal Industries?

Estimates of United States fossil fuel exploration and production subsidies from 2017 calculate them at $20.5 billion annually. Other credible estimates of annual United States fossil fuel subsidies range from $10 billion to $52 billion annually – yet none of these include costs borne by taxpayers related to the climate, local environmental, and health impacts of the fossil fuel industry.

Fossil fuel subsidies in the United States also include massive military expenditures to acquire and defend fossil fuel interests around the globe, and infrastructure spending and related maintenance based on an antiquated energy system built on large, remote power plants and cheap electricity.

What are Governments Doing to End Fossil Fuel Subsidies?

In 2009, the Obama Administration and the G20 nations proposed that they end “inefficient” fossil fuel subsidies. Although this commitment has generated repeated acknowledgments by the G20 and G8 (now G7), as well as some new studies and data, it resulted in very limited progress for many years. The 2016 G7 meeting was an important step forward, as world leaders committed to language urging all countries to eliminate inefficient subsidies by no later than 2025, and left the door open to an earlier phase-out for some countries. This commitment was re-iterated in 2021, at the Glasgow climate summit, and then again in December 2023, at COP28, where the Netherlands launched an international coalition to phaseout fossil fuel subsidies. The initiative includes the Netherlands, Austria, Belgium, Ireland, Finland, Antigua and Barbuda, Canada, France, Denmark, Costa Rica and Luxembourg.  

With the 2025 deadline looming, to date Canada is the only G20 country to release their plan to phase out inefficient fossil fuel subsidies, though the plan omits the largest form of federal fossil fuel support, domestic public finance.

The science is clear. We have far more oil, gas, and coal than the world can afford to burn. And yet, each year governments around the world hand out hundreds of billions of our tax dollars to help fossil fuel companies exploit more unburnable carbon. 

As with most climate change solutions, a major stumbling block to reform is the power of the fossil fuel industry. As we’ve seen time and time again, the fossil fuel industry has a stranglehold on policy makers all around the world, and they love these handouts.

The principle is simple and clear: You can’t really say you’re committed to the fighting against climate change if you’re still funding oil, gas, and coal. Until we break the grip of the fossil fuel industry over our energy policy, it will be much harder to make progress and eliminate subsidies.

It’s Time to #StopFundingFossils

It’s time to #StopFundingFossils, and we’re building a worldwide movement to do just that. In September 2023, Oil Change International joined 500 organizations along with tens of thousands of people all around the world for the march to end fossil fuels. This helped to build momentum for COP28 where activists from around the world demanded a full, fast, fair, funded phaseout of all fossil fuels and to make polluters pay.

The movement to #StopFundingFossils is continuing to grow. At COP28 people-powered movements lead by frontline communities, Indigenous people, and most affected countries were able to secure the first UN climate agreement that calls on all countries to ‘transition away from fossil fuels.’ This sent an unprecedented signal to the fossil fuel industry that its days are numbered. 

Momentum to end international public finance for fossil fuels

At COP26, the 2021 global climate conference in Glasgow, 34 countries and 5 institutions pledged to end direct international public finance for unabated fossil fuels by the end of 2022 and prioritize their public finance fully for the clean energy transition. This was the Clean Energy Transition Partnership or CETP (sometimes called the Glasgow Statement) the first international political commitment that focused on ending public finance for oil and gas in addition to coal. The signatories include some of the largest historic providers of international public finance, including Canada, Germany, Italy, United States, United Kingdom, and France. With Japan joining peers in making a near-identical commitment at the G7 in May 2022, the potential total financial shift increases even further. Realizing this shift is critical to tip the international public finance balance in favor of clean energy.

As of February 2024, Eight out of the sixteen CETP signatories with significant amounts of international energy finance have policies that end fossil fuel support, and only five have violated their pledge by financing new fossil fuel projects since the deadline passed. These laggard countries, particularly the United States, Italy, Germany, and Japan must put an end to their international public finance for fossil fuels.

Oil Change International maintains a running briefing tracking of CETP policies as well as a tracker of fossil fuel projects that violate the commitment. 

There is also a campaign underway to end oil and gas export finance at the Organization for Economic Cooperation and Development (OECD). In 2023 The Financial Times (FT) has revealed that the UK and the EU will put forward proposals for doing so, with Canada planning to back the UK’s proposal. These efforts can end the USD 41 billion per year flowing to fossil fuel projects from government-run OECD export credit agencies (ECAs). 

Sign the petition here to tell the OECD countries to stop propping up the oil and gas industry with public money!