COP26: How much is spent supporting fossil fuels and green energy?

COP26: How much money is spent on fossil fuels and green power? Reality Check team
BBC News Published 6 hours ago

Global warming is a result of the burning of fossil fuels.

According to the UN Development Programme, governments worldwide spend more than $420bn per year (PS313bn), despite promises to end support.

What are the effects of fossil fuel subsidies and what countries are spending most on them?

What are fossil fuel subsidies?

Fossil fuel subsidies refer to government measures that artificially lower the prices of natural gas, oil, and coal.

They come in two forms.

Production subsidies are tax breaks or direct payments to reduce the cost of producing fossil-fuels.

Consumption subsidies - Energy price cuts for consumers such as fixing prices at petrol stations

Although transparency regarding fossil fuel funding is not common, three quarters of all global subsidies are estimated to be directed at consumers and one quarter towards producers.

In lower income countries, consumption subsidies are frequently seen to alleviate poverty by making cooking gas more affordable or lowering the cost of transport.

According to the International Energy Agency (IEA), Iran topped the list of consumption subsidies for 2019, followed by China, India and China. All three countries subsist petrol prices.

What are the steps taken to eliminate them?

The draft agreement was published at the COP26 Climate Summit. It calls on all countries to speed up the phasing-out of fossil fuel subsidies. However, no dates have been established.

G7 countries, which represent the largest advanced economies in the world, have all previously pledged to eliminate "inefficient" fossil fuel subsidies by 2025.

Peter Wooders, Senior Director at the International Institute for Sustainable Development, says that while there has been progress in phasing out subsidies globally, it is still slow.

He adds that there has been progress in subsidy reform within the G7 member countries, but it's been very limited. They really need to do better and it's clearly inconsistent with climate promises.

While support for fossil fuels has declined in 81 of the world's major economies, it was still greater than $350bn by 2020.

How about clean energy support?

The Energy Policy Tracker tracks data to see which countries have adopted new policies since January 2020 in order to fund the energy sector.

It was found that the major world economies have spent more money funding fossil fuels since 2020 than they have for clean energy.

Although the definition of a subsidy in this case is more broad than those of the IEA and Organisation for Economic Co-operation and Development, (OECD), they provide an indication of how countries fund clean energy compared to fossil fuels.

According to data, the UK and the US have made investments in clean energy but have spent more on fossil fuels.

Both the US President Joe Biden, and the UK Prime Minister Boris Johnson said that tackling fossil fuel subsidies should be a top priority.

Biden signed a January order to end fossil fuel subsidies. He also pledged to eliminate government support by 2022.

According to the Environmental and Energy Study Institute, subsidies for the US fossil fuel industry amount to $20bn annually. 80% of this goes to oil and gas.

To encourage domestic energy production, the US offers a variety of tax breaks for the fossil fuel industry.

In December 2020, Johnson declared that the UK would cease supporting fossil fuel industries overseas.

Last year, a BBC investigation revealed that the UK spent billions of pounds abroad on fossil fuel projects.

Source: Getty Images

China and India are increasing their investment in renewable energy. However, they continue to be the largest public financiers of fossil-fuels. They spend tens of trillions of dollars each year subsidising both production and consumption.

Russia and Saudi Arabia have been subsidizing fossil fuel consumption for decades through low energy prices. This is due to their vast natural resources of oil, natural gas and other natural resources.

According to IISD, Saudi Arabia is the G20 country that has done the most to eliminate fossil fuel funding.

It joined other G20 countries in pledging to eliminate inefficient fossil fuel subsidies. However, no target date has been established.