Time to change the game: Fossil fuel subsidies and climate

This report documents the scale of fossil fuel subsidies and sets out a practical agenda for their elimination in the context of the global goal of tackling climate change. It spells out the real costs of fossil fuel subsidies within the top developed-country emitters (the E11), the G20, and more broadly across developing countries, and outlines ways to achieve their global phase-out by 2025.

Estimates of the level of subsidies vary. According to the latest figures from the International Energy Agency (IEA), subsidies to fossil fuel producers totalled $523 billion in 2011. These represent one element in an overall envelope of government finance totalling $1 trillion to exploit the world's natural resources. They are part of a wider system that obstructs efforts to halt climate change. If governments are to keep their promise to avoid dangerous climate change by holding global warming to the 2-degree commitment, they need to make carbon emissions progressively more costly through a clear and explicit price on emissions. There is, as yet, no global carbon market, but in the European Union Emissions Trading System (EU ETS), governments have allowed the price of emissions to drop to less than $7 per tonne.

If their aim is to avoid dangerous climate change, governments are shooting themselves in both feet. They are subsidising the very activities that are pushing the world towards dangerous climate change, and creating barriers to investment in low-carbon development and subsidy incentives that encourage investment in carbon-intensive energy. Coal, the most carbon-intensive fuel of all, is taxed less than any other source of energy and is, in some countries, actively subsidised. For every $1 spent to support renewable energy, another $6 are spent on fossil fuel subsidies.