coal

G20 country governments are providing $452 billion a year in subsidies for the production of fossil fuels. Their continued support for fossil fuel production marries bad economics with potentially disastrous consequences for the climate. In effect, governments are propping up the production of oil, gas and coal, most of which can never be used if the world is to avoid dangerous climate change. It is tantamount to G20 governments allowing fossil fuel producers to undermine national climate commitments, while paying them for the privilege.

The combustion of fossil fuels is a leading contributor to climate change, and many countries have already taken steps to reduce their emissions of CO2 and other pollutants. Some policies remain, however, that encourage more production and use of fossil fuels than would otherwise be the case. In so doing, these policies increase emissions and make mitigation more costly than necessary. Fossilfuel subsidies are one such policy.

There has been much discussion of fossil fuel subsidies as both an inefficient use of public tax dollars and a barrier to the scaling up of low- and no-carbon energy sources. As "green" incentives are reduced, the phase-out of fossil fuel subsidies becomes even more urgent in order to reduce market distortions and ensure a level playing field in energy markets. Developing-world subsidies to fossil fuel consumption have attracted the most attention to date. However, fossil fuels also benefit from production subsidies in both developed and developing countries.

Numbers ranging from half a trillion to two trillion dollars have been cited in recent years for global subsidies for fossil fuels. How are these figures calculated and why are they so different? The most commonly used methods for measuring subsidies are the price-gap approach-quantifying the gap between free-market reference prices and the prices charged to consumers-and the inventory approach, which constructs an inventory of government actions benefiting production and consumption of fossil fuels.

Governments across the G20 countries are estimated to be spending $88 billion every year subsidising exploration for fossil fuels. Their exploration subsidies marry bad economics with potentially disastrous consequences for climate change. In effect, governments are propping up the development of oil, gas and coal reserves that cannot be exploited if the world is to avoid dangerous climate change.

Keynote presentation at the Expert Workshop on Subsidies to Fossil Fuels and Climate Mitigation Policies in Latin America and the Caribbean (LAC), held at the Inter-American Development Bank in Washington, DC on January 14, 2014.  Slides review recent global estimates of fossil fuel subsidies, highlighting both the tallies and the reasons the estimates differ widely from one another. 

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.

This analysis identifies a number of federal programs supporting coal, including some that while not directly targeted at coal provide significant benefit to the coal sector.  In total these subsidies provided approximately $25.4 billion in financial support for coal production, transport, use, or waste disposal during the period 2002-2010. The majority of these dollars - $16.2 billion - are attributable to tax benefits. Of these tax benefits, the single largest category was the non-conventional fuels tax credit, providing $12.22 billion to coal.

This report describes organized attacks on climate science, scientists and scientific institutions like the UN  Intergovernmental Panel on Climate Change (the IPCC), that have gone on for more than 20 years. It sets out some of the key moments in this campaign of climate denial started by the fossil fuel industry, and traces them to their sources.

Special legislative provisions have allowed a select group of industries to operate as tax-favored publicly-traded partnerships (PTPs) more than 25 years after Congress stripped eligibility for most sectors of the economy. These firms, organized as Master Limited Partnerships (MLPs), are heavily concentrated in the oil and gas industry. Selective access to valuable tax preferences distorts energy markets and creates impediments for substitute, non-fossil, forms of power, heating, and transport fuels.