New OECD report on inventory of support measures for fossil fuels reveals extent of subsidies

If the energy transition is to be effective, support for fossil fuels will need to decrease but Jocelyn Timperley writes on the energymix website that such is not the case so far.

Fossil Fuel Subsidies Hit (At Least) $373 Billion in 2015, OECD Reports

Countries burned through at least US$373 to $473 billion in fossil fuel subsidies in 2015, according to a report from the Organisation for Economic Cooperation and Development (OECD) that for the first time combines its own data with measures from the International Energy Agency (IEA).

“The report shows support in 76 countries dropped significantly in 2015 compared to 2014, when it sat at $551 billion,” Carbon Brief reports. “However, the estimates do not cover all fossil fuel subsidies, therefore are likely to still be a substantial underestimate of global fossil fuel subsidies.”

The merged data set includes subsidies to coal, oil, and natural gas products, but not to electricity produced from fossil fuels—which the IEA estimated at $100 billion for 2015. That would bring the global total for the year closer to $500 billion.

The OECD calculation also excludes indirect measures like credit supports that allow fossil companies to borrow money at lower interest rates. “Government credit assistance can confer substantial benefits to carbon-intensive infrastructure, thus hampering the transition towards a low-carbon world, while inducing revenue losses for governments,” the report noted. “Quantifying the support element of such measures therefore enhances transparency on the use of public resources.”

The report added that “phasing out fossil fuel support is beneficial both through addressing climate policy objectives and raising public revenues,” writes Carbon Brief correspondent Jocelyn Timperley. It calls for greater consistency across agencies’ estimates for fossil subsidies, “especially as inconsistencies in definitions and data are sometimes used as an excuse to postpone action. Greater coordination efforts could also help move towards a consensus on key concepts, such as the conditions under which support to fossil fuel is not considered as ‘inefficient’.”

That adjective matters, Timperley notes, since both the G7 and the G20 have agreed to eliminate “inefficient fossil fuel subsidies,” but have not agreed on a common definition for the term. To help address that problem, the G20 encouraged its members to participate in voluntary peer reviews of their approaches to inefficient subsidies. The United States, China, Germany, and Mexico have completed reviews so far.

“They came up with peer review as a way to circumvent the disagreement on definitions, because with peer review you can define it the way you want,” explained International Institute for Sustainable Development researcher Ivetta Gerasimchuk. “You can define the scope the way you want, you control the process. So it’s not top down. It’s kind of more peer-to-peer, less scary. And now that several countries have done it, it’s been less and less scary.”

In 2015, using a different methodology from the OECD’s, the International Monetary Fund calculated global fossil subsidies at $5.3 trillion per year, or more than $10 million per minute.