European states, including the UK’s Conservative government, are giving more than €112bn (£99bn*) every year in subsidies to support fossil fuel production and consumption like oil, gas and coal, according to a new report. The findings fly in the face of commitments already made by both the UK and EU and put the world on a dangerous path.
The report Phase-out 2020: monitoring Europe’s fossil fuel subsidies by the Overseas Development Institute (ODI) and Climate Action Network (CAN) Europe detailed the support given by 11 European governments and the EU itself between 2014 and 2016.
Support includes over €49bn (£43bn) [pdf p7] for the use of fossil fuels in the transport sector, such as tax breaks to lower diesel prices.
This finding follows a 2015 study by Transport & Environment (T&E), that noted [pdf p4] the gap between taxes applied to petrol and diesel cars in Europe. And it noted [pdf p3] the “race to the bottom” when it came to diesel-run trucks. The report stated that “for small, central EU member states it is extremely attractive to tax diesel for trucks at the minimum rate because it seduces hauliers to fill up their huge tanks on their territory, which boosts revenue”. That means other states also find it difficult to raise taxes on diesel in order to stay competitive.
In a more recent report, T&E points [pdf p1] to the lax air pollution emission limits in Europe that have a knock-on effect on car manufacturers. Ultimately there is no real disincentive for manufacturers to produce vehicles with diesel engines. In fact, diesels now have more than a 50% sales share [pdf p1] of the vehicle market according to T&E’s report. While in other countries the sales share is below 5% [pdf p1].
There are calls [pdf p16] from Europe to incentivise the sale of electric cars instead. And the UK has targets in place to reduce diesel (as well as petrol) cars by 2040. But with diesel subsidies still in place, it is difficult to see how that will happen.
Tracking the UK’s subsidies
In addition, the EU provided an annual average of €4bn (£3.5bn) [pdf p22] in fossil fuel subsidies between 2014 and 2016. And the UK along with France provided €253m (£223m) [pdf p26] per year in public finance toward fossil fuel exploration.
In fact, the ODI and CAN’s case study on the UK found it provided the following subsidies and support on its own:
- Tax rate reductions for North Sea oil and gas production.
- £665m in support for oil and gas production per year between 2014 and 2016.
- Reduced VAT on fuel and power consumption (amounting to £3.6bn per year in lost government revenue).
- Around £7.4bn in transport sector subsidies (including tax breaks for diesel) per year between 2014 and 2016.
- Public finance institutions and the Royal Bank of Scotland (RBS), which is 73% state-owned, provided £1.3 billion per year between 2014 and 2016, to oil, gas and coal both home and overseas.
And these findings could be an underestimate considering the UK’s relatively poor [pdf] and opaque reporting on fossil fuel subsidies.
What will come of it all?
Wendel Trio, director of CAN Europe, said:
The €4bn spent by the EU on fossil fuels, most of which goes to gas infrastructure, locks Europe into fossil fuel dependency for the decades to come. This violates the Paris Agreement’s requirement to make finances work for the climate.
The UK joined almost 40 other countries in signing a communiqué in 2015 to phase out fossil fuel subsidies.
Trio also said that it was “unacceptable” that over €2bn (£1.8bn) is given by EU states to support coal-fired power, “the dirtiest of all fossil fuels”.
The report states that these countries will miss important objectives [pdf p7] to avoid dangerous climate change if they continue subsidising and supporting fossil fuel usage for energy.
Among the report’s recommendations [pdf p31] is a more transparent reporting system. And it recommends more support for those who depend on fossil fuels so they can transition to other energy sources.
The report’s findings are damning. The very type of activity we should be moving away from is the very activity we are moving towards. And it begs the question as to why. Finances aren’t working for the climate or the public good. Instead the UK is handing over buckets of public money to serve energy producers; not the taxpayers it should be working for.
*All figures based on exchange rate on 29 September 2017.
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