Generous public subsidies are bolstering otherwise unprofitable oil, gas and coal exploration

Generous public subsidies are bolstering otherwise unprofitable oil, gas and coal exploration, new evidence indicates ahead of a meeting of G20 leaders this week.

 

G20 countries spend around $88bn each year on finding new fossil fuel reserves, according to a new report by the Overseas Development Institute

(ODI) and Oil Change International.

 

By contrast, the global top 20 oil and gas companies invested $37bn, less than half of the government expenditure, in exploration activities in 2013, the authors found.

 

The report seeks to remind the G20 leaders of their 2009 pledge to phase out inefficient fossil fuel subsidies. It argues that few subsidies are less efficient than those spent on exploration as these come to almost double what the International Energy Agency estimates is needed to provide universal access to energy by 2030.

 

An average of $521m of exploration subsidies per year were channelled through multilateral development banks between 2010 and 2013, according to the report. The World Bank Group accounted for two-thirds of this, calling into question its commitment to drive low-carbon development through its loan practices, the researchers warned.

 

The report urges governments to shift their resources towards renewable energy, which provides better returns. Every US dollar in subsidies attracts

$2.5 in investment when spent on renewables but only $1.3 when it is directed to fossil fuels.

 

Global subsidies for fossil fuels, of which exploration subsidies make up only a small part, were estimated at $775bn in 2012. This contrasts with a meagre $101bn for renewable energy in 2013, the researchers said.

 

To avoid dangerous global warming, two-thirds of fossil fuel reserves already found need to be kept in the ground, argued ODI¹s Shelagh Whitley.

³Instead, governments are using tax-payers¹ money to look for more oil, gas and coal resources,² she said.