A new report by the Overseas Development Institute (ODI) and Climate Action Network (CAN) Europe has gathered detailed information on the support provided to fossil fuels, such as oil, gas and coal, from 11 European countries and the EU between 2014 and 2016. Experts found that the transport sector was the main beneficiary, with more than 49 billion euros (£38 billion) used to support fossil fuels, including tax breaks, thereby encouraging the use of diesel, at a time when the costs to health from air pollution have become more apparent. This also discourages the switch to low-carbon vehicles, including electric vehicles (EVs).
The European Union (EU) has a commitment that Members States must phase out environmentally harmful subsidies (including those to fossil fuels) by 2020. European governments have made parallel pledges to end fossil fuel subsidies under the G7 and the G20.
The World Trade Organization (WTO) definition of a subsidy includes fiscal support, such as direct spending by governments, tax breaks and income or price support; domestic, regional (EU) and international public finance through grants, loans, equity and guarantees; and investment by state-owned enterprises.
“The air pollution crisis in cities across Europe and the recent diesel emissions testing scandal have rightly led to increased pressure for governments to act, yet our analysis shows European countries are providing enormous fossil fuel subsidies to the transport sector” said Lead author Shelagh Whitley, Head of Climate and Energy at ODI. “This study shows how governments in Europe and the EU continue to subsidise and finance a reliance on oil, gas and coal, fuelling dangerous climate change and air pollution with tax-payers' money.”
The report, Phase-Out 2020: Monitoring Europe’s fossil fuel subsidies, also found that every year between 2014-2016, the EU provided an annual average of 4 billion (£3 billion) in fossil fuel subsidies through its budget, development and investment banks and funds. The growing support for gas, and the continued provision of support for coal-fired power, are particularly concerning.
The findings come despite European governments and the EU pledging to phase out fossil fuel subsidies by 2020 and committing to phase out emissions from fossil fuels by the second half of this century as part of the Paris Agreement.
Wendel Trio, director of CAN Europe, added that the 4 billion euros spent by the EU on fossil fuels, most of which goes to gas infrastructure, locks Europe into fossil fuel dependency for decades to come, violating the Paris Agreement’s requirement to make finances work for the climate.
“In addition, the fact that over 2 billion (£1.6 billion) a year is provided by EU Member States to support coal-fired power, the dirtiest of all fossil fuels, is unacceptable” Mr Trio said. “The EU must stop subsidising fossil fuels. Instead, the scarce resources of the EU budget and the EU’s development and investment banks should serve higher climate ambitions by financing the clean and sustainable energy transition.”
The report also found that after transport, industry and business received the most government support, benefitting from just less than 15 billion euros (£12 billion) per year. Subsidies also continue to be provided for fossil fuel exploration, with the UK and France providing 253 million euros (£198 million) per year in public finance between 2014 and 2016 for finding new resources.
European Governments and EU institutions should lead the G7 and G20 by meeting their commitment to phase out fossil fuel subsidies by 2020, says the report. They should also increase transparency through a publicly-disclosed and consistent annual reporting scheme and ensure mechanisms supporting energy transition do not support fossil fuel production and consumption.
Furthermore, any remaining subsidies should be targeted at supporting workers and communities to move away from fossil fuels.
Image: Traffic congestion in Bristol, UK
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