Subsidising climate change

We need to raise awareness about how the rich oil nations keep subsidising oil extraction whilst agreeing that the world needs to cut emissions. Taxpayers cannot passively let their governments do this.

Tina Andersen Vågenes
16 January 2015
From climate protest in Lima.

From climate protest in Lima. Photo: Luka Tomac. Used with permission. The annual climate negotiations in Peru in December gave us another useless global agreement, which is nowhere near strong enough. Yet while politicians claim the agreement is just what we need, massive subsidies in the oil industry remain something we rarely hear about. Studies from the IEA have shown that governments all over the world subsidise fossil fuels. In 2012, the fossil industry received 775 billion dollars in support, compared with the renewable industry’s subsidies at a meagre 101 billion in 2013. This inequality is proving a deathtrap – as governments all over the world are literally subsidising climate change.

Most countries have cut their direct subsidies, but some still delay. Saudi Arabia, Russia and Iran are among the worst, having kept most of the direct economic support, which includes tax cuts and support for oil exploration. It may surprise most people that many countries still support the exploration of oil that can neither be extracted nor burned. Countries such as Norway, Canada and the US are covering expenses for oil companies’ search for more oil. These countries are all aware that the oil, coal and gas found cannot be burned if we are to stay inside the “carbon budget”. Every year the Canadian government uses more than 928 million dollars supporting oil exploration, a sum that is likely to rise due to the increase in tar sands production. The US government alone deploys a staggering 5.1 billion dollars in national subsidies. The G20 countries spend almost 88 billion dollars annually on searching for oil that will have to stay untouched. Is it really a surprise that the shift towards a greener economy is moving so slowly?

Many involved in the oil industry claim that refunded search expenses are not subsidies. But a growing number of people disagree. Australia alone spent 3.5 billion dollars on oil exploration in 2013. The amount of money the G20 spend on oil subsidies are almost double that spent by the biggest 20 fossil companies. This means that public rather than private investments are what is financing oil exploration.

G20 countries have actually agreed to stop “inefficient” fossil-fuel subsidies, yet they cannot seem to cut out the least efficient subsidies – for exploration. Using taxpayers’ money to explore oil reserves the world cannot use must surely be inefficient. Many of these subsidies finance exploration in remote offshore areas, such as the Arctic. Several Russian companies are searching for oil far north in the Barents Sea, alongside the Norwegian company Statoil.

Drilling for oil in the Arctic is extremely risky, and some companies have said publicly that they are not willing to start production there because of the risks. Sadly, many companies are still willing to try – and many have governmental support. Both the Norwegian and Russian government support the efforts to search for oil in ice-filled areas in the Arctic, overlooking warnings from top researchers. While drilling for oil in extreme Arctic conditions may seem insane to the public, governments in the North support the plans financially.

When the G20 nations subsidise further fossil fuel extraction, they create a triple problem. Firstly, they are binding up huge sums of money in reserves that can never be used if the world is to avoid the worst effects of climate change. Supporting these high-carbon assets is not clever if the world economy is planning to move away from fossil dependence. Secondly, they are diverting investments from low-carbon alternatives, like solar- , wind- and hydropower. Last but not least, they are undermining the chance of an ambitious climate deal at the Paris summit in 2015.

Whenever environmentalists try to point out the obvious inequalities, they are dismissed, by among others, Norway, the self-acclaimed climate hero. The Norwegian government refunds expenses from oil exploration, but denies that it is subsidising. While the government talk about necessary cuts in emissions, cutting down on its own oil production is seen as laughable. Almost daily, the Norwegian oil industry claims that as the producer of “the world’s cleanest oil”, we have a “responsibility to extract it”.

Cutting out exploration subsidies therefore seems to be on no-one’s agenda. As a Norwegian environmentalist, the irony is painful, as my government simultaneously subsidises climate change and preaches the need to fight it. We need to raise awareness about how the rich oil nations keep subsidising oil extraction whilst agreeing that the world needs to cut emissions. How we will get even close to the two-degree target at this rate is difficult to see.

What we need now is global knowledge about this subsidising. Taxpayers cannot passively let their governments use their money on subsidising climate change. The world needs divestment, moving the big money from fossil fuels to renewables. If not, the world’s richest countries will keep on subsidising severe climate change, making a worthwhile agreement in Paris seem impossible.

Had enough of ‘alternative facts’? openDemocracy is different Join the conversation: get our weekly email


We encourage anyone to comment, please consult the oD commenting guidelines if you have any questions.
Audio available Bookmark Check Language Close Comments Download Facebook Link Email Newsletter Newsletter Play Print Share Twitter Youtube Search Instagram WhatsApp yourData