Coal Subsidies Double in G20 Despite Climate Pledges

Despite promising to phase out fossil fuel subsidies about a decade ago, world’s leading economies (G20) has more than doubled subsidies to coal-fired power plants over three years putting climate goals at risk, according to a study by  energy researchers.

The study from the Overseas Development Institute (ODI), Oil Change International (OCI), the International Institute for Sustainable Development (IISD) and the Natural Resources Defense Council (NRDC) tracks three types of government support provided by the G20 governments. They are fiscal support, lending by public banks and investments made by state-owned enterprises.

The report said that G20 governments more than halved direct support for coal mining: from $22 billion to about $10 billion on average each year between 2014 and 2017. But in the same period they boosted backing for coal-fired power plants, particularly supporting construction of the plants in other often poorer nations—from $17 billion to $47 billion a year.

China and Japan—which will host a G20 summit later this week in Osaka—were the biggest providers of public finance for coal-fired power, followed by South Korea and India.

The report said that while spending from G20 countries’ national budgets on coal fell, including the past tax breaks; other forms of support—from development finance institutions, export credit agencies and state-owned enterprises—increased substantially.

“You can see they’re pretty much exporting the dirty energy systems to countries in much earlier stages of their development,” said Ipek Gencsu, a researcher at ODI and a lead author of the report.

Those include nations such as Bangladesh, Indonesia, Pakistan and Vietnam, she said, where foreign backing for coal power is slowing adoption of cleaner renewable energy systems and locking in dirty energy and air pollution risks.

India’s Coal Addiction

India’s public banks invest Rs 79,800 crore per year in the coal sector, said the study which was released ahead of the G20 summit in Japan on June 28-29. These are fiscal support, lending by public banks and investments made by state-owned enterprises.

In India, which will chair the G-20 in 2022, state-owned enterprises invested $6.4 billion (Rs 44,800 crore) per year and public banks lent $11.4 billion (Rs 79,800 crore) per year for coal projects in 2016-17, mostly in the power sector.

This is despite the fact that $27 billion (Rs 1,74,468 crore) worth of coal power assets are under financial stress and that India has made significant progress in reforming support for other fossil fuels, like gasoline, diesel and kerosene.

Christopher Beaton, IISD Senior Policy Advisor and the author of the India chapter of the report, said: “India’s coal power will face further challenges due to air pollution regulations, water scarcity concerns and competition from renewables.”

“But this situation can prompt India to re-think its support to coal and move beyond it to cleaner energy.”

G20’s Dirty Secret

The combined government support of G20 countries to coal stood at $63.9 billion per year in 2016-17.

These investments lock coal into the energy system for decades and prevent countries from meeting their long-term G20 and Paris Agreement climate commitments, while also showing poor economic performance, said the report.

The International Institute for Sustainable Development’s Ivetta Gerasimchuk, one of the report’s co-authors, said: “In reality, government support to coal is much larger than our report’s numbers show, because many G 20 countries still lack transparency on the many ways they subsidize coal.”

“Our estimates also exclude the external costs of coal associated with air pollution, which are currently borne by the public.”

The authors call for greater transparency by requesting G20 countries to conduct peer reviews of subsidies to coal and other fossil fuels by 2020. It further suggested that G-20 countries should establish a regular process to track the removal of fossil fuel subsidies and share lessons learned from successful reforms. Ending coal subsidies will bring environmental, social and economic benefits while setting a level playing field for clean energy, the report said.