The 19 individual country members of the G20 (the 20th member is the European Union) provided $693bn in fossil fuel support in 2021, thereby slowing down progress on reaching the goals of the Paris Agreement, according to a new report released by Bloomberg Philanthropies and BloombergNEF (BNEF). This distorted prices, encouraged potentially wasteful use and production of fossil fuels, and resulted in investment in long-lived, emission-intensive equipment and infrastructure, the report claims.
 

According to the Climate Policy Factbook, the share of G20 fossil fuel support allocated to coal is slowly shrinking – from 4.1% in 2016, to 2.9% in 2021, but still attracted a total of $20bn of government support in 2021. This is surprising given that much of the effort to phase out fossil fuel support has focused on coal, including pledges announced at recent G20 summits and COP26, the report says.
 

While 2021 estimates are provisional, they suggest fossil support spending surged 16%. This spike was not simply due to economic recovery and higher energy use as 2021’s total was 5% higher than 2016, a year in which energy use was approximately level. In fact, the 2021 increase was driven by a 16% increase in support to fossil fuel producers and utilities.
 

Commenting on the report, Victoria Cuming, Head of Global Policy at BloombergNEF and the report’s lead author, says: ‘The G20 and G7 governments have announced a range of seemingly more ambitious commitments to phase out fossil fuel subsidies. But they always seem to include imprecise language and caveats, giving governments wiggle room to interpret these pledges as they wish. BNEF’s analysis shows that there seems to be little evidence of those countries delivering on their promises.’
 

At the national level, China may have accounted for the largest share (26%) of G20 fossil fuel support in 2020 (the latest year for which country-level data is available). But it is well below other G20 members on a per-capita basis – at $111 in 2020 compared with, for example, Saudi Arabia ($1,433), Argentina ($734) and Canada ($512). It also scaled back this support by 12% over 2016–2020, while Canada more than doubled fossil fuel support over that period. The US has the lowest per-capita total out of the G20 (at $34 in 2020) but provided 57% more of such subsidies in 2020 relative to 2016.
 

To effectively lead the phase-out of coal and other fossil fuels, G20 countries must introduce a meaningful carbon price, so that companies and consumers pay for their greenhouse gas emissions, the report says. In total, 12 member countries of G20 have nationwide carbon pricing. Europe and Canada remain G20 leaders for robust carbon policies. In particular, prices are close to or far above the level needed to limit global warming to 2°C above pre-industrial levels by the end of the century. The World Bank estimates this range to be $40–80/t by 2020 and $50–100 by 2030. The other G20 countries with nationwide schemes have an average carbon price of $8/t and the US, which has several state level programmes, has an average price of $9/t. Most of these programmes are less effective as they cover such a small share of national emissions or offer concessions that are too generous to participants, notes the report.
 

Another priority area is to enforce climate risk disclosure by companies and financial institutions, says BNEF. Policymakers are more loudly than ever voicing concern that climate change poses major risks to financial stability. However, out of the G20 countries, only the European Union and the UK have passed laws or regulations to mandate specific, nationwide climate-risk disclosure for investors, while the US has issued a proposal to take this step. Instead, most G20 governments have only gone as far as launching pilot projects and issuing voluntary guidance documents. These may mark a change in rhetoric and help improve financial market participants’ capabilities without being too disruptive for current market practices. But this type of voluntary approach allows institutions to delay action, the report notes.