Subsidies for coal, oil and gas are not falling despite EU pledges to tackle climate change
— The UK leads the European Union in giving subsidies to fossil fuels, according to a report from the European commission. It found €12bn (£10.5bn) a year in support for fossil fuels in the UK, significantly more than the €8.3bn spent on renewable energy.
The commission report warned that the total subsidies for coal, oil and gas across the EU remained at the same level as 2008. This is despite both the EU and G20 having long pledged to phase out the subsidies, which hamper the rapid transition to clean energy needed to fight climate change.
Germany provided the biggest energy subsidies, with €27bn for renewable energy, almost three times the €9.5bn given to fossil fuels. Spain and Italy also gave more subsidies to renewable energy than fossil fuels.
But along with the UK, France, the Netherlands, Sweden and Ireland all gave more to fossil fuels. The report is based on 2016 Eurostat data, the latest available, and found that across the EU renewable energy received 45% of subsidies and fossil fuels 33%.
The commission report said policies were being pursued to cut carbon emissions and meet the Paris climate agreement goals of limiting global warming to well below 2°C above pre-industrial levels. “However, despite this and the international commitments made in the context of G20 and G7, fossil fuel subsidies in the EU have not decreased,” it said. “EU and national policies might need to be reinforced to phase out such subsidies.”
The total fossil fuel subsidies in the EU were €55bn in 2016, the report concluded. “This is a very high number, given we are reaching the deadline for some of their [phase out] promises,” said Ipek Gencsu, subsidies expert at the Overseas Development Institute (ODI).
A significant part of the UK fossil fuel subsidies identified by the commission is the 5% rate of VAT on domestic gas and electricity, cut from the standard 20%. The UK government did not dispute the data but denied that it provided any subsidies for fossil fuels under its own definition and that of the International Energy Agency.
“We do not subsidise fossil fuels,” a government spokeswoman said. “We’re firmly committed to tackling climate change by using renewables, storage, interconnectors, new nuclear and more to deliver a secure and dynamic energy market at the least possible cost for consumers.”
Shelagh Whitley, also at ODI, was dismissive of the UK government’s claim to provide no fossil fuel subsidies. “They are lying,” she said. “It’s absurd. They are playing games and continuing to prop up a centuries old energy system.”
She said the WTO definition of subsidies, accepted by the UK and 163 other nations, includes “government revenue that is otherwise due, foregone or not collected” such as reduced tax rates. Other countries, such as Germany and Italy, call such tax breaks subsidies, she said and noted the UK also gave tax breaks for oil and gas operators in the North Sea. Whitley said that rather than arguing about definitions, the UK should use its tax system to accelerate the transition to clean energy.
In September, the chancellor, Philip Hammond, said the government had “forgone” billions of pounds by choosing not to implement a scheduled rise in duty on petrol and diesel. “The fuel duty freezes since 2011 have meant that the exchequer has forgone around £46bn in revenues through to 2018-19.” He said the tax not collected was “about twice as much as we spend on all NHS nurses and doctors each year”.
The UK government spokeswoman said low VAT was important in keeping bills down for families. But experts say untargeted measures are an inefficient way to help those in need. Worldwide, fossil fuel subsidies overwhelmingly benefit the well off. “There are better ways to help on heating costs in the UK, such as installing insulation measures,” Gencsu said.
Rebecca Long-Bailey, Labour’s shadow business and energy secretary, said: “The balance of the UK’s energy subsidies are all wrong. Denmark and Germany won big by investing early-on in what is now a hugely profitable offshore wind industry. The UK must not miss out on the opportunity to lead the world on the next generation of renewables, and support should be geared towards these technologies of the future.”
Craig Bennett, the Friends of the Earth CEO, said: “Spiralling climate change is going to cost people and our economy huge sums of money, through the damage, disruption and instability it causes. So it’s astonishing that the UK government is still throwing taxpayers’ money at some of the world’s largest oil and gas companies. Ministers must switch funding to rapidly boost energy efficiency and renewables.”
by Damian Carrington | The Guardian