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France Subsidies

Fossil fuel subsidies (excluding tax advantages on Diesel) in France accounted for €1.41 Billion in 2017 down from €3.42 Billion in 2014.

The total, including advantages on Diesel, accounts for €7-10 Billion a year. These subsidies mainly consist of tax exemptions / fiscal gifts on the one hand and, direct budget transfer / support on the other hand. For instance, VAT on gas in French Overseas Territories is 13% compared to 20% in mainland France. In the same way, the airline industry benefits from tax exemption on kerosene for domestic flights. On the other hand, direct budget support is relatively limited compared to tax exemptions and mainly consists of direct support to independent gas stations located in remote areas in France.

The Climate-Energy Contribution, aka Carbon Tax, was one of the key tools/policies enacted by the French Government in 2014. Its key strength is believed to be its ability to take into account / measure Carbon, i.e. to gradually enable Carbon pricing and reduce tax benefits / exemptions for fossil energies. For instance, the fiscal advantages / benefits on Diesel alone account for €5 to 6 Billion (often seen as a fiscal niche – not taken into account in the figures cited earlier in the article, i.e. the total fossil fuel subsidies, including tax advantages on Diesel, would reach €8 to 10 Billion). The 2016 draft Budget Bill is another essential policy that will, once enacted, upgrade and speed up the Climate-Energy Contribution until 2020, by gradually reducing tax advantages on Kerosene for example.

In terms of areas of improvement, experts estimate there are several types of subsidies that need to be reviewed and possibly eliminated. For instance, gradually reducing the tax advantages granted to road transporters could help finance and upgrade public rail infrastructure. Furthermore, the IMF and the OECD clearly advised governments to take advantage of the low prices of fossil fuel/energies and see it as an opportunity to implement taxes and eliminate subsidies without too much risking to antagonise / upsetting populations. Nevertheless, countries, including France, are still failing to accelerate the move and engage in large scale initiatives aimed at reducing or even eliminating fossil fuel subsidies.

Advocacy efforts are, therefore, necessary in this context, be it from NGOs and independent organisations and/or from other stakeholders, including public decision-makers, in order to engage in serious/long-term initiatives that will help reduce fossil fuel subsidies and ultimately reduce the impact on climate and climate change.

Learn More

https://www.odi.org/publications/10930-monitoring-europes-fossil-fuel-subsidies-france
http://www.europarl.europa.eu/RegData/etudes/IDAN/2017/595372/IPOL_IDA(2017)595372_EN.pdf
http://en.rfi.fr/general/20150417-france-backs-fight-against-fossil-fuel-subsidies-ahead-paris-climate-change-confere

United States Subsidies

United States–$8.157 billion in 2015

The US Federal Government paid a total of USD 4.757 billion in 2015 subsidies to the fossil fuel industry, as well as USD 3.4 billion to the Low-Income Home Energy Assistance Program (LIHEAP) to subsidize fossil fuels in the residential sector. According to a G20 report in 2016, “Fossil-fuel subsidies are also often granted in order to avoid producers shutting down operating wells in response to sudden price drops.” However, the report continues, “Hedging producers against market-price volatility, however, reduces incentives to innovate and develop productivity-enhancing technologies.” Reliable, comparable statistics are not available for the amount paid in fossil fuel subsidies in 2010, but reports indicate a trend of decreasing subsidies over time as the US aims to meet the G20 goal of eliminating fossil fuel subsidies by 2025. Any change in subsidies to the industry will need to be passed by Congress, which currently leans toward supporting fossil fuels more than reducing subsidies to them. US energy-related carbon emissions have been falling gradually over time due to the expanded use of natural gas over oil and coal.

Under the current administration, and President Trump’s continued assertions that he will “bring back coal,” it is unlikely that fossil fuel subsidies will be reduced over the next three years. However, with decreasing costs of natural gas and increased technological capabilities to extract it, it is likely that fossil fuel-related emissions will continue to fall gradually due to the reduced emissions of natural gas relative to oil and coal.

Learn More

OECD (2016): “A report on the G20 peer review of inefficient fossil-fuel subsidies that encourage wasteful consumption in the United States”
https://www.oecd.org/site/tadffss/publication/United%20States%20Peer%20review_G20_FFS_Review_final_of_20160902.pdf
U.S. Energy Information Administration’s report on carbon emissions in 2016:
https://www.eia.gov/todayinenergy/detail.php?id=30712
White House “An America First Energy Plan”
https://www.whitehouse.gov/america-first-energy

United Kingdom Subsidies

United Kingdom–6 billion GBP every year

Fossil fuel subsidies are a contentious issue for the UK. Over the past 5 years, The UK has become the only G7 nation to increase its’ support for the production of fossil fuels—despite earlier pledges to phase them out entirely— and it is now the fifth largest global subsidizer with an estimated £6 billion given in subsidies to the fossil fuel industry every year. Most of this is in the form of tax breaks to help boost declining North Sea oil production (which has included figures such as £551 million being given to the Total, £131 million to Apache and £267 million to Statoil). In addition, in 2016 the UK introduced a new North Sea tax break which is estimated to be worth an additional £1.7 billion over the next five years.

This runs contrary to declarations made by the government itself. For example, then-Prime Minister David Cameron told a UN climate-change conference in September 2014 that ‘we need to give business the certainty it needs to invest in low carbon. That means fighting against the economically and environmentally perverse fossil-fuel subsidies’. Government departments have gone further—using a different, stricter definition of ‘subsidy’ to involve only ‘government action that lowers the pre-tax price to consumers to below international-market levels’ to argue that the UK does not actually provide any fossil fuel subsidies at all. This is because reducing the usual rate of tax paid in a certain sector (which is the form of subsidy the UK government favors, and which is at a rate that is still higher than the ‘normal’ rate other sectors pay) would not fit within this definition.

The UK government’s use of fossil fuel subsidies does not look to be abating any time soon, and recent cuts to offshore wind and solar subsidies appears only to reinforce this.

Turkey Subsidies

Turkey–Exact amount not available, estimated between US $ 300 million and $ US 1.6 billion

It is difficult to record the actual amount that Turkey spends on fossil fuel subsidies. According to a report published by Oil Change International and 350.org in 2015; Turkish government provides an estimated US$300 million to US$1.6 billion (TRY 683 million to TRY 3.6 billion) per year in fossil fuel producer subsidies. Given the number of subsidies for which data is not available, this estimate is likely highly conservative.

In 2013, Turkey provided some US$500 million in public funding specifically for fossil fuel exploration. In addition, the government provided between $250 and $400 million in support to hard coal enterprises. Turkey’s government-funded coal exploration program has increased coal reserves by over 50% since 2005, opening up 5.8 billion tons of new coal to be mined.

Turkey also receives international public finance to support fossil fuel operations. Between 2007-2015, fossil fuel projects in Turkey have received more than US$5 billion (TRY 11.38 billion). Of this total, over US$1.5 billion (TRY 3.4 billion) went to coal projects.

The 2012 New Investment Incentives Regime provided a higher level of subsidies to oil and coal investments than to renewable energy – encouraging carbon-intensive infrastructure projects over clean energy sources. The elevated incentives represent a potential subsidy for coal alone of US$11.6 billion (TRY 26.4 billion) based on a planned new lignite coal power plant capacity of 14.5 GW for 2012 to 2030.

Government guarantees for loans and power purchase agreements involving fossil fuels represent significant contingent liabilities for the central budget. Such liabilities can ultimately threaten the country’s credit rating and, hence, cost of borrowing.

In fact, the problematic area in Turkey in terms of climate change is not fossil fuel production, it is fossil fuel consumption. While the contribution of Turkey to world fossil fuel production was 1.7%, the consumption share approached 1%. Its share in world oil consumption is 0.8%, in natural gas consumption it is 1.2%.

If Turkey wants to make a contribution in the area of climate change, it should focus on consumption, not only fossil fuel production. However, the cost of increasing energy efficiency is not lower than the incentives given to research and production. The extent to which developed countries will assume responsibility for the aid of developing countries in meeting these costs is still in the bargaining process.

Parallel to this assistance, steps to be taken by Turkey are:

To end government-funded fossil fuel exploration activities
Eliminate tax exemptions for exploration activities
Exclude coal exploration from the Mining Fund’s below-market rate loans
Exclude fossil fuel projects from government guarantees
Set a timeline to phase out all producer fossil fuel subsidies starting with coal. A strategic transition is a must by ensuring new employment opportunities for miners.

Learn More

Acar S., Kitson L. “Türkiye’de Kömür ve Yenilenebilir Enerji Teşvikleri” International Institute for Sustainable Development, 2015
WWF Turkey and Istanbul Policy Center “Low Carbon Development Pathways and Priorities for Turkey”, 2015
Oil Change International and 350.org, “The Cost of Subsidizing Fossil Fuel Production in Turkey: Why Turkey Should Implement the G20 Commitment to Phase Out Fossil Fuel Subsidies” 2015

Thailand Subsidies

Q 16 Thailand–$.438 billion spent on fossil fuel subsidies in 2016

Increased awareness by the government about the revenue drain caused by fossil fuel subsidies has helped spark a decline since 2011 in subsidy spending. A 2014 news report by the Asian Correspondent revealed Thailand’s fossil fuel subsidy allocations. To reflect upon the annual subsidy allocations for 2011, 2012 and 2013; former Energy Minister of Thailand Piyasvasti Amranand argues, “Thailand’s junta should remove fuel subsidies that have cost $15.6 billion over the past three years to free up funds for crucial infrastructure projects.” Piyasvasti Amranand also emphasized the increased government spending on fossil fuel subsidies like diesel and LPG. With respect to the annual spending trends for diesel subsidies, Amranand suggests, “Diesel subsidies have led to a loss of over 100 billion baht in annual revenue. Data from OECD and other sources highlights that in 2013, oil subsidies were around USD $2160.7 billion, electricity subsidies were USD 326.1 billion, Natural Gas subsidies were USD 627.9 billion, coal subsidies were USD 160.8 billion and total subsidies were USD 3275.5 billion. In 2014, fossil fuel subsidies were on a decline as oil subsidies were USD 1601.7 billon, natural gas subsidies were USD 363.4 billion, coal subsidies were USD 77.7 billion and total subsidies were USD 2042.8 billion. In 2015, fossil fuel subsidies decreased even further as oil subsidies were USD 708.3 billion, natural gas subsidies were USD 188.0 billion and total subsidies were USD 896.3 billion.

The decrease in fossil fuel subsidies from 2013 to 2015 is the result of policy reforms. One such reform was established on December 3, 2014, when the Energy Policy Administration Committee of Thailand approved the removal of a seven-year LPG subsidy. Another key reform the Thailand government implemented was the removal of Certified Natural Gas (CNG) subsidies as CNG was heavily subsidized. During 2014 and 2015, the government raised the price of CNG by around 4% to 10% and eventually floated the price in 2016. As an outcome, the CNG price is at par with the market price, which fell to around 12.55 baht or USD 0.36 in January 2017. Finally, to reduce Natural Gas for Vehicles (NGV) subsidies, NGV prices were raised in October 2014, which increased from 1 baht per kg to around 11.5 baht per kg.

From the above paragraphs, it is evident that in recent years Thailand is moving towards the right direction in terms of reducing fossil fuel subsidies. However, long-term policies for phasing-out fossil fuel subsidies are yet to be adopted.

Learn More

To learn more about the expenditures for fossil fuel subsidies in 2014 please visit:
https://asiancorrespondent.com/2014/07/not-all-are-energy-subsidies-are-equal/#4AUdpjipBzLKqb7F.97

To learn more about the 2017 IEA and OECD Data about annual fossil fuel subsidies in Thailand from 2013, 2014 and 2015 please visit:
https://www.iea.org/media/statistics/Subsidies20132015.xlsx

To learn more about the removal of the 7-year subsidy on LPG and CNG subsidy removal please visit:
https://www.iea.org/publications/insights/insightpublications/TrackingFossilFuelSubsidiesinAPECEconomies.pdf

To learn more about fossil fuel subsidy reforms in Thailand please visit the report by Asian Development Bank at: https://www.adb.org/sites/default/files/publication/175455/fossil-fuel-subsidies-thailand.pdf

Spain Subsidies

Spain–1,177 million Euros between 2014 and 2016

Spain is a country that has been fossil fuel dependent and that is still far from being a significant producer of renewable energy. According to data from the World Bank Group on Energy Consumption, in 2015, 72.9% of the energy consumed in Spain was from fossil fuels.

The Overseas Development Institute (ODI) and the Climate Action Network (CAN) released the results of the study called Monitoring Europe’s Fossil Fuel Subsidies in September 2017. This study highlights that “Spain’s transparency and reporting on fossil fuel subsidies is relatively poor. – … – The fossil fuel estimates (in this study) are therefore likely to be underestimates.” It estimates that between 2014 and 2016, Spain’s subsidies to fossil fuel production and consumption was an average of 1,711 million euros per year.

The study mentions that the extent of Spain’s subsidies goes beyond its borders. Through the country’s export credit agency, Spain has supported oil and gas projects in Angola, Costa Rica, Kenya, Romania and Turkey worth an average of 56 million euros per year between 2014 and 2016. A part of the study says that “Spain, as part of the European Union (EU), has repeated its commitment to phase out the fossil fuel subsidies every year since 2009.”

The Framework Plan for Coal Mines and Mining Communities 2013-2018, was set in October 2013, and states that because of the intermittent character of the renewable energy (meaning the dependency on meteorological conditions), it is necessary to preserve energy sources that guarantee the energy supply under any kind of circumstances. In the case of Spain, the main source would be coal and its exploitation would only be possible if it ensures a set of standards that mitigates the impact in the environment. One of the objectives of this plan is to ease the closure of mines that under the conditions proposed to preserve the environment are not able to be financially efficient. In accordance with this scenario, the plan to help the affected communities in the transition to other ways of employment involves several subsidies and requires the use if at least 7.5% of autochthonous coal in the generation of energy.

The time frame of the current policy will come to an end soon and the achievement of its objectives is still unclear. The future of this subject is primarily unclear as it is with, basically, all the plans needed to achieve the goals of the Paris Agreement in the short and long term. Spain will need to develop a well-integrated program when preparing its next plan to reduce its greenhouse emissions. This plan will include changes in tax policies for the different industries and preserving the environment while growing the economy. Businesses will need to find another way to produce and consume energy.

Learn More

https://datos.bancomundial.org/indicador/EG.USE.COMM.FO.ZS?view=chart
https://www.odi.org/sites/odi.org.uk/files/resource-documents/11785.pdf
https://www.irmc.es/Noticias/common/Nuevo-Marco-2013-2018.pdf

South Korea Subsidies

South Korea–$667 million in 2013-2014 counting domestic subsidies and subsidies for overseas oil and gas exploration

According to a report, “G20 subsidies to oil, gas and coal production: Republic of Korea”, that was published in 2015, South Korea’s subsidies for fossil fuels can be summarized as follows:

As the table above shows, the majority of South Korea’s subsidies have been used for supporting coal production, and the largest subsidy went to the production of coal briquettes. This is related to South Korea’s energy market structure. In South Korea, major energy industries are still publicly owned. For example, Korea National Oil Corporation (KNOC) is responsible for exploration, development and production of oil and natural gas within and outside of the country as well as strategic reserves. Likewise, the coal industry is also largely dependent on state ownership. Three out of eight major domestic anthracite mines are run by Korea Coal Corporation (KCC), which is state-owned.

South Korea has the highest level of support for overseas coal power plant projects through export credit agencies among OECD countries. Also, Korea ranked first in terms of the size of the export credit institutions that were supported by foreign export credit institutions in the overseas coal-fired power plant projects that were done by Korea’s Exports Bank and Korea’s Trade Insurance Corporation. Their total support amounted to $4.345 billion from 2003 to 2013. Japan ranked second with $ 3.27 billion, and Germany third with $2 billion.

Learn More

Alex Doukas, “G20 subsidies to oil, gas and coal production: Republic of Korea” (Overseas Development Institute, 2015). https://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-files/9984.pdf

Saudi Arabia Subsidies

Saudi Arabia–$60.9 billion in 2011

Diesel and gasoline sold in Saudi Arabia are about 12% and 30% of international reference prices, respectively. Saudis enjoy the second lowest domestic fossil fuel prices in the world, behind only Venezuela. In 2009, the Kingdom spent a total of $32.5 billion on fossil fuel subsidies. In 2010, this figure increased to $43.6 billion. In 2011, it ballooned to $60.9 billion. Of its total subsidy spending in 2011, 76 percent went to subsidizing oil, while 24 percent went to electricity, which is also derived from oil. Riyadh is currently the second highest spender on fossil fuel subsidies in the world. In fact, the Kingdom spent more on fossil fuel subsidies (10.6% of GDP) than on health (about 3% of GDP) and education (about 6% of GDP) combined. Saudi Arabia is the second-leading subsidizer of end-use fossil fuel prices, providing 61% of its $48.6 billion in fossil fuel consumption subsidies to oil, 26% to electricity, and 14% to natural gas in 2015.

Saudi Arabia recently scaled back some fossil fuel consumption subsidies that artificially lowered the price of fuel for its citizens, increasing its country’s gasoline prices by 50 percent. Saudi Arabia’s government also started a policy to reduce fossil fuel subsidies in 2015 when the kingdom raised the price of 95 Octane gasoline from 0.60 to 0.90 riyal. Currently, the government is considering the details of a plan to phase out subsidies for gasoline and jet fuel. This could result in a hike of about 80% for octane-91 grade gasoline to about 1.35 riyals per liter (0.36 cents), one person said on condition of anonymity. The government plans to delay increases in other energy prices until early 2018. The plan would also include a cash handouts transfer program for low and middle-incomes families to help them cope with the impact.

The government wants to make a carefully balanced move as removing energy subsidies is politically sensitive issue for the nationals who are accustomed to low energy prices. Therefore, it seeks to review the impact on economic activities and the burden on its citizens to avoid political backlash. A person with knowledge of the matter stated that gasoline and jet fuel would undergo immediate, one-time increases under the Saudi plan, while the government would raise prices of other fuels gradually between 2018 and 2021.

Learn More

Saudi Arabia fossil fuel subsidies: Understanding the Problem by Fuadi Pitsuwan January 24, 2014
http://hksjmepp.com/saudi-arabias-fossil-fuel-subsidies-understanding-the-problem/

Fossil Fuel Consumption Subsidies, While in Decline, Are Still Pervasive in the Developing World. June 5, 2017
http://instituteforenergyresearch.org/analysis/fossil-fuel-consumption-subsidies-decline-still-pervasive-developing-world/

Saudi Arabia studies fuel subsidies reform. October 29, 2015. Economic Intelligence Unit.
http://www.eiu.com/industry/article/1633636747/saudi-arabia-studies-fuel-subsidy-reform/2015-11-04

Saudis May Raise Domestic Gasoline Prices by 80%. Bloomberg.
https://www.bloomberg.com/news/articles/2017-09-18/saudis-said-to-weigh-raising-gasoline-prices-by-end-of-november

Saudi Arabia may raise gasoline prices by 30 pct from July, February 27, 2017. Reuters.
http://www.reuters.com/article/saudi-fuel/saudi-arabia-may-raise-gasoline-prices-by-30-pct-from-july-idUSL8N1G030D

Russia Subsidies

Russia–$14.4 billion in 2010

Generally, the federal government’s fossil fuel subsidies in Russia are complex and not transparent. Five years ago, an extensive research report “Government subsidies to oil and gas: at what costs?” was published with support of WWF and International Institute of Sustainable Development. This research summarized the possible subsidies schemes for oil and gas industries in Russia.

This research identified 30 schemes for granting subsidies to oil and gas producers in Russia at the federal level. These schemes included: direct support (state targeted financing, state loans on preferential terms, etc.), and indirect support—for example, the state’s acceptance of liability for compensation for damage as a result of accidents or the provision of public infrastructure facilities on preferential terms.

The study quantified 17 subsidy systems which amounted to a total of $8.1 billion in 2009 and to $14.4 billion in 2010. The ten largest federal subsidies for oil and gas production in Russia were as follows:

• Temporary benefits for export customs duty for oil produced on new deposits of Eastern Siberia (approximately $4 billion);
• Tax holidays for the mining tax for new deposits of Eastern Siberia (approximately
$2 billion);
• Exemption from property tax for main oil and gas pipelines (approximately $1.9 billion);
• Tax holidays for mining tax for new oil fields in the territory of Nenets Autonomous Okrug and on the Yamal Peninsula in the Yamal-Nenets Autonomous District (approximately $1.5 billion);
• Subsidized tariff for transportation of oil through the Eastern Pipeline System Siberia – Pacific Ocean (approximately $1.1 billion);
• Lowering coefficient to the rate of mining tax for oil of depleted deposits (approximately $1 billion);
• Temporary exemption from export customs duty for gas exported to Turkey through the Blue Stream pipeline (approximately $0.8 billion);
• Accounting for exploration costs and R & D for the purpose of calculating income tax (at least
$0.6 billion);
• Accelerated depreciation charges (at least $ 0.6 billion);
• State financing of geological exploration for hydrocarbon raw materials ($284 million).

For the moment, no significant actions regarding reducing governmental subsidies to fossil fuels has been implemented. The problem that goes along with significant subsidies to fossil fuels is that it affects tariffs, lowering them and making, for example, renewable energy development not profitable.

After discovering these aspects of the government paying subsidies, it appears to me that this issue raises more questions than answers.

Nigeria Subsidies

Nigeria—$160 million USD in 2017

Nigeria introduced petroleum subsidies in the 1960s with the aim of strengthening its local industry and improving product affordability and domestic consumption (Akinyemi and others, 2015). A report published by the Council on Foreign Relations estimates that the Federal Government of Nigeria spent about $20 billion on fuel subsidy in 2013 (CFR, 2016).

The subsidy was removed in May 2016 amid falling crude oil price and an economic recession. However, more than $160 million was spent on subsidy in early 2017 as the national oil company absorbed costs due to an increase in crude oil price from about $20 per barrel in 2015 to about $50 per barrel for most of 2017 (Vanguard, 2017). The short duration of the subsidy removal makes it difficult to assess its effect on carbon emissions reduction.

The collapse in crude oil price in recent times was an important factor that led the Federal Government to remove fuel subsidies. It also was felt that an enduring global shift in focus from fossil fuels to renewables (available at an affordable price) would drive down petroleum prices and naturally incentivize the government to remove subsidies. In the meantime, local production and supply of petroleum products by existing and new refineries would eliminate much of the costs subsidized by the government (CPPA, 2015).

Learn More

A research paper on fuel subsidy reform and environmental quality in Nigeria is available at: http://www.academia.edu/27122604/Fuel_Subsidy_Reform_and_Environmental_Quality_in_Nigeria

The Council on Foreign Relations report is available here: https://www.cfr.org/sites/default/files/pdf/2016/10/Discussion_Paper_Sivaram_Harris_Subsidies_OR.pdf

A news article on 2017 fuel subsidy in Nigeria is available at: https://www.vanguardngr.com/2017/06/fuel-subsidy-returns-nnpc-records-n50bn-shortage/

A discourse on Nigeria’s fuel subsidy can be found here: http://cpparesearch.org/wp-content/uploads/2015/01/Fuel-Subsidy_Study-Report_2011.pdf