Despite climate pledges, G20 coal subsidies are on the rise

Despite promising a decade ago to phase out fossil fuel subsidies, the world's leading economies more than doubled subsidies to coal-fired power plants over three years, putting climate goals at risk, energy researchers said Tuesday.

Between 2014 and 2017, G20 governments more than halved direct support for coal mining, from $22 billion to about $10 billion on average each year, according to a report by the London-based Overseas Development Institute (ODI), a think tank.

But over 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, the report noted.

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, it said.

While spending from national budgets on coal fell, as did tax breaks for it, other forms of support - from development finance institutions, export-credit agencies and state-owned enterprises - soared, the report said.

"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.

To meet an internationally agreed goal of holding rising global temperatures to well below 2 degrees Celsius above pre-industrial times, coal power will need to be phased out between 2030 and 2050, according to the Powering Past Coal Alliance.

That alliance, formed in 2017 and led by the British and Canadian governments, includes 30 countries as well as businesses and other organisations committed to switching to clean energy as rapidly as possible to meet climate goals.

Coal currently provides about 40 percent of the world's electricity, according to the alliance.

Because new coal-fired power plants have a life of about 40 years, over which their costs must be paid back to investors, building new coal plants could lock countries into using them beyond the needed phase-out of coal, energy experts say.

"They're heading toward a car crash," Gencsu predicted, with taxpayers in countries that accept new coal plants likely to foot the bill for bailing out investors if the plants are shut early to meet climate goals.

Transition Funds

About $3 billion a year in support by G20 governments for coal aims to ease the pain at home of the transition away from the fuel, through measures such as helping workers retrain or rehabilitating closed coal mine sites, according to the ODI report.

But governments are also helping support coal companies that are no longer financially viable, often to ensure a stable baseline of power to complement fluctuating renewable energies such as wind and solar, Gencsu said.

Coal subsidies also continue in many places because of powerful coal lobbies - or because politicians prefer to delay decisions that could have political consequences, she said.

Ilan Kelman, a researcher on sustainability and energy issues at University College London, said that "the people who receive the subsidies may have a lot of influence on the politicians who give them the subsidies".

Also, quickly slashing subsidies without easing the burden on people's budgets can lead to political unrest, as France found out last year when it raised fuel taxes, spurring the "yellow vest" protest movement, Kelman said.

Globally, direct fossil fuel subsidies were $427 billion last year, according to the International Energy Agency.

Indirect fossil fuel subsidies - including things like costs to health systems from air pollution and fossil fuel spill cleanups - were estimated at $5.2 trillion a year in 2017, according to an International Monetary Fund working report.

Gencsu said that to hold the line on climate change, governments, development banks and other bodies supporting coal "need to be much braver and come to grips with the reality of the climate emergency - and make policy decisions very soon."