Fossil Fuel Subsidies in the G7 and EU

An InfluenceMap Report

November 2016

The G7 nations, as well as the EU, have made a commitment to phase out fossil fuel subsidies by 2025 as part of their implementation of the Paris Agreement, with the G20 committing to a phase out timeline unspecified. The IPCC, the UN Global Compact and the UN's Sustainable Development Goals all urge nations to undertake subsidy policy reform as a fundamental means of achieving ambitious climate goals. We analyse the G7 nations' words and actions, including a detailed analysis and scoring of what they have communicated to the UNFCCC process on this topic to date, and how this compares with actual policies and practices by the countries.

A year on from Paris, France comes top in the analysis of the G7 countries but there is significant misalignment among other members. Japan’s continued provision of $19bn a year program to fund fossil fuel production, including coal, in Asia is a major barrier to the G7 achieving their UNFCCC pledge to phase out subsidies by 2025.

This study uses definitions and research on fossil fuel subsidies developed by the international community International combined with InfluenceMap's recognized, policy scoring methodology to assess stated policy and practice within the G7 nations on fossil fuel subsidy reform amid the Marrakesh COP22 follow up to Paris.

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Seven years since the G20 first pledged to end fossil fuel subsidies and six months after the G7 agreed to take another seven years to actually do it, the world is still waiting for an actual plan to stop funding fossil fuels. Meanwhile, the world agreed in Paris to limit global warming to well below 2C, and recent analysis proves that there is enough potential carbon in currently operating wells and mines to ensure the failure of the Paris Agreement. The choice for leaders is clear: stop funding fossil fuels or stop pretending you are serious about fighting climate change.

Stephen Kretzmann, Executive Director, Oil Change International

This report builds on objective, fact-based analysis done over the last few years by the ODI, Oil Change and others and the results say two things. First is the fact that despite statements otherwise and pledges to reform, huge amounts of money are spent by the richest nations on supporting fossil fuels in the market place. Second is the huge gap in practices within the G7 nations, between Japan, with its support for coal, oil and gas in Asia, and Italy, with its support of its domestic fossil fuel industry.

Dylan Tanner, Executive Director, InfluenceMap

Some climate change scenarios present existential risks to the insurance sector, and the global economy beyond. Continued fiscal support for fossil fuels via subsidies represents a misallocation of taxpayer funds, as well as a major barrier to the transition to zero carbon economy. Japan's support for coal is of particular concern, but by no means unique.

Steve Waygood, Chief Responsible Investment Office, Aviva Investors