Government ‘Ramps Up’ Fossil Fuel Subsidies to Nearly £6 billion

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The government has been found to be offering some of the largest subsidies to the fossil fuel industry out of all the G20 nations, according to a new report. 

The study estimated that the UK has provided £5.9bn a year of support during 2013 and 2014 to prop up the fossil fuel industry. The majority of this financial support is provided as tax relief for oil and gas companies operating in the North Sea. 

But the UK also provides support in the form of public finance for fossil fuel production overseas which averaged $4.6 billion per year through assistance from the: 73% government-owned Royal Bank of Scotland (RBS), UK Export Finance, the Department for International Development, and the CDC Group development finance institution.

The UK also contributed an annual average of $817 million to fossil fuel production through its shares in multilateral development banks.

The report, authored by the Overseas Development Institute and Oil Change International, states that this support is “likely to increase”. This is despite Amber Rudd announcing in July that the government will be “throwing its weight” behind the Friends of Fossil Fuel Subsidy Reform Communiqué to be launched at the climate change talks in Paris.

Hand Outs

The report explains that the reason for the UK’s “ramped up” support for the Fossil Fuel industry is a direct result of implementing the recommendations approved in the ‘Wood Review’.

This goal of the consultation was to offer recommendations to the government on how to encourage exploration for oil and gas in the UK, and reduce the costs to operators of decommissioning oil and gas rigs.

In April this year, the reviews suggestions were implemented in full and now, Amber Rudd, the Secretary of State for Energy and Climate Change, is legally obliged to ‘maximize the economic recovery’ of UK oil and gas.

This included the creation of a new regulator, the Oil and Gas authority (OGA), which is tasked with supporting the extraction of three to four billion barrels of oil and gas from the North Sea in the next 20 years, along with the introduction of further tax breaks and new support measures for oil and gas development.

Meanwhile, Ms. Rudd’s department has also been heavily criticized for cuts to solar, which has seen several firms go bust.

Shelagh Whitley, from the Overseas Development Institute, said: “The UK has been cutting back support for solar power and energy efficiency, arguing that the burden was too high.”

Our figures reveal that in spite of supposed budget constraints the government is giving ever increasing hand-outs to oil and gas majors, most of which are not British companies. Scrapping fossil fuel subsidies would rebalance energy markets and allow a level playing field for clean and efficient alternatives.”

Elimination Pledge

Overall the report, published just ahead of a G20 Leaders’ Summit in Turkey, found that the total value of support provided by G20 nations added up to $452bn a year, despite pledging to eliminate such subsidies in 2009.

These breaks included: national subsidies, (direct and indirect), investment by state-owned enterprises and public finance including support from domestic, bilateral and multilateral international agencies, 

On the other hand global renewable energy subsidies were estimated to be less than half this amount ($121 billion), according to estimates made in 2013 by the International Energy Agency.

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Ben Lucas is currently pursuing an Investigative Journalism Master’s degree at the City University of London. He has a particular interest in UK and international politics, economics and environmental issues.

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