Despite Climate Pledges, G20 Countries Boost Subsidy for Coal-Fired Power Plants

Ten years ago, G20 countries had pledged to phase out subsidies for fossil fuels to reduce global greenhouse gas emissions by 10% by 2050. That pledge will almost surely be broken next year.

New Delhi: G20 countries increased their subsidy to coal-fired power plants by almost three times between 2013 and 2017. In this period, the world’s leading economies have increased the subsidy for greenhouse gas emitting coal power plants from $17.2 billion to $47.3 billion, a new report has found.

Ten years ago, G20 countries had pledged to phase out subsidies for fossil fuels, commenting that eliminating such subsidies by 2020 would reduce global greenhouse gas emissions by 10% by 2050. But, no timeline had officially been adopted.

That pledge will almost surely be broken next year.   

For G20 countries, “which account for 79% of global emissions, it is imperative that their governments transition away from all fossil fuels, including coal,” the report authored by Overseas Development Institute, a London-based think tank, and others, noted.

The Intergovernmental Panel on Climate Change (IPCC) – which in 2018 warned of dire consequences if warming is not kept below 1.5 degree Celsius –also said that coal-fired electricity must be phased out by 2050 to stay within the 1.5 degree limit.

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But, coal-fired power plants continue to account for about a third of total carbon dioxide (CO2) emissions, according to data of the International Energy Agency (IEA). Emissions from coal-fired power plants have in fact doubled between 1990 and 2018 and reached a high of 10 gigatons of CO2 in 2018.

While there have been efforts, particularly in the European Union (EU) and the US, to move away from coal in electricity generations, it still accounts for about a fourth in the global energy mix.

China and India are providing the highest amounts of subsidies for coal-fired power, together accounting for a little over 60% of the total subsidies provided by the G20 countries in 2017. Stat-owned enterprises in India invested a little over $6 billion, while state-owned banks lent $11 billion per year for coal-fired power projects in the period studied in the report.

The report has characterised fiscal support in the form of budget transfers and tax expenditures; public finance that take the shape of cheaper credit, insurance and guarantee; and investment by state-owned enterprises as subsidy.

China, the US and India are the top three emitters of CO2 in the world, with China accounting for a massive 30% of global emissions. However, it is India whose emission are expected to grow at the fastest rate in the years to come particularly with the country’s attempt to provide grid electricity to every household.

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The report also pointed to the efforts made by certain nations and regions to move away from coal and coal fired power. “Our analysis finds that the governments of Canada, the UK and France have dramatically scaled back their support for coal over the last decade, both domestically and internationally,” it said.

However, the report expresses concern over the rapid rise in government support for production of coal-fired power, particularly in China and India.

The report comes just days before the G20 countries are scheduled to meet in Osaka for their annual summit. In this edition, climate change is one of the key themes.

Investors managing $34 trillion in assets have also escalated the pressure with a letter to ‘the governments of the world’ demanding urgent climate action, reported Reuters. They have urged governments to take ‘urgent action’ in order to achieve the Paris agreement targets.

Under the Paris agreement, 195 nations agreed to limit global average temperature rise ‘well below’ 2 degree Celsius above pre-industrial levels and strive to limit the rise to 1.5 degree Celsius above pre-industrial levels.

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However, the IPCC report last year warned that the impacts would differ greatly between a 1.5 degree and a 2 degree warmer world. For instance, the report said, ten million more people would face the risk of permanent inundation. Coral reefs would decline by between 70 and 90% in a 1.5 degree warmer world, while almost all coral reefs would be lost if global temperatures were to rise by 2 degrees.

To stay below the 1.5 degree mark, global emissions need to be cut by 45% from 2010 levels as early as 2030, and by 100% by 2050. The IPCC report also stated that the use of coal as a source of electricity will have to drop to between 1 and 7% by 2050.

The Overseas Development Institute report has recommended that subsidies for coal powered power be removed and taxes on coal be increased in order to achieve the emission targets.