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Phasing out public financial flows to fossil fuel production in Europe

Author

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  • Ipek Gençsü
  • Shelagh Whitley
  • Markus Trilling
  • Laurie van der Burg
  • Maeve McLynn
  • Leah Worrall

Abstract

Under the Paris Agreement, the world’s governments, including European governments and the European Union (EU), are committed to a low-carbon transition, with a goal of net zero emissions in the second half of this century, while ‘making finance flows consistent’ with that pathway. In addition, the EU has called upon Member States to phase out their support to fossil fuels by 2020. Progress towards this goal, however, has been slow. Our research finds that 11 countries (accounting for 83% of the EU’s emissions) and the EU’s budget and public banks still provide at least €21 billion per year of support for the production of coal, oil, and gas (with €2.6 billion of this amount allocated to the transition away from coal). This is via three distinct financial flows: fiscal support via budgetary transfers and tax breaks; public lending to the sector; and capital investment by fossil fuel-related state-owned enterprises. The financing captured by this figure is a minimum estimate due to lack of transparency in the data provided by governments. We argue that it is vital for European governments to fulfil their promises to phase out subsidies and other financial flows to fossil fuels to meet their climate goals. This must start with greater transparency around the support being provided and phase-out plans, including annual reporting on support for production and consumption of fossil fuels, in line with the EU’s recently strengthened Energy Union Governance framework for 2030. This entails the inclusion of national policies, timelines, and measures aimed at phasing out financial support to fossil fuels in Member States’ National Energy and Climate Plans (NECPs).Key Policy insights: Between 2014 and 2016, 11 European countries and the EU public banks and budget provided at least €21 billion per year of support for the production of coal, oil, and gas.Meeting commitments to phase out subsidies towards the production of fossil fuels is critical for meeting climate goals.EU Member States insufficiently reported on their fossil fuel subsidies in their draft NECPs.Greater transparency and reporting on all fossil fuel financing is a key first step towards phase-out.

Suggested Citation

  • Ipek Gençsü & Shelagh Whitley & Markus Trilling & Laurie van der Burg & Maeve McLynn & Leah Worrall, 2020. "Phasing out public financial flows to fossil fuel production in Europe," Climate Policy, Taylor & Francis Journals, vol. 20(8), pages 1010-1023, September.
    • Handle: RePEc:taf:tcpoxx:v:20:y:2020:i:8:p:1010-1023
    DOI: 10.1080/14693062.2020.1736978
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    Cited by:

    1. Skare, Marinko & Gavurova, Beata & Sinkovic, Dean, 2023. "Regional aspects of financial development and renewable energy: A cross-sectional study in 214 countries," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 1142-1157.
    2. Antimiani, Alessandro & Costantini, Valeria & Paglialunga, Elena, 2023. "Fossil fuels subsidy removal and the EU carbon neutrality policy," Energy Economics, Elsevier, vol. 119(C).
    3. Andrea Molocchi, 2021. "Circular Economy and Environmental Sustainability: A Policy Coherence Analysis of Current Italian Subsidies," Sustainability, MDPI, vol. 13(15), pages 1-38, July.

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