Oil refinery and petrochemical plant

G20 Members Must Commit Now to Reducing Fossil Fuel Spending

As governments put their COVID-19 recovery strategies into action, they must ensure that public funds go to support the energy transition, rather than perpetuate past reliance on fossil fuels.

By Joachim Roth, Lucile Dufour on October 11, 2021

The members of the G20 generate 80% of global greenhouse gas emissions. This means any meaningful climate action will require these countries to change course—and quickly. The fourth G20 Finance Ministers meeting on October 13 and the G20 Heads of State Summit on October 30–31 are major opportunities for members to make a public commitment in this direction that leaders need to take back home and put into practice. 

Key to this effort is ensuring that public funds no longer support a fossil fuel-based recovery. Over the past year, the Energy Policy Tracker has shed light on public financial commitments to energy-intensive sectors, revealing gaps between governments’ actual spending and a green recovery. As of this week, the Energy Policy Tracker website now shows how these commitments have evolved since last year. Let’s take a closer look at the trends revealed in G20 members since the start of the COVID-19 pandemic.

First, there is still a long road ahead for G20 members to truly “green” their recoveries at home.

Almost half (USD 311 billion) of the COVID-19 response in G20 members served fossil fuel-producing and consuming activities. Meanwhile, clean energy received only USD 278 billion (USD 134 billion went to “other” energy policies—those neither strictly in the clean or fossil categories). Furthermore, less than one in every ten US dollars committed to energy in the COVID-19 response benefited the cleanest energy measures, such as renewables or energy efficiency. More than eight in every ten dollars committed to fossil fuels came with no green strings attached, benefiting fossil fuel production and consumption without establishing any climate targets or reductions in pollution. 

Nevertheless, some progress is noticeable from 2020 to 2021.

In March–May 2020, when G20 members began approving COVID-19 response measures en masse, the share of clean commitments was just 22% on average. Fast forward to June–August 2021 and this share increased to 39%. The share of clean energy support could continue making gains as new, greener plans are approved. 

In the transport sector, most early commitments supported the airline or car industry, usually with no green strings attached. But looking at overall recovery support for transport in the G20 today, half of the total now targets clean energy transportation such as electric and low-emission vehicles. This dramatic green shift was largely driven by just three major policies: USD 25 billion for public transportation committed by the United States in March 2020, USD 27 billion for biogas plants committed by India in November 2020, and USD 35 billion committed to high-speed railways, electrification of transport, and electric charging infrastructure in Italy in April 2021. Similarly, in the power sector, the total amount committed to clean power has now overtaken the amount committed to fossil fuel-based power. 

Despite these positive developments, more efforts are needed to achieve a fossil-free recovery.

While the share of clean energy commitments increased from March 2020 to August 2021, since December 2020, this progress has largely stagnated, with only a 2% rise since 2021 began.  

G20 public money commitments to energy sectors over time

Note:  “Other energy” includes policies outside of the fossil fuel or clean energy categories or in both of them. This includes, among other policy measures, combined support for fossil fuels and clean energy, nuclear energy, first-generation biofuels, and hydrogen of unspecified origin. The Energy Policy Tracker methodology page gives an overview of which policies are included in each category.
Graph of cumulative public finance by G20 members for fossil fuels (2020-21)

Certain policies and sectors remain neglected, while others are almost entirely fossil fuel-based. For example, fossil fuel subsidy reform and fossil fuel taxation remain untapped measures despite their potential to raise significant revenue without increasing the public deficit of G20 economies. Recent IISD research shows that both of these tools can raise over USD 550 billion per year globally. In the G20 alone, fossil fuel subsidy reform could have raised USD 259 billion in 2019.  Similarly, policies aimed at improving energy efficiency in buildings are low-hanging fruit in terms of job creation and emissions reductions, but buildings received only 6% of total recovery commitments. 

In the resource sector, G20 members’ domestic measures also demonstrate important shortcomings, with commitments almost entirely based on new coal investments in India and China. These include investments to support new coal power plants, coal mining and coal to chemical projects, coal transportation infrastructure, and the rollback of environmental norms. This runs directly counter to the International Energy Agency’s Net Zero by 2050 Report, which calls for ending new coal projects and investments in new fossil fuel supply by the end of 2021. Clearly, much work remains for G20 members to align the public money commitments they are making at home with a net-zero future. 

Public money from G20 members to different sectors

Note: “Multiple sectors” refer to policies that apply across sectors, such as some policies supporting hydrogen. “Other sector” refers to policies that apply to energy-intensive activities (such as metal smelting) but that do not fit into any of the sectors listed.

A green recovery cannot be the purview of only a few governments. Stagnation is no longer an option. This week, G20 leaders have a window of opportunity to shift course to a fossil-free recovery before the G20 Leaders Summit and the United Nations Convention on Climate Change’s (UNFCCC) Twenty-Sixth Conference of the Parties (COP 26). To take advantage of this political moment, they must commit to ending all new recovery spending on fossil fuel production and to redirecting public finance away from fossil fuels and toward clean energy, and when G20 leaders return home, they need to translate these commitments into practice.