The Risky Gamble of Fossil Fuel Subsidies

As the world grapples with the urgent need to address climate change, a new analysis suggests that a handful of wealthy nations, led by the United States, are pouring billions of taxpayer dollars into unproven climate solutions that could further delay the transition away from fossil fuels. The report by Oil Change International reveals the staggering scale of public subsidies being directed towards carbon capture and storage (CCS) and fossil-based hydrogen, raising concerns about the effectiveness and true motives behind these investments.

Funding the Fossil Fuel Fallacy

Subsidizing an Unsustainable Future

The analysis reveals that over the past four decades, the European Union, the United States, Norway, Canada, and the Netherlands have collectively accounted for 95% of the public funding directed towards CCS and hydrogen technologies. The US alone has invested a staggering billion in direct subsidies, with fossil fuel giants like Exxon eagerly positioning themselves to secure even more funding in the years ahead.These subsidies, intended to address climate change, are instead propping up the very industries driving the crisis. The Intergovernmental Panel on Climate Change (IPCC) has warned that CCS and fossil-based hydrogen can play only a limited role in curtailing global warming, and yet these solutions are being increasingly pushed by wealthy nations at the annual UN climate summits.

Underperforming and Overpriced

Previous studies have consistently shown that CCS and blue hydrogen projects consistently fail to live up to their promises, often overrunning budgets and underperforming. These technologies, which rely on fossil fuels, can actually lead to a range of environmental harms, including increased greenhouse gas emissions and air pollution."The United States and other governments have little to show for these massive investments in carbon capture – none of the demonstration projects have lived up to their initial hype," said Robert Howarth, a professor of ecology and environmental biology at Cornell University. "It is instructive that industry itself invests very little in carbon capture. This whole enterprise is dependent on government handouts."

Diverting Funds from Proven Solutions

Critics argue that the billions of dollars being poured into CCS and fossil hydrogen would be better spent on proven, less risky solutions that can accelerate the transition to a sustainable future. These include plugging leaky oil wells, improving energy efficiency in buildings, electrifying transportation, and investing in renewable energy sources.Harjeet Singh, the global engagement director for the Fossil Fuel Non-Proliferation Treaty Initiative, describes the subsidies as a "colossal waste of money" and "a travesty that funds meant to combat climate change are instead bolstering the very industries driving it."

Perpetuating Fossil Fuel Dominance

The subsidies are not limited to CCS and hydrogen; governments around the world continue to provide massive support for the fossil fuel industry, with estimates ranging from 0 billion to trillion in direct subsidies annually, and up to trillion when accounting for the broader environmental and health costs.This financial support for the fossil fuel industry, coupled with the diversion of funds towards unproven climate solutions, is a concerning trend that threatens to perpetuate the dominance of fossil fuels and delay the necessary transition to a sustainable, low-carbon economy.

The Moral and Financial Responsibility Gap

While billions are being allocated to technologies that further entrench fossil fuel use, developed countries are falling short in their moral and financial responsibilities to support vulnerable communities facing the existential threats posed by climate change. The COP28 climate summit saw only 0 million pledged to the new loss and damage fund, a mere fraction of the estimated 0 billion needed annually."While investing billions in technologies that further entrench fossil fuel use, developed countries simultaneously neglect their moral and financial responsibilities to fund crucial efforts in vulnerable communities … that's the grim irony," said Harjeet Singh.

Conditional Subsidies and a Collaborative Approach

Some experts argue that subsidies for CCS and hydrogen could play a role in reducing emissions in hard-to-decarbonize industries, but they must come with strict conditions and targets that prioritize clean products over polluting processes."I don't think we should be directly subsidizing CCS ever … but we should directly subsidize clean things that are useful to people," said Chris Bataille, an IPCC expert on decarbonizing heavy industry. "Staggered subsidies for clean iron, clean ammonia, and clean clinker would channel the market – which is the whole idea of government regulation."This collaborative approach, where subsidies are tied to measurable emissions reductions and industry transformation plans, could help ensure that public funds are used to drive a just and economically sound green transition.

The Slow Pace of Fossil Fuel Subsidy Phase-Outs

The Netherlands, one of the countries identified in the analysis, has announced a fossil fuel subsidy phase-out coalition at COP28, amid growing public pressure to cut its financial support for oil and gas, currently estimated at over billion per year.However, climate advocates argue that the phase-out is progressing too slowly, and that these funds would be better utilized to support the development of truly sustainable industrial processes, rather than being funneled into CCS and fossil-based hydrogen, which they describe as "false solutions" and a "cash cow for industry."As the world races against the clock to mitigate the devastating impacts of climate change, the continued subsidization of fossil fuels and unproven climate technologies represents a critical failure of governments to prioritize the urgent needs of the planet and its people. A fundamental shift in funding priorities, coupled with a collaborative, targeted approach to supporting sustainable solutions, is essential to accelerate the transition to a low-carbon future.