Producer Fossil Fuel Subsidies

Indonesia’s Ministry of Energy and Mineral Resources Ignasius Jonan recently announced that there would be no new coal plants in Java. The announcement heralds, at last, a step away from the coal-dominated future that had been proposed. Why has this decision been taken? And how should Indonesia seek to power its economy with coal now taken off the menu?

Two events this September set a new bar for climate change leadership. First, over 340 non-governmental organisations from 67 countries signed the Lofoten Declaration. This document calls for an end to exploration and expansion of new oil, gas and coal reserves, a managed decline of the oil, coal, and gas industry, and a just transition to a safer climate future.

Donald Trump won the US presidency railing against “job-killing regulation” and promising to put coal miners back to work. Delivering against this promise is proving difficult: US high-cost coal is crowded out not just by increasingly low-cost renewables, but also by shale gas and lower-cost coal from other countries.

Phase-out and reallocation of fossil fuel subsidies (FFS) is a low-hanging fruit for financing and implementing SDGs. First, it has a diverse support base of both sustainable development advocates and “government downsizers.” Second, instead of requiring financing like many sustainable development policies, it could free up hundreds of billions of dollars for implementing multiple SDGs.

In 2015 electricity demand rose by just 0.5 percent over 2014 levels, while coal consumption dropped by 5 percent. The slowdown in coal-use together with a continuing rise in generation from renewable sources plunged the domestic coal production industry into a crisis and led to a dramatic fall in coal imports.

The United Kingdom may soon be entering a new phase of development of nuclear power generation. A review of planned subsidies by the Global Subsidies Initiative to the proposed Hinkley Point C nuclear project finds billions of pounds in committed subsidies and the government on the hook for billions more if the project fails to deliver.

This report presents the first detailed estimate of subsidies to coal production in China, identifying an estimated USD 5.8 billion in in government support in 2013.