Updated Jan 29, 2019

UK has biggest fossil fuel subsidies in the EU, finds commission

Subsidies for coal, oil and gas are not falling despite EU pledges to tackle climate change.

The UK leads the EU in giving subsidies to fossil fuels according to a report from the European Commission. It found there was €12 billion a year in support for fossil fuels in the UK, significantly more than the €8.3 billion spent on renewable energy.

The report warned that the total subsidies for coal, oil and gas across the EU remained at the same level as 2008. This is despite both the EU and G20 having long pledged to phase out the subsidies, which hamper the rapid transition to clean energy needed to fight climate change.

Germany provided the biggest energy subsidies, with €27 billion for renewable energy, almost three times the €9.5 billion given to fossil fuels. Spain and Italy also gave more subsidies to renewable energy than fossil fuels.

As well as Germany, France, the Netherlands, Sweden and Ireland all gave more to fossil fuels. The report is based on 2015 Eurostat data, the latest available, and found that across the EU renewable energy received 45% of subsidies and fossil fuels 33%.

The report said policies were being pursued to cut carbon emissions and meet the Paris climate agreement goals of limiting global warming to well below 2C about pre-industrial levels. Despite this and international commitments, the report stated that fossil fuels subsidies in the EU have not decreased.

The total fossil fuels subsidies in the EU were €55 billion in 2016. Experts have stated this is a very high number, given the approaching deadlines for some phase out promises.

A significant part of the UK fossil fuel subsidies identified by the commission is the 5% rate of VAT on domestic gas and electricity, cut from the standard 20%. The UK Government did not dispute the data but denied that it provided any subsidies for fossil fuels under its own definition and that of the International Energy Agency.

A Government spokeswoman commented that the UK do not subsidise fossil fuels: "We're firmly committed to tackling climate change by using renewables, storage, interconnectors, new nuclear and more to deliver a secure and dynamic energy market at the least possible cost for consumers".

Shelagh Whitley from Overseas Development Institute (ODI) was dismissive of the Government's claim to provide no fossil fuel subsidies. Stating the Government were lying, she said: "It's absurd. They are playing games and continuing to prop up a centuries old energy system".

She said the definition of subsidies, accepted by the UK and 163 other nations includes "government revenue that is otherwise due, foregone or not collected" such as reduced tax rates. Other countries, such as Germany and Italy, call such tax breaks subsidies, and the UK also gave tax breaks for oil and gas operators in the North Sea. Whitley said that rather than arguing about definitions, the UK should use its tax system to accelerate the transition to clean energy.

In September, Chancellor Philip Hammond said the Government had "forgone" billions of pounds by choosing not to implement a scheduled rise in duty on petrol and diesel. "The fuel duty freezes since 2011 have meant that the exchequer has foregone around £46bn in revenues through to 2018-19".

Labour Shadow Business and Energy Secretary, Rebecca Long-Bailey said: "the balance of the UK's energy subsidies are all wrong. Denmark and Germany won big by investing early-on in what is now a hugely profitable offshore wind industry. The UK must not miss out on the opportunity to lead the world on the next generation of renewables, and support should be geared towards these technologies of the future".

Friends of the Earth CEO, Craig Bennett added: "Spiralling climate change is going to cost people and our economy huge sums of money, through the damage, disruption and instability it causes. So it's astonishing that the UK government is still throwing taxpayers' money at some of the world's largest oil and gas companies. Ministers must switch funding to rapidly boost energy efficiency and renewables"