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UK leads EU in subsidies to fossil fuels

By Jonathan Powell in London | China Daily UK | Updated: 2019-01-24 00:17
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A new report from the European Commission highlights how subsidies for coal, oil and gas across the area have remained at the same level as 2008 despite European Union pledges to tackle climate change.

Both the EU and G20 have long pledged to phase out the spending support for fossil fuels, which it says impedes the transition to clean energy needed to fight climate change.

The United Kingdom leads the EU in subsidies to fossil fuels, according to the report, which found the nation spent 12 billion euros ($13.6 billion) a year supporting fossil fuels in the UK, significantly more than the 8.3 billion euros spent on renewable energy.

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

Along with the UK, France, the Netherlands, Sweden and Ireland all gave more to fossil fuels. The report is based on 2016 Eurostat data, the latest available, and found that across the EU renewable energy received 45 percent of subsidies and fossil fuels 33 percent.

Fossil fuels such as oil, gas, and coal are non-renewable resources that account for around three quarters of the energy consumption in the EU. They are used for the generation of electricity and heat, the powering of transport, and as materials in certain industrial processes.

While the Commission is committed to a long-term vision of decarbonization, coal and gas remain key components in the fuel mix of many EU countries, and conventional thermal generation from fuels such as coal and gas accounts for more than half of the EU's electricity needs.

Increasing competition on wholesale energy markets from greater amounts of renewable energy, improved interconnections and a more integrated internal electricity market have led to lower wholesale prices in recent years, according to the biennial report.

However, the report also warns of the EU's ongoing high exposure to volatile and growing fossil fuel prices and notes that wholesale prices have started to rise again.

The total fossil fuel subsidies in the EU were 55 billion euros in 2016, the report concluded. "This is a very high number, given we are reaching the deadline for some of their promises," said Ipek Gencsu, subsidies expert at the Overseas Development Institute, also known as the ODI.

According to a Guardian report, 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.

"We do not subsidise fossil fuels," a government spokeswoman said. "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, also at ODI, was dismissive of the UK government's claim to provide no fossil fuel subsidies. "They are lying," she said. "It's absurd. They are playing games and continuing to prop up a centuries old energy system."

Whitley said the WTO 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, she said and noted 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.

Rebecca Long-Bailey, Labour's shadow business and energy secretary, told the Guardian: "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."

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