A new report released today shows that despite the UK has given more than £3 billion in subsidies to fossil-fuel based power generation through the Capacity Market auctions, as well as billions in other subsidies. The government must now follow France and Germany in increasing transparency around fossil fuel subsidies (FFS).
The report, written by the Overseas Development Institute (ODI) and the Climate Change Action Network Europe (CAN-E) with support from Sandbag, shows that current UK fossil fuel subsidies include:

  • The Capacity Market, which has already given £4.8 billion in power generation subsidies, with more than two thirds going to fossil fuels.
  • Significant reductions to the tax rate for North Sea oil and gas production, to the extent that tax rebates now cost the public money. Overall fiscal support to oil and gas production was £665 million (€850 million) per year between 2014 and 2016. At the same time, the government is failing to invest in the essential climate solutions that will allow for jobs and industry in the North Sea in the long term; namely, Carbon Capture and Storage (CCS).
  • Subsidies to the transport sector, including tax breaks for diesel, amounted to £7.4 billion (€9.5 billion) per year on average between 2014 and 2016.
  • The UK’s public finance institutions and the Royal Bank of Scotland (RBS), which is 73% state owned, together provided financing to oil, gas and coal at home and abroad worth £1.3 billion (€1.9 billion) per year between 2014 and 2016, with RBS accounting for £937 billion (€1.2 billion) of this support.

Tilbury B Coal Power Station

Tilbury B Coal Power Station, East London, which was demolished this morning

The UK has signed up to international declarations to phase-out fossil fuel subsidies, including the 2016 commitment by the G7 to phase-out subsidies by 2025, but doesn’t currently admit to providing any subsidy to domestic fossil fuels. This is a multibillion pound accounting mistake which must be corrected.
Phil MacDonald, analyst at Sandbag commented:

“As a first step, the government must introduce legislation to remove coal from the Capacity Market, to ensure the energy system can transition cost-effectively to the 2025 coal phase-out.
To keep our emissions reductions on track with the Paris Agreement, the UK needs to remove all fossil fuel subsidies, and instead offer greater support to modern, clean technologies, such as cheaper offshore wind.”

Notes to editors: