A climate finance hypocrisy

There’s enough money to support low- and middle-income countries’ climate needs. But rich countries are instead spending it on things that harm the climate.

New analysis by The ONE Campaign shows that:

• Rich countries spent six times more to subsidise fossil fuels at home over 12 years than they committed in international climate finance to support climate-vulnerable countries.
• Rich countries spent US$2.7 trillion on fossil fuel subsidies between 2010 and 2022 and committed to provide US$437 billion in climate finance over that period.
• The money spent by advanced economies on fossil fuel subsidies each year would cover nearly half of the gap in international public finance to meet the climate and development finance needs of developing economies (excluding China).

Fossil fuel subsidies help support an already highly profitable oil and gas industry. That disproportionately harms the very countries climate finance is intended to help — which harms everyone on a climate-vulnerable planet.

Leaders are gathering at this year’s COP to agree to a new international climate finance goal. They should commit to invest what’s needed to meet the climate needs of climate-vulnerable countries now. Otherwise, we will all pay far greater consequences in the future.

Rich countries spent six times more on fossil fuel subsidies than climate finance

In 2009, both the G8 and G20 pledged to cut fossil fuel subsidies. It’s a commitment they and other countries have reiterated at least five times, including in the Sustainable Development Goals (target 12c) and at COP26, COP27, and COP28. 

Many rich countries also agreed in 2009 to provide US$100 billion per year in climate finance to developing countries by 2020. Whilst they claimed to have reached that target – albeit it two years late – that money pales in comparison to the huge sums they’ve since spent on fossil fuel subsidies at home. 

Rich countries spent US$2.7 trillion on fossil fuel subsidies between 2010 and 2022 (a yearly average of US$208 billion). 

They committed to provide US$437 billion in international climate finance (US$34 billion per year) over that same period.

Spending multiples more on domestic fossil fuel subsidies than on international climate finance is a pattern. Amongst G7 countries between 2010 and 2022:

• Italy spent 36 times more on fossil fuel subsidies than climate finance. 
• The UK spent nine times more. 
• The US and Canada spent 5 and 4 times more. 
• France and Germany spent 1.8 and 1.7 times more. 
• Only Japan provided more climate finance than fossil fuel subsidies, though it has been criticised for counting unrelated spending as climate finance.

Other notable countries did even worse for the years in which they reported climate finance data. 

• This year’s COP29 host, Azerbaijan, is the world’s worst performer, having spent over 1,800 times more on fossil fuel subsidies than climate finance between 2014 and 2022. Because it is an upper-middle income country and not a “rich” country, it is excluded from our analysis, but is a noteworthy case given its COP29 status.
• Last year’s COP28 host, the United Arab Emirates, spent over 150 times more between 2010 and 2022. 
• Saudi Arabia spent 1,200 times more between 2015 and 2022.

The gaps between spending on fossil fuel subsidies and international climate finance are likely even greater. That’s because climate finance commitments don’t typically equate to disbursements. Our previous analysis found that nearly two-thirds of international climate finance commitments weren’t recorded as disbursed or had little to do with climate. 

The money spent on fossil fuel subsidies would help cover the needs of vulnerable countries

Bloated spending on domestic fossil fuel subsidies sharply contrasts with the unmet climate needs of low- and middle-income countries, which are massive: US$1.8 trillion per year by 2030. 

Climate-vulnerable countries cannot finance the needs on their own: 35 countries are in or at risk of debt distress. 40% of the world’s population lives in countries that spend more on debt service than health or education. That’s true for 34 African countries.

That means an estimated US$400 billion of the US$1.8 trillion will need to come from bilateral and multilateral donors. But many rich countries are slashing their official development assistance budgets or diverting money to pay for domestic costs, such as housing refugees. Excluding domestic costs, funding to Ukraine, and remaining COVID-19 funding, development assistance fell by 3.6% between 2019 and 2022. 

As aid budgets fall, rich countries are providing massive sums of money to support fossil fuel production and consumption. That reveals a basic truth: the money exists to help vulnerable countries address the climate crisis, and overcome the debt crisis and extreme poverty. What’s missing is political will and the recognition that helping vulnerable countries address climate change and extreme poverty is in everyone’s self-interest. 

Political will and global action aren’t always absent. Wealthy governments are often quick to react during crises that pose an immediate threat to their interests. For instance, advanced economies mobilised nearly US$16 trillion in stimulus measures in the first year and a half of the COVID-19 pandemic.

But rich countries have been slow to react to other crises, like climate change and persistent extreme poverty, that threaten both vulnerable countries and, ultimately, themselves. 

Fossil fuel subsidies disincentivise climate action

Rich countries’ fossil fuel subsidies are propping up the very activities and industries responsible for the climate crisis. That has helped the world’s leading oil and gas companies achieve staggering profits, and led many of them to backtrack on their climate pledges. 

Between 2010 and 2022, the world’s seven largest public oil and gas companies (BP, Chevron, ConocoPhillips, Eni, Exxon Mobil, Shell, TotalEnergies) made US$1 trillion in combined profits. In the wake of Russia’s invasion of Ukraine in 2022, those companies’ profits were three times their 10-year average. That year, rich countries doled out nearly half a trillion dollars in fossil fuel subsidies, more than double the 10-year average. 

These subsidies have helped make fossil fuels so profitable that many oil and gas companies are backtracking on their climate pledges. Instead, they’re placing big bets on future production. Five major oil and gas companies are forecast to spend US$3.1 trillion on oil and gas extraction by 2050, far more than they spent over the past 25 years. 

Subsidies are locking in a fossil-fuel dependent future, slowing the energy transition and jeopardising long-term energy security. If rich countries don’t adequately invest in helping low- and middle-income countries address the climate crisis and extreme poverty right now, the costs for everyone will be far greater later. 

An urgent call to action

Rich countries need to fulfil their promises to cut fossil fuel subsidies and support vulnerable countries in meeting their climate and development needs. Doing so will make all countries more secure and prosperous. 

They should: 

• Follow through on their pledge to cut fossil fuel subsidies and use that money to support climate and development efforts in low- and middle-income countries. 
• Support an ambitious post-2025 climate finance goal that reflects countries’ needs, and ensure that climate finance is additional to development finance.
• Increase their contributions in support of a robust International Development Association replenishment. 
• Prioritise aid budgets to help with climate adaptation and economic growth.

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Read about our methodology and data sources in this notebook and access the data and code powering the analysis in this GitHub repository.