Climate Change Disinvestment Finance

Banks must put their money where their mouth is – NOT into fossil fuels – 2020 Report – Production Gap

To follow a 1.5°C-consistent pathway, the world will need to decrease fossil fuel production by roughly 6% per year between 2020 and 2030. Countries are instead planning and projecting an average annual increase of 2%, which by 2030 would result in more than double the production consistent with the 1.5°C limit.

Between 2020 and 2030, global coal, oil, and gas production would have to decline annually by 11%, 4%, and 3%, respectively, to be consistent with a 1.5°C pathway. But government plans and projections indicate an average 2% annual increase for each fuel.

This translates to a production gap similar to that estimated in the 2019 report, with countries aiming to produce 120% and 50% more fossil fuels by 2030 than would be consistent with limiting global warming to 1.5°C or 2°C, respectively.

The COVID-19 pandemic — and the “lockdown” measures to halt its spread — have led to short-term drops in coal, oil, and gas production in 2020. But pre-COVID plans and post-COVID stimulus measures point to a continuation of the growing global fossil fuel production gap, locking in severe climate disruption.

Preliminary estimates suggest that global fossil fuel production could decline by 7% in 2020, primarily as a result of the COVID-19 pandemic and lockdown measures. Specifically, coal, oil, and gas supply could decrease by 8%, 7%, and 3%, respectively, in 2020 relative to 2019,

But countries are still planning to produce far more fossil fuels by 2030 than consistent with limiting warming to 1.5°C or 2°C. Government production plans and projections — updated largely prior to the COVID-19 outbreak — point to a continuation of the very wide production gap.

However, the future of the production gap is subject to large uncertainties, as the COVID-19 pandemic and its ramifications on fossil fuel supply and demand continue to unfold. The 2021 Production Gap Report will include a more comprehensive re-analysis of the gap, including updated country profiles that were a centrepiece of the 2019 report.

To date, governments have committed far more COVID-19 funds to fossil fuels than to clean energy. Policymakers must reverse this trend to meet climate goals.

As of November 2020, G20 governments had committed USD 233 billion to activities that support fossil fuel production and consumption, as compared with USD 146 billion to renewable energy, energy efficiency, and low-carbon alternatives such as cycling and pedestrian systems.

In general, government responses to the COVID-19 crisis have tended to intensify patterns that existed prior to the pandemic: jurisdictions that already heavily subsidized the production of fossil fuels have increased this support, while those with stronger commitments to a transition to clean energy are now using stimulus and recovery packages to accelerate this shift. Unfortunately, most of the world’s major producing countries are in the former category; this needs to change, if the world is to meet climate goals.

The COVID-19 pandemic has provided a reminder of the importance of ensuring that a transition away from fossil fuels is just and equitable. Countries that are less dependent on fossil fuel production and have higher financial and institutional capacity can transition most rapidly, while those with higher dependence and lower capacity will require greater international support.

Developing countries have borne the brunt of the fossil fuel industry’s fragility during the pandemic, with lost oil revenue, for example, driving a 25% cut in government spending in Nigeria, significantly reducing Iraq’s social benefits, and severely affecting Ecuador’s public sector.

But a just and equitable transition away from fossil fuels offers the potential for alternative high-quality jobs, improvements in public health, a re-envisioning of urban areas, and a refocusing of economic systems on human well-being and equitably shared prosperity. This requires recognizing that countries’ transitional challenges differ widely, depending on their level of dependence on fossil fuel production and their capacity to support a transition.

Policymakers can support a managed, just, and equitable wind-down of fossil fuel production through six areas of action:

Ensure COVID-19 recovery packages and economic stimulus funds support a sustainable recovery and avoid further carbon lock-in.

Provide local and international support to fossil-fuel-dependent communities and economies for diversification and just, equitable transitions.

Reduce existing government support for fossil fuels.

Introduce restrictions on fossil fuel production activities and infrastructure.

Enhance transparency of current and future fossil fuel production levels.

Mobilize and support a coordinated global response.

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