Crisis should see end of fossil fuel support
According to the International Monetary Fund, one of the most important steps countries can take to address climate change is to end subsidies and other forms of support to the fossil fuel industry. In 2017, the world subsidised fossil fuels by US$5.2 trillion, equal to roughly 6.5 per cent of global GDP.
New Zealand governments have maintained that they provide minimal ‘‘subsidies’’ to the fossil fuel industry, and indeed have played a lead role in the intergovernmental Friends of Fossil Fuel Subsidy Reform (FFFSR). But is New Zealand really doing all it could to end fossil fuel supports?
The problem lies in how officials and government ministers choose to define ‘‘subsidy’’ – which, for National and more recently coalition ministers, has been extremely narrow.
If we use broader definitions of the IMF and the Organisation for Economic Cooperation and Development, you may be surprised to learn that over the past 10 years, $237 million of taxpayer funds have been spent on special treatment for the fossil fuel industry. In 2017, New Zealand provided $87.6m in direct subsidies and other support to the oil and gas industry alone.
The Labour-led coalition claims to have effectively done away with ‘‘subsidies’’ and other forms of support. But have they?
The 2019 Productivity Commission report A LowEmissions Economy identified $4m in government support to activities with ‘‘some relationship to fossil fuel production and consumption’’. But of course, that didn’t take account of the wider range of government assistance – like rolling over for another five years the previous National Government’s tax break for owners of non-resident drilling rigs and seismic vessels, so they didn’t have to spend millions moving their rigs out of New Zealand waters every 183 days to avoid tax. Or picking up the tab for part of the costs for decommissioning exhausted offshore wells.
Apart from the largely symbolic ban on new offshore exploration permits, the Minister for Energy and Resources, Dr Megan Woods, has continued to grant extensions to existing exploration permits under a questionable interpretation of the Crown Minerals Act (CMA).
The Petroleum Exploration and Production Association of New Zealand (PEPANZ) has estimated that if the minister were to refuse further work programme extensions, all 30 existing exploration permits could be dropped by 2022 and few onshore permits would remain by 2035.
The minister has also continued to grant permits for onshore drilling, adopted a Resource Strategy that envisions an ‘‘environmentally and socially responsible’’ role for fossil fuel extraction for years to come, and is carrying out a review of the CMA that the petroleum industry insists must not include ‘‘non-economic’’ issues like climate change.
In an election year, the coalition Government appears to be attempting to maintain a politically expedient balancing act between passing the Zero Carbon Act and adopting a ‘‘non-disruptive’’ multidecade transition plan, while continuing to surreptitiously support and facilitate fossil fuel exploration and production.
If the Government is serious about urgently addressing climate change, it needs to withdraw all taxpayer support for this sunset industry and accelerate the country’s shift to a renewables-based energy and transport system.
Dr Terrence Loomis is an independent researcher and coordinator of the Fossil Fuels Aotearoa Research Network. He was Professor of Development Studies at Waikato University before becoming a senior policy advisor under successive National and Labour governments.
If the Government is serious about urgently addressing climate change, it needs to withdraw all taxpayer support for this sunset industry.