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Govts’ 2030 fossil fuel production plans out of sync with Paris limits: Production Gap Report

Despite a plethora of climate pledges, the report finds that the current production gap has remained largely unchanged compared to prior assessments

The world is on track to produce 110% over the amount of fossil fuels that is consistent with maintaining 1.5°C of temperature warming, and 45% more than what is consistent with 2°C, according to The Production Gap Report. Released just days before COP26, it revealed that despite increased climate ambitions and net-zero commitments, the current production gap remains largely unchanged compared to the first report that came out in 2019. 

The report was prepared by leading research institutes and the UN Environment Programme (UNEP) and it provided data on 15 major producer countries, including India. It conveyed the large discrepancy between countries’ planned fossil fuel production and the global production levels necessary to limit warming to 1.5°C and 2°C. 

Is the world moving towards limiting temperature to 1.5°C?

According to the report, the governments’ production plans and projections would lead to about 240% more coal, 56% more oil, and 71% more gas in 2030 with gas production projected to increase the most between 2020 and 2040. The production gaps for all fuels grow much wider by 2040 under both temperature limits, it stated.

The estimations projected in the report could even be worse. The current analysis depended on model assumptions and conceptions of how the low-carbon transition upholds such as how much carbon dioxide can be captured and stored or sequestered, the report stated. There would be a wider production gap than estimated in the report if carbon dioxide removal technologies fail to develop at a large scale, or if methane emissions are not reduced, it added. 

Since the release of the 2019 production gap report, many countries have announced ambitious greenhouse gas (GHG) emission reduction targets, including net-zero pledges. Despite the positive development, only a few countries have begun to take action on these goals, the report stated.

Moreover, the governments are planning and projecting production levels higher than those implied by their emission reduction goals, as announced in their Nationally Determined Contributions (NDCs) under the UN climate process and other climate policies as of mid-2020, it noted.

Did COVID funding go to clean energy or fossil fuels?

Since the beginning of the pandemic, G20 countries have invested $300 billion in new funds towards fossil fuel consuming and producing activities, the report revealed. It stated that although governments have begun shifting their COVID-19 recovery spending to clean energy, they still spend more on support for fossil fuels.

In recent years, G20 countries have notably reduced new international finance for fossil fuel production, it stated. The report also noted that multilateral development banks (MDBs) and G20 development finance institutions (DFIs) holding over $2 trillion in assets have adopted policies that exclude fossil fuel production activities from future finance.

“Early efforts from development finance institutions to cut international support for fossil fuel production are encouraging, but these changes need to be followed by concrete and ambitious fossil fuel exclusion policies to limit global warming to 1.5°C,” said Lucile Dufour, senior policy advisor, International Institute for Sustainable Development (IISD). 

India’s story: No policies towards a managed wind-down of fossil fuel production

According to the report, no policies or discourse were identified at the federal level, which showed that India is moving towards a gradual decrease in fossil fuel production. Additionally, the country has no policies at the federal level for a just and equitable transition away from fossil fuel production.

Under the Atma Nirbhar Bharat (self-reliant India) campaign announced by PM Modi in May 2020, the governments sought to “unleash the power of coal” and become self-reliant by 2023–24. Last year, several ministries jointly presented a vision to expand coal production by nearly 60% from 2019 to 2024 (from 730 to 1,149 tonnes), including through the removal of barriers to land acquisition and building capacity for exploration.

The country also aims to increase total oil and gas production by over 40% in the same period through measures such as accelerated exploration licensing, faster monetisation of discoveries, and gas marketing reforms.

Government support for fossil fuel production

1. India provided tax breaks and budget expenditures for fossil fuel production worth Rs11.8 billion ($168 million) in 2019, according to the OECD (OECD, 2021b). Another report, considering a wider range of government support measures, estimates that subsidies for coal production totaled Rs17.5 billion ($249 million) and those for oil and gas production totaled Rs29.3 billion ($417 million) in 2020 (Garg et al., 2021). Fiscal support for coal production is small in comparison with the fiscal revenue collected from coal. 
2. In response to the COVID-19 crisis, the government provided a 50% rebate on revenue payable to the government for coal extraction projects (Bhaskar, 2021).  
3. As part of structural reforms announced in 2020 amid the Self-Reliant India campaign, the government committed Rs500 billion ($7.1 billion) for coal extraction infrastructure (Press Information Bureau of the Government of India, 2020a).  
4. In 2020, India opened up its coal mining sector to private and foreign investment, offering financial incentives and organising large auctions of coal mining blocks. A 2020 auction included mines that would add an estimated 225 million tonnes at peak production, representing around 15% of India’s projected coal output for 2025 (Press Information Bureau of the Government of India, 2020d, p. 41). It was opposed by the states of Jharkhand, Chhattisgarh, and Maharashtra, with concerns about potential social and environmental impacts (Indian Ministry of Coal, n.d.; Jamwal, 2020). A second auction took place in 2021.  
5. Over the past decade, the Ministry of Environment, Forest, and Climate Change has narrowed the public consultation process for coal mine projects (Ministry of Environment, Forest and Climate Change, 2019; Aggarwal, 2021).

The way ahead

The 15 country profiles assessed by the report showed that the governments continue to provide “significant policy support” for fossil fuel production through different measures like tax breaks, finance, direct infrastructure investments, and exemptions from environmental requirements.

“…It is urgent that all remaining public financiers as well as private finance, including commercial banks and asset managers, switch their funding from coal to renewables to promote full decarbonisation of the power sector and access to renewable energy for all,” said António Guterres, UN secretary general.

To address the production gap, the report recommended verifiable and comparable information on fossil fuel production and support from both government and companies. It stated that the government should be more transparent in disclosing their production plans in their climate commitments.

Although the governments have already committed to reporting emission goals as a part of the Paris Agreement, the report suggested that they should also include production plans and projections and how these plans align with their climate goals in their NDCs.

It also stated that countries with greater capacity should lead the way in helping countries highly dependent on fossil fuel production and having limited financial and institutional capacity to achieve a just, equitable, and effective transition.

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