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New “production gap" report shows how fossil fuels hinder climate goals

The world is on track to produce far more coal, oil and gas than would be consistent with limiting warming to 1.5°C or 2°C, creating a “production gap” that makes climate goals much harder to reach, according to the Production Gap Report – the first report to assess countries’ plans and projections for fossil fuel production.

The world is on track to produce far more coal, oil, and gas than would be consistent with limiting
warming to 1.5°C or 2°C, creating a “production gap” that makes climate goals much harder to reach,
according to the Production Gap Report – the first report to assess countries’ plans and projections
for fossil fuel production (graphic courtesy SEI, IISD, ODI, Climate Analytics, CICERO, and UNEP).

The “Production Gap Report” was produced by leading research organizations, including the Stockholm Environment Institute (SEI), International Institute for Sustainable Development (IISD), Overseas Development Institute (ODI), CICERO Centre for International Climate and Environmental Research, Climate Analytics, and UN Environment Programme (UNEP).

Countries are planning to produce fossil fuels far in excess of the levels needed to fulfil their climate pledges under the Paris Agreement, which themselves are far from adequate. This overinvestment in coal, oil, and gas supply locks in fossil fuel infrastructure that will make emissions reductions harder to achieve.

Over the past decade, the climate conversation has shifted. There’s greater recognition of the role that the unfettered expansion of fossil fuel production plays in undermining climate progress. This report shows, for the first time, just how big the disconnect is between Paris temperature goals and countries’ plans and policies for coal, oil, and gas production. It also shares solutions, suggesting ways to help close this gap through domestic policies and international cooperation. said Michael Lazarus, a lead author on the report and the Director of Stockholm Environment Institute’s US Center.

The report complements the UNEP Emissions Gap Report, which shows that country pledges fall short of the emission reductions needed to meet global temperature limits. The report’s main findings include:

  • The world is on track to produce about 50 percent more fossil fuels in 2030 than would be consistent with limiting warming to 2°C and 120 percent more than would be consistent with limiting warming to 1.5°C.
  • This production gap is largest for coal. Countries plan to produce 150 percent more coal in 2030 than would be consistent with limiting warming to 2°C, and 280 percent more than would be consistent with limiting warming to 1.5°C.
  • Oil and gas are also on track to exceed carbon budgets, with continued investment and infrastructure locking in use of these fuels, until countries are producing between 40 percent and 50 percent more oil and gas by 2040 than would be consistent with limiting warming to 2°C.
  • National projections suggest that countries are planning on 17 percent more coal, 10 percent more oil and 5 percent more gas production in 2030 than consistent with NDC implementation (which itself is not enough to limit warming to 1.5°C or 2°C).

Numerous options to close the gap

Countries have numerous options for closing the production gap, including limiting exploration and extraction, removing subsidies, and aligning future production plans with climate goals. The report details these options, as well as those available through international cooperation under the Paris Agreement.

The authors also emphasize the importance of a just transition away from fossil fuels.

There is a pressing need to ensure that those affected by social and economic change are not left behind. At the same time, transition planning can build a consensus for more ambitious climate policy. said report author and SEI Research Fellow Cleo Verkuijl.

The Production Gap Report comes as more than 60 countries have already committed to updating their nationally determined contributions (NDCs), which set out their new emission reduction plans and climate pledges under the Paris Agreement, by 2020.

Coal, oil, and gas have a long history of providing exceptionally concentrated, ready-made energy, often at low and subsidized prices that do not reflect their full societal and environmental costs. As fast as renewable and other climate-compatible energy technologies are rising, however, there is no guarantee that fossil fuels and their greenhouse gas (GHG) emissions will decline — let alone at the pace needed to avoid dangerous climate change. The Production Gap Report is about how governments can work towards aligning fossil fuel production with the globally agreed climate goals of the Paris Agreement. It puts forward a new metric called the fossil fuel production gap: the discrepancy between, on the one hand, countries’ planned levels of fossil fuel production and, on the other hand, global levels of production consistent with low-carbon pathways capable of limiting global warming to 1.5° or 2°C.

However, governments not only play central roles in the permitting of exploration and production; they also support the fossil fuel industry through direct investments, research and development funding, tax expenditures, and assumed liability and risk.

Fossil fuel subsidies span all stages of the fossil fuel production process, from research, development, and exploration, to operations, transport, processing, marketing, decommissioning, and site remediation.

Despite more than two decades of climate policy-making, fossil fuel production levels are higher than ever. This report shows that governments’ continued support for coal, oil and gas extraction is a big part of the problem. We’re in a deep hole – and we need to stop digging, said SEI’s Executive Director, Måns Nilsson.

To help close the production gap, countries would benefit from new models of addressing fossil fuel supply. Though most countries focus exclusively on the “demand side” — with policies that aim to boost renewable energy, energy efficiency, and other low-carbon technologies — some governments have also begun to enact “supply-side” measures that aim to limit fossil fuel production.

Countries can use this opportunity to integrate strategies to manage fossil fuel production into their NDCs – which in turn will help them reach emission reduction goals, said Niklas Hagelberg, UNEP’s climate change coordinator.

A range of policy options can help governments align their fossil fuel development plans and policies with climate goals, including:

  • economic instruments (such as subsidy reform);
  • regulatory approaches (such as banning new extraction permits);
  • government provision of goods and services (such as just transition plans); and
  • measures to enhance information and transparency (such as national reporting of fossil fuel production and targets).

The governments of Belize, Costa Rica, France, Denmark, and New Zealand have all enacted partial or total bans or moratoria on oil and gas exploration and extraction, while Germany and Spain are phasing out coal extraction.

US dollars

According to the Production Gap Report, local governments, companies, investors, trade unions, and civil society organizations can also accelerate a transition away from fossil fuels, by mobilizing constituencies and shifting investment to lower-carbon options. For example, individuals and institutions have already pledged to divest over US$11 trillion from fossil fuel holdings.

In the report preface, UNEP Executive Director Inger Andersen notes that carbon emissions have remained exactly at the levels projected a decade ago, under the business-as-usual scenarios used in Emissions Gap Reports.

The world’s energy supply remains dominated by coal, oil and gas, driving emission levels that are inconsistent with climate goals. To that end, this report introduces the fossil fuel production gap, a new metric that clearly shows the gap between increasing fossil fuel production and the decline needed to limit global warming, Inger Andersen writes.

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