Domestic limits to fossil fuel production and expansion in the G20
Catherine Higham and Arnaud Koehl examine the regulatory measures being taken by G20 countries to limit domestic fossil fuel production and call for international coordination on this issue at COP26.
In the lead-up to the COP26 climate summit, so-called fossil fuel supply-side actions – those focused on the exploration, extraction and production of coal, oil and gas – have been increasingly in the spotlight. In May, the International Energy Agency launched a landmark report setting out a “comprehensive energy roadmap” to achieving net-zero emissions by 2050, which included “no investment in new fossil fuel supply projects” as one of its key milestones. Last month, a paper published in Nature sought to quantify the “unextractable fossil fuels” that need to be “left in the ground” to limit warming to 1.5°C, as set out in the Paris Agreement.
Significant attention was given to the future of fossil fuels, particularly coal, at the G7 summit in Cornwall in June, which resulted in announcements on the phase-out of international financing for coal power. The issue was also in the spotlight at the recent G20 meetings and the 76th UN General Assembly, at which China pledged to end support for coal power plants abroad.
But while phasing out financing for new coal infrastructure is critical, it is only one of the fossil-fuel-focused policy tools that is now receiving global attention. In this commentary, we take a closer look at another of the measures that is becoming increasingly widely discussed: national and international regulatory efforts to curb fossil fuel supply.
A growing emphasis on fossil fuel supply-side measures
Climate policy at the national level has historically focused on demand-side measures to curb greenhouse gases emissions, an emphasis that is also reflected in the wording of the Paris Agreement. While this has led to major gains in some economies, it has arguably failed to disincentivise the continuing production of fossil fuels, particularly for countries with significant fossil fuel exports.
However, some countries are getting ready to adopt a range of limitations to the production of fossil fuels. A quick survey of developments at the international level shows the remarkable growth in efforts in this area: November will see the launch of the Beyond Oil and Gas Alliance (BOGA), backed by Denmark and Costa Rica, which aims to agree on a date to phase out the domestic production of oil and gas; existing multilateral initiatives, such as the Powering Past Coal Alliance (PPCA), have gained new members and momentum in recent months; and there is growing civil society support for the non-governmental campaign for the idea of a fossil fuel non-proliferation treaty. All these developments suggest that a favourable context for supply-side climate policies may now be starting to emerge.
Moratoria, bans and limits within the G20
To better understand the existing legal landscape on this issue in the world’s largest economies, we have explored the decisions that are either enshrined in law or written into national policy documents by G20 countries to place limits on fossil fuel exploration, extraction, and production under their respective jurisdictions.
Drawing on records from the Climate Change Laws of the World database, we identified domestic laws and policies encompassing moratoria, bans and other limitations that are explicitly mentioned and directly relate to the phasing out of exploration and/or production. We compared these with proven reserves of oil, coal and natural gas for each country to illustrate the potential impact of each decision, although we acknowledge the limitations of focusing on ‘reserves’ as a way to assess and understand progress on fossil fuel supply-side action. An overview of our findings is provided in the table.
(See Authors’ notes at the end of this commentary for more on our methodology.)
|G20 country||2020 proven oil reserves (m barrels)||2020 proven coal reserves (m tonnes)||Natural gas reserves (trn cubic feet)||Moratoria||Bans||Limits||Details|
|United States||47,053||248,941||308||✓||X||✓||Moratorium on oil and gas drilling in certain offshore Arctic areas; moratorium on new oil and gas leases on all federal lands and waters (policy) revoking of Keystone XL Pipeline permit (policy)|
|Canada||167,896||6582||68||✓||X||✓||Phase-out of mining for thermal coal by 2030 (policy); Moratorium on arctic oil and gas exploration (policy)|
|China||25,620||143,197||141||X||X||X||China’s actions either focus on the demand side or are not presented under the form of a national law or policy.|
|Germany||145||35,900||4||✓||X||X||Moratorium on shale gas exploration (legislation)|
|Mexico||7,300||1,211||17||X||X||✓||Prohibition on hydrocarbon exploration and extraction in Safeguard Zones (legislation)|
|Italy||557||n/a||2||X||X||X||Italy’s parliament approved an 18-month moratorium on offshore exploration and extraction of oil and gas in February 2019, but it has expired and the government granted new licences in 2021.|
|Spain||150||1,187||n/a||X||✓||X||End of new oil and gas exploration/extraction licensing (legislation)|
|France||72||n/a||0.4||X||✓||✓||Prohibition of new oil and gas exploration/extraction licensing, also inducing an immediate ban on shale gas extraction; phase-out of oil production by 2040 (legislation).|
Limited action within the G20
Overall, we found nine occurrences of legislation or policies setting moratoria, bans or other limits to fossil fuels taken by five of the G20 countries. There is not yet blanket termination of all fossil fuel production or exploration activities. Germany, Spain and France provide the only examples of phase-outs concerning a whole type of fossil fuel, namely coal for Germany, and oil and gas for Spain and France.
Major producers have been slower to take significant curbing measures, with the exception of the United States and Canada. However, these two countries’ targeted decisions appear to have a limited impact on current production. While the American moratorium on new oil and gas leases on federal lands and waters took effect in January 2021, approvals of drilling sites have actually increased; while Canada’s government expanded the moratorium on oil and gas activities in 2019, but it only concerns the Arctic region and does not affect the bulk of current production and proven reserves.
South Korea, Japan and China have all made announcements on this issue but as yet we have been unable to find any domestic law or written policy on it. Interestingly, all G20 countries that imposed domestic limits also have a net-zero goal enshrined into law for the year 2050, or in a policy document in the case of the United States.
Moratoria and bans: a growing global trend?
Despite the limited action by the G20 demonstrated above, measures of this type may increase in the near future. Beyond the G20, a number of countries have already implemented relevant measures: Ireland (2021) and Greenland (2021) have both banned future oil exploration; Costa Rica has imposed a moratorium on oil exploitation (2011, extended in 2019 to 2050); Belize has introduced a de facto ban on offshore exploration and exploitation of oil in (2017); New Zealand has banned new offshore oil and gas exploration (2019). Several European countries have also now seen inter-party political agreements on these issues, such as one in Denmark on the future of oil and gas extraction in the North Sea (2020).
In addition to the growing popularity of measures tackling fossil fuel production, key announcements about legislation setting phase-out dates for coal power stations can also be taken as evidence of a trend that sees policymakers looking at intervening further upstream in the fossil fuel energy supply chain than in the past. The UK, for example, has now announced 2024 as the date for its phase-out of coal power, one year sooner than Israel’s 2025 phase-out and six years ahead of the Netherlands’ 2030 date. The date of a coal phase-out is also one of the key issues on the table for those negotiating to form a new government in Germany, with plans to move the legislated phase-out date forward from 2038 to 2030 recently announced.
However, the 2020 version of the Production Gap Report makes it clear that current production trends, estimated at 2% growth annually, are not aligned with the 6% annual decrease needed by 2030 to stay within the remaining carbon budget consistent with a 1.5°C pathway. Financial flows stemming from the COVID-19 crisis recovery plans and current responses to the global energy crisis do not indicate a rapid transition to low-carbon solutions either.
Elsewhere, relevant decisions have been taken by judicial branches, such as a moratorium on fracking by the Colombian State Council which suspended the previous regulatory framework for this activity (2018) or the suspension of fracking operations in South Africa (2019, not on climate grounds). In the Australian case of Sharma v. Minister of the Environment, a court held that the government had a duty of care to consider the “risk of personal injury and death” posed to young people when deciding whether to approve a coal mine extension. For the time being, the Australian Minister has decided to proceed with the extension (the case is now under appeal), but such developments could ultimately result in additional measures on the part of governments.
Making space for the just transition
While there is solid analysis that suggests there are real merits to introducing supply-side measures alongside existing demand-side strategies, it is critical that any such measures are carefully crafted so they do not result in adverse socioeconomic effects overall, such as entrenching energy poverty or removing vital sources of income for communities and regions with strong dependencies on fossil fuel extraction. It is crucial to the fairness and success of such policy approaches that there is equitable burden-sharing in the introduction of bans and limits on fossil fuel production, and that communities are provided with the financial and technological wherewithal to benefit from low-carbon alternatives to ensure both access to energy and access to jobs.
This imperative of equitable burden-sharing holds true within and across countries: high-income developed countries that have benefited most from fossil fuel use now have a responsibility to support the energy transition in less developed countries. Bolstering international solidarity and financial support will be key to mediating the fact that decarbonisation shifts rely on different capacities and national interests. In order to implement effective solutions to limit future fossil fuel development, policymakers and negotiators must draw inspiration from past efforts, whether successful or not, such as the 2007 Yasuní-ITT initiative of Ecuador’s President Correa, which ended in failure in part due to unclear economic incentives for funders.
Looking ahead – the need for coordination
While attention on supply-side measures to limit fossil fuel use is welcome, policymakers should carefully consider how such measures are introduced to avoid potential adverse impacts on vulnerable communities. Strengthening the international policy framework on supply-side measures is also critical to the coordination of national action to sustain efforts achieved by first movers, allowing for burden-sharing and advancing human rights. It is to be hoped that the upcoming talks at Glasgow will provide a much-needed opportunity to enable such coordination.
The authors would like to thank Rebecca Byrnes of the Fossil Fuel Non-Proliferation Treaty Initiative and Freddie Daley of Sussex University for their thoughtful reviews of earlier drafts of this commentary.
Authors’ notes on methodology
We have chosen a narrow focus for this commentary, considering only specific types of regulatory measures at the national level. Relevant related measures not discussed here include: shifts in the approach to subsidies and taxation that decrease the relative attractiveness of the fossil fuel sector on the supply side, such as the Mexican, Canadian and Austrian taxes on fossil fuels; sub-national legislation, such as the banning of fracking in a range of Brazilian cities and two Brazilian states or the banning of coal use in New Delhi; documents promoting a shift to low-carbon solutions that in effect put limits to fossil fuels use, such as the 2020 Korean New Deal; and demand-side measures such as putting limits on the sale of internal combustion engines into cars. We have not considered fossil fuel phase-outs that have already occurred via market forces and without the passing of a law or adoption of a written policy (non-G20 examples of such cases include Belize and Portugal), nor on de facto moratoria on fracking, such as that in the UK. We have also not looked at policies dealing with the tightening of financial support to overseas coal-fired plants, although draft legislation was introduced in South Korea in 2020.