A new report has found that the world’s biggest economies are paying $633 billion in production subsidies every year to oil, gas and coal companies.

The report by US environmental think tank, Oil Change International and UK humanitarian think tank, the Overseas Development Institute, found Australia is paying $7 billion on average annually in production subsidies to fossil fuel producers.

The report said the amount spent by G20 governments on fossil fuel subsidies was more than three times the amount spent by the world on subsidies to the renewable energy industry.

“The evidence points to a publicly financed bailout for some of the world’s largest, most carbon-intensive and polluting companies,” the report said.

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Among G20 countries, Russia topped the list with $32 billion in production subsidies every year, the US paid out more than $28 billion annually, the UK paid $12 billion, Brazil’s annual subsidies were an average of $7 billion and China gave just over $4.2 billion to oil, gas and coal firms.

Japan had the largest level of public finance for fossil fuel companies with US$26 billion in funding annually.

China was second with $23 billion. Chinese state owned enterprises invested $107 billion a year on average in fossil fuel production.

‘Fossil fuel producers paid to undermine climate commitments’

Steve Kretzmann, executive director of Oil Change International, said the payments called into question the commitment of governments to tackle global warming at the United Nations Climate Change conference in Paris later this month.

“Despite the fact that six years ago G20 nations pledged to end fossil fuel subsidies they are still collectively providing in the G20 more than $US450 billion dollars for fossil fuel production, for the production of coal, oil and gas, each year,” Mr Kretzmann said.

The report said the $7 billion spent by Australia was mainly on tax breaks for fuel and capital investment costs.

But the Minerals Council of Australia deputy chief executive, John Kunkel, said the fuel tax credit granted to industry was not a subsidy.

Political debate over potential new coal mines is growing.

“They are probably talking about the fuel tax credit scheme but as the treasury and the productivity commission have said a number of times that is not a subsidy,” Mr Kunkel said.

Mr Kretzmann argued that fossil fuel subsidies identified in the report met the World Trade Organisation’s (WTO) description of a subsidy.

“It is a subsidy under the WTO definition which is something Australia has signed onto, so we would certainly dispute that characterisation,” he said.

The report called on G20 countries to take immediate action to phase out subsidies to fossil fuel producers in order to meet global commitments to combat global warming.

“It is tantamount to G20 governments allowing fossil fuel producers to undermine national climate commitments, while paying them for the privilege,” the report said.

Energy subsidies discourage investments in energy efficiency

The authors used publicly available information on subsidies to fossil fuel producers to compile the report.

The report defends fossil fuel production subsidies as national subsidies delivered through direct spending and tax breaks, investments by state owned enterprises, and public finance from majority government owned banks and financial institutions.

Renewables receive around a third of the amount of subsidies paid to fossil fuel companies. Pic: Shutterstock

A report earlier this year from the International Monetary Fund (IMF) said that after-tax energy subsidies were expected to reach $7.4 trillion or 6.5 per cent of global GDP in 2015.

“Post-tax energy subsidies are dramatically higher than previously estimated and are projected to remain high,” the IMF working paper said.

“The potential fiscal, environmental, and welfare impacts of energy subsidy reform are substantial.”

The authors said energy subsidies damaged the environment, caused more premature deaths from air pollution, worsened traffic congestion and increased greenhouse gases.

“Energy subsidies discourage needed investments in energy efficiency, renewables, and energy infrastructure, and increase the vulnerability of countries to volatile international energy prices,” the paper said.

– ABC