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Ministers Mislead the Public over Fossil Fuel Subsidies

Media Release
Dr Terrence Loomis, Coordinator
Fossil Fuels Aotearoa Research Network (FFARN)

Ministers Mislead the Public over Fossil Fuel Subsidies

9 October 2017

During the recent election campaign, Minister for Climate Issues Paula Bennett came under pressure from celebrities, scientists and a coalition of environmental organisations to state what National was doing to address climate change and meet New Zealand’s Paris commitments. Bennett claimed the government was undertaking a range of work to address climate change including "eliminating fossil fuel subsidies" (New Zealand Herald, 18 June 2017).

It now appears that Minister Bennett misled the New Zealand public, either intentionally or out of ignorance of the facts.

Responding to an OIA request in late September, Ms Bennett declined to provide any information on government efforts to eliminate fossil fuel subsidies. Instead she referred the matter to the Minister of Energy and Resources Judith Collins.

Ms Collins chose to ignore Ms Bennett’s earlier statement, denying in an OIA reply that there were any subsidies at all. “The New Zealand Government does not subsidise fossil fuel exploration, production or consumption.”

It appears Ms Collins was playing semantic games in order to disguise the level of taxpayer support the Government has been providing the oil and gas industry. If ‘subsidies’ are defined narrowly as cash transfers, then technically the Minister was right. But most energy experts and government policy advisors now accept the International Energy Agency’s definition of subsidies as any government action that lowers the cost of energy exploration and production, raises the price received by energy producers or lowers the price paid by energy consumers.

Since coming to power in 2008, successive National governments have gone to great lengths to promote the petroleum industry and expand oil and gas exports under their Business Growth Agenda.

A 2013 report by the World Wildlife Fund [World Wildlife Fund (NZ), 2013. Fossil Fuel Finance in New Zealand. WWF, Auckland.] revealed that the New Zealand government was providing tax incentives, R&D spending, free geological survey data and promotional support to the industry. WWF estimated the total value of production and consumption support from the Government was around $85m in 2013 alone. To make matters difficult for researchers and concerned citizens, the National government has stopped gathering information about oil rig income tax exemptions and tax deductions for petroleum mining.

My research, published earlier this year [Loomis, Terrence, 2017. Petroleum Development and Environmental Conflict in Aotearoa New Zealand: Texas of the South Pacific. Lexington Books, Lanham, MD.], found the level of taxpayer support for the petroleum industry was actually higher than WWF’s figures if all forms of promotional spending, conference sponsorships, overseas trips and public ‘informational’ reports were taken into account.

Minister Collins in her OIA reply inadvertently acknowledged that subsidies do in fact exist. She referred to a 2015 OECD review that concluded there were no “inefficient fossil fuel subsidies” contributing to wasteful consumption in New Zealand. In other words there were consumption subsidies, contrary to the Minister’s claims, but they were ‘efficient’.

So it was at least disingenuous of Minister Collins to claim that New Zealand does not ‘subsidise’ the fossil fuel industry or fossil fuel consumption. Both she and Minister Bennett have been reluctant to tell the public the full truth about the support the Government has provided the industry.

Apparently National is committed to continuing such support in spite of the need for concerted action to reduce the country’s CSG emissions and transition to a low-carbon economy. The head of the UN António Guterres recently called on governments to take more concerted action to achieve the goals agreed in the Paris Accords. There is general agreement among climate scientists that at least 70% of known reserves must remain unburned if we are to stay below 2C warming. Even the fossil fuel industry is starting recognise its days are numbered. There is mounting international pressure from the insurance and finance sectors for governments to urgently phase out fossil fuel subsidies.

The previous Climate Change Minister Tim Groser was criticised for attending international conferences and talking up the need to reduce fossil fuels subsidies, while at home the National government was increasing its support for the industry. It’s time the incoming Government, whatever its political composition, took meaningful action to phase out support for fossil fuels and back the speedy transition to a low-carbon economy.


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