2019 Report

The Production Gap
The discrepancy between countries’
planned fossil fuel production andglobal production levels consistent
with limiting warming to 1.5°C or 2°C

About This Report
This report is the first assessment of countries' plans and outlooks for fossil fuel production, andwhat is needed to align this production with climate objectives. It follows in the footsteps of theUnited Nations Environment Programme’s (UNEP) Emissions Gap Report and other reports that
review countries’ greenhouse gas emissions and compare them with the emission levels needed
to meet global climate goals.
The report represents a collaboration of several research and academic institutions and experts.
UNEP staff provided guidance and insights from their experience leading other gap reports.
Assessment of the production gap was based on the most recent and publicly accessible government plans and projections for fossil fuel production at the time of analysis. For other elementsof the report, such as the magnitude of producer subsidies or the status of policies to limit production, the report draws from a mix of publicly available government, intergovernmental, andresearch sources as cited and listed in the references.
As this is the first report of its nature, we welcome feedback and suggestions.
Contact info@productiongap.org

Citation
This document may be cited as: SEI, IISD, ODI, Climate Analytics, CICERO, and UNEP. (2019). The Production Gap: The
discrepancy between countries’ planned fossil fuel production and global production levels consistent with limiting
warming to 1.5°C or 2°C. http://productiongap.org/
A digital copy of this report along with supporting appendices is available at http://productiongap.org/

Photo Credits
P. 49: Bonn Climate Change Conference, May 2017. Photo by IISD/Kiara Worth (enb.iisd.org/climate/sb46/enb/8may.html).
All other photos: Getty Images.

Acknowledgements
We would like to thank the following contributors fortheir input.

Authors and Research Contributors
Asterisk (*) connotes corresponding author.

Chapter 1
Authors: Harro van Asselt (University of Eastern Finland(UEF)), Peter Erickson (Stockholm Environment Institute(SEI)), Ivetta Gerasimchuk (International Institute for
Sustainable Development (IISD)), Sivan Kartha (SEI),
Michael Lazarus (SEI), Cleo Verkuijl (SEI)

Chapter 2
Authors: Ploy Achakulwisut (SEI), Peter Erickson* (SEI),
Sivan Kartha (SEI), Michael Lazarus (SEI)
Research Contributors: Bill Hare (Climate Analytics),
Paola Yanguas Parra (Climate Analytics), Steve Pye(University College London), Roberto Schaeffer(Universidade Federal do Rio de Janeiro), Michiel
Schaeffer (Climate Analytics)

Chapter 3
Authors: Ploy Achakulwisut (SEI), Harro van Asselt(UEF), Ivetta Gerasimchuk (IISD), Ipek Gençsü (Overseas
Development Institute (ODI)), Michael Lazarus* (SEI),
Cleo Verkuijl (SEI)

Research Contributors: Kathryn Harrison (University of
British Columbia), Bert de Wel (International Trade Union
Confederation (ITUC))

Research Contributors: Peter Wooders (IISD)

Chapter 6

Chapter 4

Authors: Harro van Asselt (UEF), Peter Christoff(University of Melbourne), Joanna Depledge (Centre forEnvironment, Energy and Natural Resource Governance,
University of Cambridge), Sivan Kartha (SEI), Michael
Lazarus (SEI), Greg Muttitt (Oil Change International(OCI)), Anju Sharma (Oxford Climate Policy), Cleo Verkuijl*

Authors: Ploy Achakulwisut (SEI), Anna Chapman(Climate Analytics), Peter Erickson (SEI), Vibhuti Garg
(IISD), Philip Gass (IISD), Ivetta Gerasimchuk (IISD),Bård Lahn (CICERO), Hongyou Lu (Lawrence Berkeley
National Laboratory (LBNL)), Michael Lazarus* (SEI),
Paola Yanguas Parra (Climate Analytics), Leo Roberts(ODI), Anissa Suharsono (IISD)
Research Contributors: Peter Wooders (IISD)

Chapter 5
Authors: Ploy Achakulwisut (SEI), Harro van Asselt (UEF),
Peter Christoff (University of Melbourne), Richard Denniss(Australia Institute), Fergus Green (Department of
Philosophy, Utrecht University), Natalie Jones (Trinity
College, University of Cambridge and Centre for the
Study of Existential Risk (CSER)), Georgia Piggot* (SEI),
Oliver Sartor (IDDRI), Fernando Tudela (Centro delCambio Global y la Sustentabilidad A.C), Cleo Verkuijl(SEI), Oscar Widerberg (Vrije Universiteit Amsterdam)(SEI), Harald Winkler (University of Cape Town)
Research Contributors: Fergus Green (Utrecht
University), Natalie Jones (Trinity College, University ofCambridge and CSER), Bert de Wel (ITUC)

Reviewers
Chapter 2
Steven J. Davis (University of California Irvine),
Andrew Grant (Carbon Tracker Initiative (CTI)),
Fergus Green (Department of Philosophy, Utrecht
University), Kathy Mulvey (Union of Concerned
Scientists (UCS)), Greg Muttitt (OCI), Adrien Vogt-Schilb(Inter-American Development Bank (IADB))The Production Gap: 2019 Reportiii

Chapter 3

Chapter 6

Andrew Grant (CTI), Fergus Green (Utrecht University),
Kathy Mulvey (UCS), Greg Muttitt (OCI), Adrien VogtSchilb (IADB), Peter Wooders (IISD)

Siân Bradley (Chatham House), Alex Doukas (OCI),
Ipek Gençsü (ODI), Joyeeta Gupta (University of Amsterdam), Christian Holz (Carleton University and CERP),
Glada Lahn (Chatham House), Nathan Lemphers (OCI),
Thomas Spencer (TERI)

Chapter 4Anders Bjartnes (Energi og Klima), Richard Denniss(Australia Institute), Shantanu Dixit (Prayas (Energy
Group)), Fergus Green (Department of Philosophy,
Utrecht University), Li Shuo (Greenpeace East Asia),
Marc Lee (Canadian Centre for Policy Alternatives),
Tatiana Mitrova (Energy Centre, Moscow School ofManagement, SKOLKOVO), Greg Muttitt (OCI), Rebekka
Popp (E3G), Ashok Sreeniva (Prayas (Energy Group)),
Kelly Trout (OCI), Peter Wooders (IISD)

Chapter 5Siân Bradley (Chatham House), Ipek Gençsü (ODI),
Joyeeta Gupta (University of Amsterdam), Christian Holz(Carleton University and Climate Equity Reference Project(CERP)), Bård Lahn (CICERO), Glada Lahn (Chatham
House), Nathan Lemphers (OCI), Hongyou Lu (LBNL),
Greg Muttitt (OCI), Thomas Spencer (The Energy andResources Institute (TERI), Kelly Trout (OCI)iv

The Production Gap: 2019 Report

Other Acknowledgements
Emily Yehle (SEI) led the report’s editing andcommunications.
The report was designed by One Visual Mind.
Participants at a planning workshop held on thesidelines of the Katowice Climate Change Conference(UNFCCC COP 24) offered helpful inputs and suggestions.
Niklas Hagelberg (UNEP), John Christensen (UNEP DTU
Partnership), and Anne Olhoff (UNEP DTU Partnership)provided invaluable guidance throughout the drafting
process. Thanks also to Christophe McGlade (IEA).
This report was supported with funding from the KR Foundation, the High Tides Foundation, the 11th Hour Project of
the Schmidt Family Foundation, and the Swedish International Development Agency (SIDA).

Foreword
In 2009, the UN Environment
Programme released the first
Emissions Gap Report, anassessment of the global community’s plans for mitigatingclimate change. In the decadesince, countries have madenew rounds of commitments
through the Paris Agreement. However, carbon emissions
have remained exactly at the levels projected a decadeago, under the business-as-usual scenarios used in
Emissions Gap Reports.
This calls for a sharpened, and long overdue, focus on fossil fuels. The world’s energy supply remains dominated bycoal, 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 clearlyshows the gap between increasing fossil fuel production
and the decline needed to limit global warming.
By bringing coal, oil, and gas outlooks in line with climate
goals, governments can round out their climate plans andbetter position themselves to achieve emission reductions. This report helps start that conversation, with a setof tools for assessing and closing this important gap inclimate policy.

Inger Andersen
Executive Director
United Nations Environment Programme

The Stockholm Environment
Institute is entering its 30thyear of informing sciencebased climate action. In thattime, we’ve seen important
strides to improve energy
efficiency, deploy renewables,and price carbon. But in recent
years, we’ve also helped sound the alarm about how thosesuccesses have not translated into lower global emissions.
A key reason for this paradox is that major coal, oil, andgas projects have simultaneously continued to attract
investment, receive public permits, or otherwise enjoy
government support. This undercuts efforts, sometimes
by these same governments, to reduce emissions.
There is a need to quantify, track, and address this disconnect. The fossil fuel production gap introduced in thisreport demonstrates clearly that governments’ collectiveplans and projections for future fossil fuel production are
incompatible with a safe climate.
The good news is that a host of policy solutions areavailable. Some countries — as well as subnational
governments, businesses, investors, and trade union andcivil society organizations — are already beginning a justtransition away from fossil fuel production. Others must
now follow their lead.

Måns Nilsson
Executive Director
Stockholm Environment Institute

The Production Gap: 2019 ReportvGlossary
Carbon entanglement
The process by which government
dependence on fossil fuel extraction
creates heavily vested interests inbringing fossil fuels to market thatstand in the way of progress in climate
policy (Gurría 2013).

Carbon lock-in
The tendency for certain carbon-intensive technological systems to persist
over time, ‘locking out’ lower-carbon
alternatives, owing to a combination oflinked technical, economic, and institutional factors. These technologies may
be costly to build, but relatively inexpensive to operate (Erickson et al. 2015).

Emissions gap
The difference between the greenhousegas (GHG) emission levels consistent
with a specific probability of limiting themean global temperature rise to below
2°C or 1.5°C in 2100 above pre-industrial levels and the GHG emission levels
consistent with the global effect of thenationally determined contributions,assuming full implementation from2020 (UNEP 2018).

Extraction-based emissions
accounting
An accounting framework that attributes GHG emissions from the burningof fossil fuels to the location of fuelextraction.

Fossil fuel production
A collective term used in this report torepresent processes along the fossil
fuel supply chain, which includes locating, extracting, and processing, and delivering coal, oil, and gas to consumers.

Green paradox
The phenomenon whereby fossil fuelproducers may be incentivized toaccelerate production in the near-term
under the expectation of increasingly
stringent demand-side policies (Hoel2013; Sinn 2012).

Greenhouse gases
Atmospheric gases that absorb andemit infrared radiation, trap heat,
contribute to the greenhouse effect,and cause global warming. The principal GHGs are carbon dioxide (CO2),methane (CH4) and nitrous oxide (N2O),

vi

The Production Gap: 2019 Report

as well as hydrofluorocarbons (HFCs),
perfluorocarbons (PFCs) and sulphur
hexafluoride (SF6).

Integrated assessment models(IAMs)
Models that combine knowledge frommultiple disciplines and are used to explore how social and economic factors
and choices interact with the naturalenvironment.

Just transition
In the context of climate policy, this refers to a shift to a low-carbon economy
that ensures disruptions are minimised,and benefits maximised, for workers,
communities and consumers who may
be disproportionately affected (ITUC
2017; UNFCCC 2016).

Long-term low GHG emission development strategies (LEDS)
Under the Paris Agreement and its accompanying decision, all countries areinvited to communicate LEDS, taking
into account their common but differentiated responsibilities and respective
capabilities, in the light of different
national circumstances, by 2020.

Multilateral development bank
(MDB)
An international financial institution
chartered by multiple countries to support economic and social development
in lower-income countries.

Nationally determined contributions (NDCs)
Submissions by Parties to the Paris
Agreement that contain their statedambitions to take climate change action
towards achievement of the Agreement’s long-term goal of limiting global
temperature increase to well below
2°C, while pursuing efforts to limit theincrease to 1.5°C. Parties are requested
to communicate new or updated NDCs
by 2020 and every five years thereafter.

National fossil fuel productionplans and projections
Fossil fuel production targets, plans,
and projections drawn from national
plans, strategy documents, and outlooks published by governments andaffiliated institutions.

New Policies Scenario (NPS)
A widely-used scenario from the International Energy Agency's 2018 World
Energy Outlook that reflects countries’
climate policies and ambitions announced as of August 2018 towards theachievement of their NDCs. The NPS
is nearly identical to the IEA’s estimate
for full implementation of NDCs (assubmitted in 2015) in terms of future
global CO2 emissions from fossil fuels(IEA 2018a).

Non-state and subnational actors
Regions, cities, investors, companies,
civil society, individuals, and other actors, beyond national governments, thatmay play a role in taking climate action.

Production gap
The discrepancy between countries'
planned fossil fuel production andglobal production levels consistent withlimiting warming to 1.5°C or 2°C.

Resource curse
Refers to the fact that many resourcerich countries do not fully benefit fromtheir natural resource wealth, and may
in fact experience worse development
and economic growth outcomes thancountries with fewer natural resources(Sachs and Warner 1995).

Stranded assets
Assets that suffer from unanticipated orpremature write-offs, downward revaluations or are converted to liabilities, as
the result of a low-carbon transition orother environment-related risks (Ansar
et al. 2013).

Subsidy
A financial benefit accorded to a
specific interest (e.g. an individual,organization, company, or sector) by agovernment or public body.

Supply-side climate policy
Policies and measures aimed at regulating or managing the wind-downof, or transition away from, fossil fuelproduction.

Territorial emissions accounting
The standard accounting frameworkthat attributes GHG emissions from theburning of fossil fuels to the entity or
location where the fuels are burned.

Abbreviations
Bcm

Billion cubic meters

BECCS

Bioenergy with carbon capture and storage

CDR

Carbon dioxide removal

CO2

Carbon dioxide

COP

Conference of the Parties to the UNFCCC°C

Degree Celsius

EJ

ExajouleETS

Emissions Trading System

G20Group of Twenty

GHG

Greenhouse gas

Gt

Gigatonne (Billion tonnes)

IAM

Integrated assessment model

IEA

International Energy Agency

IPCC

Intergovernmental Panel on Climate Change

LEDS

Long-term low greenhouse gas emission development strategies

Mb/dMillion barrels per day

MMBtu

Million British Thermal Units

Mt

Million tonnes

NDC

Nationally determined contributionNPS

New Policies Scenario

OECD

Organisation for Economic Co-operation and Development

OPEC

Organization of the Petroleum Exporting Countries

PPCA

Powering Past Coal Alliance

SDG

Sustainable Development Goal

UNEP

United Nations Environment Programme

UNFCCC UN Framework Convention on Climate Change
WTO

World Trade Organization

The Production Gap: 2019 Report

vii

viii

The Production Gap: 2019 ReportContents
About this Report .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  ii
Acknowledgements .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . iii
Foreword .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . vGlossary .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . vi
Abbreviations  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . vii
Contents  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 1Executive Summary  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  2
1. Introduction  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 62. The Production Gap .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 12
2.1. Estimating the production gap .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  13
2.2. Implications .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .173. Government support, planning, and projections  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .203.1. Government support mechanisms for fossil fuel production .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  22
3.2. Synthesis of fossil fuel production plans and projections from major producers .  .  25
4. Support for fossil fuel production in key producer countries  .  .  .  .  .  .  .  .  .  .  . 28
5. Policy options to close the production gap  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .405.1. Supply-side climate policy .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 41
5.2. Support for just transitions  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 44
5.3. The role of subnational and non-state actors  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  46
6. Increasing international ambition and action  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .486.1. Winding down fossil fuel supply through the UN climate change process .  .  .  .  .  .  .  49
6.2. Winding down fossil fuel supply through other institutions  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 52
6.3. Toward an equitably managed decline in fossil fuel extraction .  .  .  .  .  .  .  .  .  .  .  .  . 54
References  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .56

The Production Gap: 2019 Report

1

Executive Summary

Key Findings
Governments are planning to
produce about 50% more fossil
fuels by 2030 than would beconsistent with a 2°C pathway
and 120% more than would beconsistent with a
1.5°C pathway.

This global production gap iseven larger than the alreadysignificant global emissions gap,
due to minimal policy attention
on curbing fossil
fuel production.

Several governments havealready adopted policies torestrict fossil fuel production,
providing momentum andimportant lessons for broader
adoption.

International cooperation playsa central role in winding down
fossil fuel production.

2

The Production Gap: 2019 Report

The continued expansion offossil fuel production — and thewidening of the global production
gap — is underpinned by a
combination of ambitious
national plans, government
subsidies to producers, andother forms of public finance.

Executive Summary
This report addresses the necessary winding down of the world’s production of fossil fuels in order
to meet climate goals. Though coal, oil, and gas are the central drivers of climate change, they are
rarely the subject of international climate policy and negotiations. This report aims to expand that
discourse and provide a metric for assessing how far the world is from production levels that areconsistent with global climate goals.

Specifically, this first Production Gap Report assesses thediscrepancy between government plans for fossil fuelproduction and global production levels consistent with
1.5°C and 2°C pathways. This production gap tells us themagnitude of the challenge.
The report reviews, across 10 fossil-fuel-producing
countries, the policies and actions that expand fossil fuelproduction and, in turn, widen the gap. It also provides
policy options that can help countries better align production with climate goals. This is especially relevant over the
next year, as countries prepare new or updated nationallydetermined contributions (NDCs), which set out their new
emission reduction plans and climate pledges under theParis Agreement.

Figure ES.1
The fossil fuel production gap ­— the difference between national production plans and low-carbon pathways (1.5°C and 2°C),
as expressed in fossil fuel carbon dioxide (CO2) emissions — widens between 2015 and 2040.

Global fossil fuel CO2 emissions
GtCO2/yr40

The Production Gap

30

20

10

		

Countries' productionplans & projections

		Production implied byclimate pledges

		Production consistent
with 2°C		

Production consistent
with 1.5°C

0
2015

2020

2025

2030

2035

2040

The Production Gap: 2019 Report3

280% (6.4 billion tonnes) more than would be consis-

The report’s main findings are as follows.

tent with a 1.5°C pathway.

Governments are planning to produce about 50% more
fossil fuels by 2030 than would be consistent with a 2°C
pathway and 120% more than would be consistent witha 1.5°C pathway.

jas countries continue to invest in fossil fuel infrastructure that “locks in” oil and gas use. The effects of thislock-in widen the production gap over time, until coun-

To estimate the production gap, this report puts forward
a method analogous to that used in the Emissions Gap
Report. It uses publicly available data to estimate thedifference between what countries are planning and what
would be consistent with 1.5°C and 2°C pathways, basedon scenarios from the recent Intergovernmental Panel on
Climate Change (IPCC) Special Report on Global Warmingof 1.5°C.

tries are producing 43% (36 million barrels per day)more oil and 47% (1,800 billion cubic meters) more gas
by 2040 than would be consistent with a 2°C pathway.
This global production gap is even larger than thealready-significant global emissions gap, due to minimal
policy attention on curbing fossil fuel production.
Collectively, countries’ planned fossil fuel production not
only exceeds 1.5°C and 2°C pathways, it also surpasses
production levels consistent with the implementation of
the national climate policies and ambitions in countries’
NDCs. As a consequence, the production gap is wider
than the emissions gap.1

This analysis shows that:j

In aggregate, countries’ planned fossil fuel production
by 2030 will lead to the emission of 39 billion tonnes(gigatonnes) of carbon dioxide (GtCO2). That is 13
GtCO2, or 53%, more than would be consistent with a
2°C pathway, and 21 GtCO2 (120%) more than would be

Indeed, though many governments plan to decrease theiremissions, they are signalling the opposite when it comesto fossil fuel production, with plans and projections for
expansion. This hinders the collective ability of countries
to meet global climate goals, and it further widens not justthe production gap, but the emissions gap as well.

consistent with a 1.5°C pathway. This gap widens significantly by 2040.
j

Oil and gas are also on track to exceed carbon budgets,

This production gap is largest for coal. By 2030, countries plan to produce 150% (5.2 billion tonnes) morecoal than would be consistent with a 2°C pathway, andFigure ES.2
The production gap is widest for coal but grows rapidly for oil and gas. By 2040 the production gap, in energy terms, is as large for oil as it
is for coal. Physical units are displayed as secondary axes: billion tonnes per year for coal, million barrels per day for oil, and billion cubic
meters per year for gas.
Coal

EJ/yr

Gt/yr

250

Oil

EJ/yr

mb/d

250

120

Gas

EJ/yr

bcm/yr

250

10
200

100

200

6000

200

8
80
150

150

150
4000

6
100

60
100

100

4

40
2000

50

2

0
2015

1

4

2020

2025

2030

2035

0
2040

50

0
2015

20

2020

2025

2030

2035

0
2040

Countries' production plans & projections

Production consistent with 2°C

Production implied by climate pledges

Production consistent with 1.5°C

50

0
2015

2020

2025

2030

2035

0
2040

Since the emissions gap is the difference between the implementation of NDCs and Paris Agreement goals, an exceedance of planned fossil fuel production above the levelconsistent with NDCs implies that the production gap is larger than the emissions gap, at least for CO2 emissions from fossil fuel combustion

The Production Gap: 2019 Report

The continued expansion of fossil fuel production — andthe widening of the global production gap — is underpinned by a combination of ambitious national plans,
government subsidies to producers, and other forms of
public finance.
Governments support production in numerous ways. They
not only play central roles in the permitting of explorationand production; they also support the fossil fuel industry
through direct investments, research and development
funding, tax expenditures, and assumed liability andrisk. Fossil fuel subsidies span all stages of the fossil fuelproduction process, from research, development, and exploration, to operations, transport, processing, marketing,decommissioning, and site remediation.
This report reviews specific production plans, outlooks,
and support mechanisms in 10 key countries: seven top
fossil fuel producers (China, the United States, Russia,
India, Australia, Indonesia, and Canada) and three significant producers with strongly stated climate ambitions(Germany, Norway, and the United Kingdom). It finds that:j

The production of coal, oil, and gas in nearly every national plan or outlook exceeds the 2030 levels projected in the International Energy Agency’s New Policies
Scenario, a scenario roughly consistent with global
implementation of the NDCs.

j

Many countries appear to be banking on export markets to justify major increases in production (e.g., theUnited States, Russia, and Canada) while others areseeking to limit or largely end imports through scaledup production (e.g., India and China). The net result
could be significant over-investment, increasing the riskof stranded assets, workers, and communities, as well
as locking in a higher emissions trajectory.

Several governments have already adopted policies torestrict fossil fuel production, providing momentum andimportant lessons for broader adoption.
To help close the production gap, countries would
benefit from new models of addressing fossil fuel supply.
Though most countries focus exclusively on the “demandside” — 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. A rangeof 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 reportingof 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. Local
governments, companies, investors, trade unions, andcivil society organizations can also accelerate a transition
away from fossil fuels, by mobilizing constituencies andshifting investment to lower-carbon options. For example,
individuals and institutions have already pledged to divest
over USD 11 trillion from fossil fuel holdings.
International cooperation plays a central role in winding
down fossil fuel production.
The UN climate process and other international institutions and initiatives can help catalyse supply-side ambition and action. Measures to move away from fossil fuelproduction are more effective when countries adopt
them together, and international cooperation can senda clear signal to policymakers, investors, consumers,
and civil society that the world is shifting towards a
low-carbon future.
The Paris Agreement provides key opportunities forcountries to report their fossil fuel production and theirplans and strategies to align future production with climate goals, including through the global stocktake, NDCs,
long-term low greenhouse gas emission development
strategies, and financing. Countries that have alreadybegun to wind down fossil fuel production can help othercountries learn from their experiences. International
financing institutions can accelerate the transition byshifting financial support away from fossil fuel production
and towards low-carbon solutions. And, drawing inspiration from models such as the Powering Past Coal Alliance,
coalitions of leading actors can work together to raise
ambition through joint targets and actions that align future
fossil fuel production with global climate goals.

The Production Gap: 2019 Report51
Introduction

Key Messages
This report puts forward a new
metric called the fossil fuelproduction gap: the discrepancy
between countries' planned
fossil fuel production andthe global production levels
necessary to limit warming to
1.5°C and 2°C.

Fossil fuels are, by far, the largest
contributor to global climatechange, accounting for over
75% of global greenhouse gas
emissions and nearly 90% of all
carbon dioxide emissions.

Countries that limit the
production of coal, oil, andgas can avoid carbon lock-in,
limit financial risks, improvethe effectiveness of climate
policies, and achieve sustainable
development benefits.

Now is the moment to address
the fossil fuel production gap,
as countries submit new andupdated nationally determined
contributions, and long-term
low greenhouse gas emission
development strategies.

6

The Production Gap: 2019 Report

Moving away from fossil fuelproduction poses both economic
and political challenges,
but doing so is possible andincreasingly necessary to avoid
dangerous climate change.

1. Introduction
The world is awash in fossil fuels. From the vast reservoirs of oil and gas in North America to thesweeping coal fields of Australia, there is no shortage of fossilized carbon to burn. Coal, oil, and gas
have a long history of providing exceptionally concentrated, ready-made energy, often at low andsubsidized prices that do not reflect their full societal and environmental costs; it is no wonder they
have powered the planet for more than a century.

But citizens, businesses, and political leaders are now
starting to turn elsewhere for their energy needs. Energy from the wind and sun is becoming ever easier andcheaper to gather and store, providing the first real threat
to fossil fuel dominance. This trend is emerging not a moment too soon, given the mounting climate change crisis,borne mostly from decades of burning fossil fuels.
As fast as renewable and other climate-compatible energy
technologies are rising, however, there is no guaranteethat fossil fuels and their greenhouse gas (GHG) emissions
will decline — let alone at the pace needed to avoid dangerous climate change. The continued drive to increase
fossil fuel production throughout the world only makesthat harder.
This report is about how governments can work towards
aligning fossil fuel production with the globally agreed climate goals of the Paris Agreement. It begins by posing thequestion: how far off track is the world’s current pace offossil fuel extraction? It puts forward a new metric called
the fossil fuel production gap: the discrepancy between,on the one hand, countries’ planned levels of fossil fuelproduction and, on the other hand, global levels of production consistent with low-carbon pathways capable oflimiting global warming to 1.5° or 2°C.
Measures of climate-related “gaps” are not new. The mostwell-known and analogous is the longstanding emissions
gap, measured in an annual report by the United Nations
Environment Programme. That gap — critical for global
climate policy — is the gap between countries’ emission
reduction pledges and the levels of emissions consistent
with limiting global warming to 1.5°C or 2°C. In fact, theEmissions Gap Report provides the template for our work.
Like other gap reports, this report brings greater transparency and awareness to a key issue — in this case, tocountries’ fossil fuel development plans and policies. It
also offers solutions that can help close the gap; in particular, it presents policies to support countries’ transitions
away from dependence on coal, oil, and gas production,and new ways to work together internationally.

Developing more coherent, climate-consistent plans forfossil fuel production is a tall task. Many governments rely
heavily on revenues generated by oil, gas, and coal. Theinterests of fossil fuel producers are powerful and difficult
to align with greater climate ambition. Unless these challenges are addressed, however, it will be more difficult tomake rapid climate progress.
No single document can provide a full roadmap for thewinding down of fossil fuel production. This report offers
a starting point. As the first Fossil Fuel Production Gap Report, it widens the climate discourse to include fossil fuelsupply and provides a resource for policymakers aiming
to wind down coal, oil, and gas production in line with theParis Agreement’s goals.

The Production Gap: 2019 Report7Fossil fuels: the heart of the climate challenge
In 2019, as climate impacts intensified, global fossil fuelcombustion was at an all-time high. Coal, oil, and natural
gas remain the world’s dominant sources of energy,
accounting for 81% of total primary energy supply (IEA
2019a). These fuels are, by far, the largest contributor to
global climate change, accounting for over 75% of global
GHG emissions — as shown in Figure 1.1 — and close to90% of all carbon dioxide (CO2 ) emissions.
Last year, the Intergovernmental Panel on Climate Change(IPCC) put new numbers to what has long been known:
CO2 emissions from fossil fuels will need to decline
rapidly, by approximately 6% per year to remain on a
1.5°C-compatible pathway, and by roughly 2% per year toremain on a 2°C-compatible one (see Chapter 2). Barring
dramatic, unexpected advances in carbon capture andstorage (CCS) technology, these declines mean thatmost of the world’s proven fossil fuel reserves must beleft unburned (Leaton 2011; McGlade and Ekins 2015;
Meinshausen et al. 2009; Muttitt et al. 2016).
Ongoing expansion of fossil fuel infrastructure points inthe opposite direction, however. Major infrastructure
projects in coal, oil, and gas continue to attract investors,
receive public permits, or otherwise enjoy government
support. Energy analysts predict that investment in fossil
fuel exploration, extraction, and delivery infrastructure
could remain at about USD 1 trillion annually through2040 (IEA 2018a).
There are some positive signs of change. Civil society andmany in the business and finance community have begun
to consider what climate constraints mean for future fossil
fuel production plans and investments (Carney 2016;
TCFD 2016). And, as described in Chapter 5, some governments are beginning to reckon with this question as well.

Figure 1.1
Global greenhouse gas emissions by source, 2015. All emissions data were drawn from IEA (2019b) except for land use and land usechange, which are from the Food and Agriculture Organization of the United Nations (FAOSTAT 2019). The fraction of emissions attributed
to fossil fuels within each IEA source category — fuel combustion, fugitive, industrial processes and product use, and other — were
estimated using data and information from the IEA (2019b) and the Emissions Database for Global Atmospheric Research v4.3.2(Janssens-Maenhout, G. et al. 2019). All non-CO2 gases were reported using 100-year Global Warming Potentials (GWPs) from the IPCC’s
Fourth Assessment Report (IPCC 2007).

Global greenhouse gas emissions by source

All other sources
24%

Fossil fuels
76%

Energy use – 64%

Energy use for fossil
fuel production – 3%
Fugitive emissions – 7%
Non-energy use and other – 2%

8

The Production Gap: 2019 ReportWhy focus on fossil fuel production?

jpolicies to limit fossil fuel supply with policies to limit

For decades, efforts to reduce fossil fuel CO2 emissions
have focused almost solely on decreasing demand forfossil fuels, through measures to improve energy
efficiency, deploy renewable energy technologies, andshift markets through carbon pricing (see, for example,
Grantham Research Institute and Sabin Center for
Climate Change Law n.d.).
The focus on demand is important. One could even saythat if policies and actions to reduce the use of fossil fuels
were sufficiently ambitious and well-designed, it would
be unnecessary to focus on supply. Indeed, strong,
harmonized, and widespread carbon prices could, inprinciple, put fossil fuel CO2 emissions on a sufficiently
steep downward path (Rogelj et al. 2018). But suchpolicies and actions have not materialized (Rogelj et al.
2016; UNEP 2018).
The continual shortfall in ambition of demand-side policy
has led some policymakers to add supply-side measures
to their climate policy mix (Erickson et al. 2018). These
policymakers have realized that limiting production ofcoal, oil, and gas can bring countries several benefits,among them:j

Avoiding carbon lock-in. The more fossil fuel infrastructure that is built, the harder it is to shift away fromfossil-based energy, for reasons both financial andpolitical (Gurría 2013; Seto et al. 2016). Limiting fossil
fuel production therefore has tangible emission reduction benefits by helping non-fossil alternatives compete(Erickson and Lazarus 2014).

j

Limiting financial risks. Investors in fossil fuel extraction and processing expect certain returns on theirexpended capital, but a low-carbon transition could welllead to asset devaluation and “stranding”, even if assets
are not physically retired (Carbon Tracker Initiative andGrantham Institute 2013). Making fewer investments
in fossil fuel infrastructure in the first place limits theserisks for investors, and for governments and communities that depend on associated royalty and tax revenue.

Improving effectiveness of climate action. Combining
demand reduces the overall cost of achieving emission reduction goals (Asheim et al. 2019; Green and
Denniss 2018). For instance, Norway could halve thecost of achieving its 2020 emission reduction target by
reducing investment and production in its oil fields andaccounting for the global impact (Fæhn et al. 2017).

jAchieving sustainable development benefits. Addressing fossil fuel supply can also bring a range of additionalsustainable development benefits, such as: decreased
air and water pollution and reduced habitat degradation (Harfoot et al., 2018); improved health outcomes
for those in close proximity to fossil fuel development(Epstein et al., 2011, Epstein 2017); and greater economic
and democratic stability as a result of diversification
away from hydrocarbon revenues (Ross, 2013).

j

Promoting policy coherence. Policies to limit fossil fuelproduction can align energy policies with climate goals,
sending a more coherent and consistent signal that agovernment intends to wind down dependence on bothfossil fuel supply and use.

Reflecting such benefits, policies to constrain fossil fuelproduction have recently begun to gain ground. The governments of Belize, Costa Rica, Denmark, France, and New
Zealand, for instance, have set limits on the explorationand future extraction of oil and gas. Likewise, Spain has
committed to phasing out coal production and Germany
may soon follow, and several national and international
finance institutions are ceasing to invest in upstream coal,oil, and gas.
Such actions demonstrate the feasibility of “supply-side”
measures as part of a broader policy response and send
an important signal about the overall direction towards a
low-carbon economy. However, measures to limit production continue to be underrepresented in many governments’ overall climate change portfolios. And importantobstacles to the transition away from fossil fuels will need
to be addressed.

The Production Gap: 2019 Report9Barriers exist — but also opportunities
Moving away from fossil fuel production poses both
economic and political challenges. For some developing
countries with newly discovered fossil fuel reserves, major
investments in new production facilities are viewed as away out of dependency on energy imports and development assistance (Lahn and Bradley 2016). And in many
long-standing producer countries, fiscal revenues can remain highly dependent on resource extraction; this is especially true for major exporters of oil and gas. For manymembers of the Organization of the Petroleum ExportingCountries (OPEC), for example, oil and gas payments
represent well over half of all fiscal revenues (IEA 2018b).
While some countries have made advances in diversifying
their economies, this goal remains elusive for many others(Global Commission on the Geopolitics of Energy Transformation 2019; Ross 2019; van der Ploeg 2016).
Politically, fossil fuel producers represent a large andconcentrated force, in contrast to the often dispersed
proponents of low-carbon energy transitions (Lazarus
and van Asselt 2018; Newell and Johnstone 2018; Victor2009). Fossil fuel interests can be closely aligned withgovernments, particularly when state-owned enterprises(SOEs) are involved and where royalty and tax revenues
are significant. And the authority of political leaders may
depend on delivering jobs and services financed by oil,gas, or coal revenues, while the loss of revenues can posea risk to the state’s legitimacy (Cust and Mihalyi 2017;
Global Commission on the Geopolitics of Energy Transformation 2019; Moerenhout et al. 2017).
Despite the barriers, it is also increasingly necessary toforge new energy pathways — not only to avoid dangerous climate change, but also to address the increasing
competition fossil fuels face from renewable energy,
energy efficiency, and electrification (Global Commission
on the Geopolitics of Energy Transformation 2019), as
well as the downsides of overreliance on revenues fromvolatile energy commodities (Bjorvatn et al. 2012; Bradley
et al. 2018; Cust and Mihalyi 2017). As the IEA recently
noted in its Outlook for Producer Economies, “more thanat any other point in recent history, fundamental changes
to the development model in resource-rich countries lookunavoidable” (IEA 2018b, p. 12).

10

The Production Gap: 2019 Report

Alternatives to high-carbon development are now moreabundant. In two thirds of the world, wind or solar technologies are now the least expensive option for adding
new power-generating capacity. Combined with battery
storage, they are poised to outcompete even existing gas
and coal in most of the world by 2030 (Bloomberg New
Energy Finance 2019). More broadly, as emphasized bypast Emissions Gap Reports, “technologies and institutional innovations are available to bridge the emissions
gap, and at reasonable cost”, while simultaneously providing many benefits for other important environmental,social, and economic goals (UNEP 2017, p. 9).
The move to a low-carbon economy also comes with jobs.
The International Labour Organization estimates that 24
million jobs could be created through changes in energy
production and use that limit warming to 2°C (ILO 2018).
At the same time, six million jobs will be lost, including
two million in the mining and extraction of fossil fuels (ILO
2018). Careful and inclusive planning, as well as international cooperation and support, will be key to ensure atransition away from fossil fuels that leaves no one behind(Chapters 5 and 6).
Now is a timely moment to address the fossil fuel production gap. Countries are in the process of submitting new
or updated nationally determined contributions (NDCs)
and long-term low greenhouse gas emission development
strategies, which set out their emission reduction plans
and climate pledges under the Paris Agreement. The UN
Secretary-General’s Climate Action Summit in September
has underscored the importance of increasing ambition
and broadening the scope of action. And civil society’s
calls for bold and decisive climate action are stronger thanever. Acknowledging and reckoning with the production
gap can play a key role in bringing this vision within reach.

The Production Gap: 2019 Report11

2
The Production Gap

Key Messages
The world is on track to produce
about 50% more fossil fuels by
2030 than would be consistent
with a 2°C pathway and 120%
more than would be consistent
with a 1.5°C pathway.

Oil and gas are also on track toexceed carbon budgets, withthe effects of lock-in increasingover time, until countries areproducing between 40% and
50% more oil and gas by 2040
than would be consistent with a
2°C pathway.

12

The Production Gap: 2019 Report

These planned levels of fossil
fuel production are also
inconsistent with the collective
climate pledges under the Paris
Agreement. As a consequence,
the global production gap iseven larger than the alreadysignificant global emissions gap.

This production gap is largest forcoal. Countries plan to produce
150% more coal by 2030 thanwould be consistent with a 2°C
pathway, and 280% more thanwould be consistent with a 1.5°C
pathway.

2. The Production Gap
Countries need to triple their emission reduction pledges to limit global warming to 2°C — andquintuple them to reach a 1.5°C goal (UNEP 2018). This emissions gap is well known. Less recognized is the closely related gap between the level of planned fossil fuel production and the muchlower level of production consistent with climate goals. This chapter assesses the magnitude ofthat fossil fuel production gap.

Every year, the United Nations Environment Programme(UNEP) releases its Emissions Gap Report, which measures the gap between national plans and policies toreduce greenhouse gas (GHG) emissions, and the levels
required to limit warming to below 1.5°C or 2°C. Those
reports draw the world’s attention to the nature and scaleof the efforts needed to close this gap.
This chapter assesses the magnitude of the related fossil
fuel production gap, which stymies climate ambitions bylocking in fossil fuel infrastructure that will make emission
reductions harder to achieve. This gap is the discrepancy
between national plans and projections for fossil fuelproduction and global production levels consistent with
1.5°C or 2°C pathways.
National plans and projections for fossil fuel production
have consequences. Governments set expectations
for future production through policies, incentives, andregulations that create a supportive environment for new
investments in the production of coal, oil, and gas.
But when such government plans and projections do
not align with climate ambitions, too much fossil fuelinfrastructure — too many platforms, pipelines, ports,
and mines — gets built. Once built, this infrastructure isdifficult to turn away from; it decreases fossil fuel prices,
hooks consumers on fossil fuels, and deeply entangles
many parts of society — including workers and communities — in a fossil fuel economy. In short, overbuilding fossil
fuel infrastructure makes a low-carbon transition lesslikely. And from another perspective, it renders a low-carbon transition even more disruptive to those dependent
on fossil fuels.
Many countries already publish national fossil fuelproduction plans and projections that are used to
inform and guide policy and investment. However, few —if any — countries have indicated how those plans alignwith international climate goals or their own domestic

climate ambitions, including those outlined in nationallydetermined contributions (NDCs). This report seeks tosupport countries with this alignment process, first byassessing the nature and size of the global production gap.

2.1. Estimating the production gap
To estimate the production gap, we developed amethod analogous to the one used in the Emissions Gap
Report (UNEP 2018). In brief, our calculation uses publicly
available data to estimate the difference between whatcountries are currently planning and what the Intergovernmental Panel on Climate Change (IPCC) estimates would
be consistent with 1.5°C or 2°C pathways.
To develop the global “plans and projections” trajectory,
we reviewed plans and projections of major fossil-fuelproducing countries that currently account for around
60% of global production (see Section 3.2 for a morein-depth description).
For the low-carbon trajectory, we used the least-cost
mitigation scenarios compiled by the IPCC for their landmark Special Report on Global Warming of 1.5°C (Rogelj
et al. 2018). For an indicative 1.5°C pathway, we took the
median of scenarios that have at least a 66% probabilityof limiting global warming to 1.5°C throughout the 21st

The Production Gap: 2019 Report13

century (with overshoot limited to <0.1°C). For the 2°C
pathway, we took the median of scenarios that exceed the
1.5°C limit but have at least a 66% probability of limiting
global warming to below 2°C.2
Finally, we excluded scenarios that rely heavily on
negative emissions or “carbon dioxide removal” (CDR)
technologies to meet temperature limits, given their“multiple feasibility and sustainability constraints” (IPCC
2018, p. 19, see Box 2.1). As described in further detail in
Appendix A (available online), this scenario methodology
closely follows the approach outlined in the 2018 Climate
Action Tracker Warming Projections Global Update report

Figure 2.1
Global fossil fuel supply under four pathways, 2015-2040. For the
1.5°C and 2°C pathways, the median and 25th to 75th percentile
range (shaded) are shown. See Chapter 3 and online Appendix B
for discussion of how fossil fuel CO2 emissions are calculated
from fossil fuel supply.4

Global fossil fuel CO2 emissions(Climate Action Tracker et al. 2018) and leads to results
similar to the scenario groupings used in the UNEP 2018
Emissions Gap Report (UNEP 2018).
Figure 2.1 presents the overall results, comparing global
fossil fuel production under national plans and projections
with those under the 1.5°C and 2°C mitigation pathways.
It shows that the fossil fuel production gap is large: theworld is currently on track to produce far more fossil fuels
in 2030 than would be compatible with a 2°C pathway
and, especially, with a 1.5°C pathway. Specifically, countries’ current plans and projections for fossil fuel production would lead, in 2030, to the emission of 39 billion
tonnes (gigatonnes) of carbon dioxide (GtCO2). That is 13
GtCO2, or 53%, more than would be consistent with a 2°C
pathway (with an interquartile range of 11–15 GtCO2). It is120% or 21 GtCO2 (with a range of 18–23 GtCO2) greaterthan fossil fuel production levels consistent with a 1.5°C
pathway.
This gap grows even wider by 2040, when productionlevels reach 110% (22 GtCO2, with a range of 18–24) and
210% (28 GtCO2, with a range of 27–31) higher than thoseconsistent with the 2°C and 1.5°C pathways.3

GtCO2/yr40

The Production Gap

30

20

10

0
2015

2020

2025

2030

2035

Countries' production plans & projections
Production implied by climate pledges
Production consistent with 2°C

2040

A production gap of this magnitude implies a risk of substantial over-investment in fossil fuel exploration, development, and infrastructure. Indeed, researchers have foundthat Paris Agreement goals imply major drops in plannedand expected capital investment in fossil fuel production,
including for oil and gas in the near term (Grant 2018;
McCollum et al. 2018; Muttitt et al. 2016).
Our analysis also suggests another important finding:with respect to fossil fuels, the production gap is evenlarger than the emissions gap.5 Collectively, countries
are planning to increase production to levels that exceed
those consistent with fulfilment of their NDCs, the metrictypically used for measuring the emissions gap.6 This is evident in Figure 2.1, which shows the world on track to produce more fossil fuels (red line) than under a scenario thatreflects countries’ NDC pledges (brown line, representing

Production consistent with 1.5°C

2

It is important to note that the Paris Agreement refers to holding warming “well below 2°C”, whereas we included pathways with as little as 66% probability of success. This
1-in-3 chance of failing is not itself Paris-consistent, but defines an upper bound, which any outcome must be “well below”.

3This report presents the production gap in terms of total CO2 emissions from all fuels (coal, oil, and gas) for comparability with other emissions-based analyses, and in energy
and physical units for individual fuels for comparability with other common sources. Estimates of fossil fuel CO2 emissions from 2015-2040 were calculated using the methods
described in online Appendix B.

4

Due to differences in historical data sets for fossil fuels and the fact that most Integrated Assessment Models (IAMs) report only at decadal intervals, values for 2015 do notmatch precisely.

5

The emissions gap covers all emissions sources and gases. Figure 2.1 shows only the portion of that gap (by far, the largest) that is attributable to CO2 emissions from fossil fuels.

6

Since the emissions gap is the difference between implementation of NDCs and Paris Agreement goals, an exceedance of planned fossil fuel production above the levelconsistent with NDCs implies that the production gap is larger than the emissions gap, at least for CO2 emissions from fossil fuel combustion.

14

The Production Gap: 2019 Reportthe New Policies Scenario (NPS) of the International Energy Agency’s 2018 World Energy Outlook) (IEA 2018).7

pathway. Oil and gas production are also set to overshootthis pathway. Countries are on track to produce 16% moreoil — or 15 million barrels per day (with a range of 3–24
million barrels) — more than the median 2°C pathway; forgas, that overshoot is 14%, or 590 billion cubic meters intotal (with a range of 470–1,200 bcm).

The production gap is denominated in CO2 emissions, as itprovides a single metric to tally up the gap across coal, oil,and gas, and convey their primary impact on the global climate. At the same time, it is more common to think about
the production of coal, oil, or gas in terms of physical units(e.g., tonnes of coal) or energy units (e.g., exajoules).

The gaps in 2030 are much larger relative to the median
1.5°C pathway: coal production exceeds this pathway
by 280% or 6.4 billion tonnes (with a range 6.1–7.1 billion
tonnes); oil exceeds it by 59% or 42 million barrels per day(with a range of 28–58 million barrels); and gas exceeds
it by 70% or 2,000 billion cubic meters ( with a range of
1,300–2,500 bcm).8

Breaking the production gap down by fuel, Figure 2.2
compares national plans and projections for coal, oil, andgas production, in both primary energy and physical units,with production levels under the 1.5°C and 2°C pathways.
All three fossil fuels are on a path to be produced well inexcess of Paris-compatible levels.

Though near-term production gaps for oil and gas are lesspronounced than for coal, ongoing investments in oil andgas infrastructure widen the production gap over time.
These gaps thus grow far bigger by 2040. Countries areplanning to produce 43% more oil and 47% more gas thanwould be consistent with a 2°C pathway by 2040.

The production gap is greatest for coal, despite efforts
in some countries in recent years to move away from it.
Countries are on track to produce 150% — or 5.2 billion
tonnes (with a range of 3.8–6.3 billion tonnes) — morein 2030 than would be consistent with the median 2°C

Figure 2.2
Global coal, oil, and gas production (exajoule or EJ) under four pathways, 2015-2040. Physical units are displayed as secondary axes:
billion tonnes per year for coal, million barrels per day for oil, and billion cubic meters per year for gas. The 2015 global fossil fuelproduction values derived from model ensembles of 1.5°C and 2°C mitigation pathways differ from historical estimates from IEA andnational plans and projections and have not been harmonized.
Coal

EJ/yr

Gt/yr

250

Oil

EJ/yr

mb/d

250

120

Gas

EJ/yr

bcm/yr

250

10
200

100

200

6000

200

8
80
150

150

150
4000

6
100

60
100

100

4

40
2000

50

0
2015

2

2020

2025

2030

2035

0
2040

50

0
2015

20

2020

2025

2030

2035

0
2040

Countries' production plans & projections

Production consistent with 2°C

Production implied by climate pledges

Production consistent with 1.5°C

50

0
2015

2020

2025

2030

2035

0
2040

7

The NPS reflects countries’ climate policies and ambitions announced as of August 2018 to ensure the achievement of their NDCs. It thus provides a proxy for the level of total
fossil fuel production implied by a scenario in which nations meet the emission reduction goals corresponding to their unconditional NDCs. As shown in Figure 2.11 of the 2018
World Energy Outlook, the New Policies Scenario is nearly identical to IEA’s estimate for full implementation of NDCs (as submitted in 2015) for future global CO2 emissions fromfossil fuels. Climate Action Tracker models an NDC-only pathway, but results are not available for fossil fuel CO2 (https://climateactiontracker.org/).

8

In terms of extraction-based emissions, these values translate to gaps of 11 GtCO2 for coal, 1 GtCO2 for oil, and 1 GtCO2 for gas, relative to the median 2°C pathway by 2030.
Relative to the median 1.5°C pathway, the values translate to 13 GtCO2 for coal, 4 GtCO2 for oil, and 3 GtCO2 for gas.

The Production Gap: 2019 Report15

Box 2.1. The potential role of negative emissions technologies
Carbon dioxide removal (CDR) refers to variousjapproaches to reducing atmospheric concentrations

unacceptable ecological and social impacts. CDR

of carbon dioxide by removing it from the air. In ad-

could, for example, compete with food production

dition to land-use changes such as afforestation, re-or habitat areas for available land, with the poten-

forestation, and ecological restoration, technologicaltial for adverse impacts on biodiversity, food secu-

methods currently under investigation include using

rity, water resources, and human rights (Dooley etbioenergy with carbon capture and storage (BECCS)

al. 2018). BECCS is inherently land-intensive: IAM

and direct air capture (DAC).

scenarios assembled for the IPCC Fifth Assessment Report assumed that between 245 million

Using CDR can make it possible to exceed the car-hectares and about 1.5 billion hectares of agricul-

bon budget in the near-term and make up for it bytural land would be dedicated to bioenergy crops,

later removing CO2 from the atmosphere. It can allow

compared to the approximately 1.5 billion hectares

for a slower and more orderly winding down of fossil

currently devoted to agriculture (Popp et al. 2017).

fuel production, while taking pressure off sectors,
such as aviation, where mitigation is particularly
costly or otherwise challenging (Creutzig et al. 2015).
Reflecting these potential benefits, Integrated Assessment Models (IAMs) have introduced CDR technologies as mitigation options, along with assumptions about future cost competitiveness. Practicallyall IAMs rely heavily upon carbon dioxide removal toachieve net negative CO2 emissions in the second
half of the century (van Vuuren et al. 2017).
Nonetheless, the IPCC Special Report on Global
Warming of 1.5°C underscores that “CDR deployed atscale is unproven, and reliance on such technology
is a major risk in the ability to limit warming to 1.5°C”
owing to “multiple feasibility and sustainability concerns” (Rogelj et al. 2018, p. 96). Risks include:jj

Negative emissions activities could prove lesseffective than hoped. Land-based carbon stocks
are vulnerable to release through human action or
natural forces. And as noted in the Special Report,“carbon cycle and climate system understanding is
still limited about the effectiveness of net negativeemissions to reduce temperatures after they peak”(IPCC 2018, p. 19).

If CDR proves feasible and sustainable at large scale,then it could prove an important tool for limiting
climate change. Scenarios that use CDR have been
included here, but none that exceed the upper end of
the range of estimates by Fuss et al. (2018) (as citedin the IPCC 1.5°C Special Report) for sustainableglobal potentials for BECCS (5 GtCO2/year) and afforestation and reforestation (3.6 GtCO2/year). That

Negative emission options may not ultimately

said, it is a relatively modest constraint, as even suchprove technically or biophysically achievable orlimits are subject to “a heavy caveat of uncertainty”

affordable. Scenarios rely most heavily on BECCS

and hence do pose significant risks (Fuss et al. 2018).

for power plants, which has not yet been demonstrated (Fuss et al. 2018; van Vuuren et al. 2013).

16

The large-scale deployment of CDR may involve

The Production Gap: 2019 ReportGas occupies a unique situation. It is the least carbon-intensive fossil fuel, and so as illustrated in Figure 2.2, IPCC
scenarios show its production declining less rapidly thanthat of other fuels. But it must still decline, whether that
downward path starts soon (under a 1.5°C pathway) or
around 2030 (under a 2°C pathway). Looking a decadeout or less, the production gap for gas is already substantial. With average lifetimes of 20 years or longer for
pipelines, terminals, wells, and platforms, the time tobegin planning for a wind-down of gas production is, aswith other fossil fuels, already upon us. As shown in Figure
2.2, the gaps between planned oil and gas production
and 1.5°C and 2°C pathways grow much wider startingin 2030. It has been argued that increased reliance onnatural gas may lead to climate benefits and serve as abridge fuel to a low-carbon energy system consistent withclimate goals. As discussed in Box 2.2, it is unclear to what
extent such a bridge still exists.
Regardless of the particular distribution of decline rates
among fossil fuels — which vary considerably depending on modelling assumptions9 — the overall modelling
results indicate that the production of coal, oil, and gas
will need to decline substantially compared to existing
government plans in the near- to medium-term to meetthe climate goals of the Paris Agreement.

2.2. Implications
Drawing on a review of coal, oil, and gas extraction policies and plans in key producing countries (Chapter 3), we
find that planned production greatly exceeds global 1.5°C
and 2°C mitigation pathways. In aggregate, countries’plans and projections also significantly surpass production levels that are consistent with their climate ambitions, as represented in NDCs and related policies (andmodelled in the IEA NPS) — and which are themselves
inadequate to meet the goals of the Paris Agreement.
In other words, with respect to fossil fuels, the global
production gap is even larger than the already significant
global emissions gap. This is a consequence of the minimal policy attention governments have thus far given to
curbing fossil fuel production. Indeed, many governments
and businesses continue to signal their intentions to
expand or maximize the exploration and development of
new resources, which further hinders the collective abilityof countries to stabilize the climate system, including
closing the emissions gap.

9

The global production gap is evenlarger than the already significant
global emissions gap.
Estimating and tracking the production gap serves as animportant tool in directing attention to the inadequate effort at transitioning away from fossil fuels. It complements
other approaches that have defined the limits to overall
fossil fuel production (Leaton 2011; McGlade and Ekins
2015; Muttitt et al. 2016) and assessed whether individual investments are inconsistent with Paris goals (Grant
2018; TCFD 2016). As such, the production gap provides
a reference point for the international community andgovernment decision makers, highlighting the disconnect
between climate policies and support for increased fossil
fuel production. As discussed in subsequent chapters,
countries can take concrete steps to connect the dots
between fossil fuel production and emissions by reporting
their levels of production and communicating their plans
to align future production with climate goals.
Scaling down fossil fuel production provides countries
with many potential benefits, including: supporting global
action to achieve climate goals; reducing the risk of
stranding assets and communities; reducing the potential
for the “resource curse” (the tendency of resource-richdeveloping countries to have lower economic performance) (Venables 2016); and decreasing other adverse
social, environmental, and economic impacts. However, as
noted in Chapter 1, there are also major challenges. Policymakers can anticipate political opposition from powerfulinterests when taking action to constrain fossil fuel production. They will also need to pay careful attention to the
distributional impacts of scaling down production, and toensuring that transitions are just and equitable.
But these challenges are not insurmountable. Though the
production gap is wide, the opportunities to narrow it areabundant. As described in Chapters 5 and 6, a growing
body of literature and experience shows that national andsubnational governments can use a number of policies
and tools to help them align their fossil fuel supply andinvestment strategies with Paris Agreement goals.

Various uncertainties apply here. The carbon budget could end up being larger or smaller than is assumed in the underlying model. Progress on non-CO2 gases and land-use
change could be quicker or slower than planned, leaving, respectively, more or less room for fossil carbon. The world could conceivably end up developing and effectively
deploying negative emissions technologies at scales greater or smaller than the levels considered here. Additional uncertainties apply to disaggregating the production gap
estimate among individual fuels. A low-carbon pathway need not be attained using the specific mix of reductions in coal, oil, and gas implied by underlying model analyses. One
model may opt for a slower phase-out of coal, for example, implying a faster phase-out of oil and/or gas.

The Production Gap: 2019 Report17Box 2.2 Gas as transition fuel?
Over the past decade, some researchers — andet al. 2018; Brandt et al. 2014; Höglund-Isaksson

many industry representatives — have suggested

2017; Schwietzke et al. 2016). For example, Alvarez

that natural gas could serve a valuable role as a “tran-

et al. (2018) find overall methane leakage rates ofsition fuel.” They argue that gas could replace more

2.3% across the United States gas supply chain, 60%

carbon-intensive coal and oil while lower-carbon

greater than official estimates and comparable intechnologies mature, and could help integrate more

warming impact to the CO2 emissions from gas com-variable renewables into existing systems (IEA 2011;bustion over a 20-year time horizon. Second, lower

Levi 2013). Accordingly, some have seen natural gas

prices and greater availability of natural gas stimulate

as a potential “bridge” to a lower-carbon future.10

higher overall energy use and emissions (Chen et al.

However, more recent studies have increasingly questioned the extent to which gas can play abridging role. Research has found that increasing
natural gas production and the resulting decreasein gas prices may instead lead to a net increase inglobal emissions and risk delaying the introduction ofnear-zero-emission energy systems (McGlade et al.
2018; Zhang et al. 2016). This is due to three principal
factors. First, recent studies find that rates of methane leakage from natural gas systems are significantly higher than often estimated in inventories (Alvarez

10

See McGlade et al. (2018) for a fuller discussion of the bridging roles that gas could play.

18

The Production Gap: 2019 Report

2019; McJeon et al. 2014). Finally, the rapid advanceof renewable energy and battery technologies has
decreased the need for a potential gas bridge. Thus,
the continued rapid expansion of gas supplies andsystems risks locking in a much higher gas trajectory
than is consistent with a 1.5°C or 2°C future. However, national plans and projections — and the current
boom in liquefied natural gas (LNG) infrastructure(Nace et al. 2019) — indicate that countries are on
track for this kind of rapid expansion.

The Production Gap: 2019 Report19

3
Government support,
planning, andprojections

Key Messages
Governments continue tosupport increased fossil fuelproduction through plans andtargets, direct investment,
R&D funding, public finance,
tax expenditures and othersubsidies.

Over-investment in production
puts assets, workers, andcommunities at risk of stranding
if efforts to reduce fossil fueldependence accelerate.

20

The Production Gap: 2019 ReportCollectively, countries are aiming
to produce considerably morecoal, oil, and gas than would
be consistent with their NDCs,
suggesting a major disconnect
between energy and climate
plans.

Specifically, national projections
suggest that countries areplanning on 17% more coal,
10% more oil, and 5% more gas
production by 2030 than would
be needed under a scenario
roughly consistent with NDC
implementation.

3. Government support, planning, and projections
Despite their stated climate ambitions, many governments continue to widen the gap between
fossil fuel production and climate goals. Governments support production in numerous ways.
They play central roles in the sanctioning and permitting of exploration and production. They
support the fossil fuel industry with direct investments, research and development funding, andtax breaks. They often assume liability and risk associated with fossil fuel production, especiallywhere they are direct investors in state-owned enterprises (SOEs). This chapter summarizes
these and other ways in which governments worldwide support fossil fuel production.

Twenty-seven countries produce the coal, oil, and gas that
ultimately lead to 90% of global fossil fuel CO2 emissions
as shown in Figure 3.1. The top nine producing countries
alone account for over two-thirds of global fossil fuel CO2
emissions, when accounted from an extraction-based
perspective (See Box 3.1 and online Appendix B).
We review specific examples of support mechanisms
from 10 key countries: seven of the top nine producing
countries (China, United States, Russia, India, Australia,
Indonesia, and Canada), and three significant producers
with strongly stated climate ambitions (Germany, Norway,
and the United Kingdom). These reviews show how national plans and projections of fossil fuel production steer
expectations, policy, investment, and ultimately infrastructure toward global production levels that significantly
exceed what would be consistent with the achievement of
nationally determined contributions (NDCs) — let alone
what would be compatible with Paris Agreement goals tokeep warming well below 2°C and pursue efforts to limit
it to 1.5°C.
Government efforts to maximize extraction can beunderstood in light of the perceived benefits of coal, oil,and gas production. As noted in Chapter 1, for many fossilfuel-producing countries, proceeds related to production
account for a sizeable fraction of government revenues.
Meanwhile, importing countries aim to ramp up domestic
production to improve their “balance of payments”,
with the goal of importing less. Countries also associate
production with increased energy security and access,and perceived geopolitical advantages. Incumbent andpowerful fossil fuel interests also play an important role,
applying pressure for more extraction through lobbying
and influence.

But promoting increased production comes with realand serious risks. As Angel Gurría, Secretary-General of
the Organisation for Economic Co-operation and Development (OECD), has noted, government dependence
on fossil fuel extraction creates “carbon entanglement”,
whereby heavily vested fossil fuel interests stand in theway of progress in climate policy (Gurría 2013). Government support for fossil fuel production threatens climate
objectives by artificially lowering the price of fossil fuels,
thereby increasing global consumption and emissions.
In the longer-term, dependence on future production
and revenues can put economies and livelihoods at riskof stranding as stronger climate action leads to reduced
demand for coal, oil, and gas. Therefore, it is critical thatmajor coal-, oil-, and gas-producing countries pay greaterattention to aligning their fossil fuel production plans andpolicies with what is required for a low-carbon future.

The Production Gap: 2019 Report213.1. Government support mechanisms forfossil fuel production

a “conservative” scenario) (Ministry of Energy of the Russian Federation 2017), and India released a Draft Energy
Plan that aims for a roughly three-fold increase in coalproduction by 2040 (NITI Aayog 2017). Countries beyond
those surveyed in this report provide other examples: Argentina’s 2018 Annual Energy Plan signalled the country’s
objective to double oil and gas production in the next five
years and triple it by 2030 (Secretaría de Gobierno de
Energía 2018), while Nigeria and Iraq recently announced
targets that seek to roughly double their oil production
within five to six years (Katsoulas 2019; Wallace and Bala-Gbogbo 2019).

Fossil fuel supply does not merely respond to consumer
demand. Governments support and guide production
in various ways. Such support is often justified on thepremise that it will enhance energy security and economic development. But it also serves to lock in dependence
on fossil fuels and lock out lower-carbon pathways that
could provide equal or greater economic and security
benefits, as well as environmental and social benefits.
This section provides an overview of how governments
worldwide — through planning, policies, and the provision of finance — support the production of fossil fuels.

Even where countries do not issue explicit plans, government projections serve as reference points that inform
political, investment, and business decision-making. Published energy outlooks in the United States, Canada, andAustralia, as described in Chapter 4, project large increases in fossil fuel production: between now and 2030, theUnited States’ oil and gas production are each projected
to increase by 30%, Canada’s oil production is projected
to increase by 30%, and Australia’s coal production is
projected to increase by 34%.

Plans, targets, and projections
Many countries issue fossil fuel production targets, plans,
and projections that drive policy and investment in the
exploration, extraction, and development of related infrastructure. These can signal government intentions to ramp
up production, as evident among countries surveyed in
Chapter 4. For example, Russia drafted an energy strategy
that forecasts a 38% growth in natural gas production
from 2015 to 2035 under an “optimistic” scenario (20% in

Figure 3.1
Top countries in terms of extraction-based CO2 emissions (million tonnes CO2, MtCO2), 2017. The top 9 producers account for 69%, andthe top 27 producers shown here account for 90%, of the global total. Countries with emissions below 200 MtCO2 are not shown.
Countries indicated in bold* are discussed further in Chapter 4. See online Appendix B for sources and methods.

Extraction-based CO2 emissions (MtCO2), 2017
China*

8000

Coal
Oil
Gas

0

22

The Production Gap: 2019 Report

United Kingdom*

AngolaMalaysia

PolandColombia

Nigeria

Algeria

Venezuela

MexicoGermany*

Brazil

KuwaitNorway*Kazakhstan

South Africa

Qatar

United Arab Emirates

Iraq

Canada*IranIndonesia*

Australia*

India*

2000

Saudi Arabia

4000

Russia*United States*

6000Box 3.1 Extraction-based emissions accounting
The UN climate change process currently uses a

2011; Erickson and Lazarus 2013; Steininger et al.

“territorial” emissions accounting framework for

2016; Piggot et al. 2018).

national greenhouse gas emissions inventories. This
framework attributes emissions from fossil fuel combustion to the country where the fuels are combusted; it also includes the “fugitive” greenhouse gases(GHGs) that are released, vented, flared, or leaked ascoal, oil, and gas are located, extracted, processed,
and transported. This approach tracks the consumption of fossil fuels as well as “upstream” emissions,and provides a way to track the impact of efforts
to reduce emissions. However, it fails to provide aframework to track the production of fossil fuels.
As a result, efforts to wind down production are notcurrently reflected in national accounts.

Extraction-based emissions accounting effectively
reallocates emissions from the location of fuel combustion to the location of fuel extraction. Under theUnited Nations Framework Convention on Climate
Change (UNFCCC), countries follow standardized
guidelines — developed by the Intergovernmental
Panel on Climate Change (IPCC) (IPCC 2006) —to report inventories of territorial emissions fromfuel combustion and of fugitive emissions fromfuel extraction. As shown in Appendix B (available
online), these inventories could be easily expanded,using readily available data, to incorporate extraction-based emissions estimates. As discussed in

A complementary “extraction-based” accounting

Chapter 6, countries can already voluntarily reportapproach would enable countries to track thetheir extraction-based emissions — and on their“downstream” emissions that ultimately result

progress towards reducing these emissions — underfrom the combustion of extracted fuels, helping to

the UN climate change process’ existing modalities.

ensure that sufficient fossil fuel reserves are left

Such efforts would represent an important step inundeveloped as required by the Paris Agreement’s

enhancing transparency, and assist in tracking and

1.5°C and 2°C goals (for examples of alternative

managing the alignment of production with emis-

emissions accounting frameworks, see Davis et al.

sions targets and climate goals.

This finding is not necessarily surprising; many countries,
especially (but not exclusively) those with state-owned
energy enterprises, view energy production as part oftheir national identity and as an engine for economic
development — and their plans and actions reflect theseaspirations (Eckersley 2016). However, as Chapter 2
shows, these aspirations clash with the climate goals of
the Paris Agreement.

Subsidies
In addition to planning and target-setting, governments
support fossil fuels through direct budgetary transfers,
tax expenditures, and other subsidies. In 2009, Group of
Twenty (G20) leaders made a commitment to “phase out
and rationalize, over the medium term, inefficient fossil
fuel subsidies” (G20 2009). Ten years later — despitesome reforms — many governments have kept most of
their fossil fuel production subsidies, and some haveeven introduced new ones (Gerasimchuk et al. 2018;
OECD 2018).

Fossil fuel subsidies span all stages of the fossil fuelproduction process, from research, development, and exploration, to operations, transport, processing, marketing,decommissioning, and site remediation (Aldy 2013; Bast etal. 2015; Koplow et al. 2010; OECD 2013). Many fossil fuelprojects, such as large coal mines or oil pipelines, receive
government support through several channels, including
direct budgetary transfers, tax breaks, public finance, andgovernment ownership (including on conditions better
than the market) (Gençsü et al. 2019). Some governments
support fossil fuel production by providing the industry
with infrastructure — such as land, water, roads, rail,and ports — as well as low-cost or free exploration andproduction licenses, non-enforcement or exemption fromvarious regulations, and limited corporate liability for environmental and health damage (Koplow et al. 2010).
Almost all forms of government support to fossil fuelproduction fall under the World Trade Organization’s
definition of a subsidy (ASCM Article 1.1); most of these

The Production Gap: 2019 Report23subsidies confer benefits to a specific industry or groupof industries (ASCM Article 2) — in this case typicallyfossil fuel producers — and can therefore be challenged
by WTO Members (WTO 2019). Differing methodologies
and a lack of data transparency have led to different
estimates of the size of fossil fuel subsidies, but the overall
amounts are clearly large. The OECD and International
Energy Agency (IEA) estimate subsidies going to fossil fuelproduction at USD 24 billion in 2017 (OECD/IEA 2019).
However, other estimates put fossil fuel production subsidies much higher. For example, across the G20 countries,
one study estimated that direct budgetary transfers andtax expenditures in favour of fossil fuel production totalledover USD 70 billion per year in 2013 and 2014 (Bast et al.
2015).
Government support reduces the capital and operationalcosts of extraction to fossil fuel producers, thus unlocking projects that would otherwise not be commercially
viable. For instance, one study found that, at USD 50 per
barrel, 45% of discovered (but not yet producing) U.S. oil
would depend on subsidies to reach the minimum returns
acceptable to investors (Erickson et al. 2017). Moreover,by increasing the quantity and pace of fossil fuels supplied
to regional or global markets, government support toproduction drives down coal, oil, and gas prices, thus
encouraging their consumption. One study estimated thata continuation of existing fossil fuel production subsidies globally between 2017 and 2050 would lead to CO2emissions equivalent to those resulting from the burning

24

The Production Gap: 2019 Reportof all proven oil reserves in the United States and Norway(Gerasimchuk et al. 2017).

Other forms of public finance
Article 2.1(c) of the Paris Agreement calls for “making
finance flows consistent with a pathway towards low
greenhouse gas emissions and climate-resilient development”. However, in addition to the subsidies discussed
above, many governments provide financing for fossil fuelproduction through the public finance institutions which
they own and operate or in which they invest and govern
multilaterally. These include development finance institutions (such as national, bilateral, and multilateral development banks) and export credit agencies.
These institutions provide domestic and international
finance in the form of grants, loans, equity, insurance, andguarantees, often at a subsidized, below-market value.
These investments are often backed by governments
through direct investment using public funds. Even when
governments do not deploy public funds, the high credit
ratings of publicly owned financial institutions, and their
willingness to invest in the sectors linked to government
objectives, can reduce the risk to parallel private investors
and drive private investment in fossil fuel production thatwould not otherwise occur (Bast et al. 2015).
According to one recent report, “brown” public financeflows (i.e. to upstream and downstream fossil fuelprojects) continue to overshadow “green” flows (i.e. torenewable energy); brown finance provided by the publicfinance institutions of G20 countries alone amounted to
USD 91 billion per year during the period 2013–2015 (Climate Transparency 2018). Preliminary estimates suggestthat public finance to coal, oil, and gas exploration andextraction is increasing, rising from USD 16 billion in 2015
to USD 23 billion in 2017.11 These estimates do not accountfor financing provided by multilateral development banks,
where G20 countries are major shareholders.

The IEA (2018) estimates that SOEs accounted for 42%
of global energy investment in 2017. One study found that
SOEs in the G20 countries annually invested an average of
USD 286 billion in oil, gas, and coal production (including
fossil-fuel-based power) in 2013 and 2014 (Bast et al. 2015).
However, SOEs can also serve as a vehicle for managing
extraction levels to serve wider policy goals, which could
potentially include climate aims. This was demonstrated in
China, where the government managed coal “decapacity”
through the closure of smaller mines, industry consolidation, and a fund for worker transition (Bridle et al. 2017).

State-owned enterprises
Many countries also support fossil fuel production
through their state-owned enterprises (SOEs). With majority ownership, governments maintain a degree of effective
control and involvement in decision-making and financing,often on subsidized conditions that are more favourable
than market terms. For example, as owners of SOEs, governments may expect lower rates of return on equity andinvestment than private investors, and may be more willing to bail out poorly performing SOEs than would private
owners; the assumption of such bailouts lowers the riskfor private sector investors. While this varies by country
and institution, the impact is nonetheless significant.

3.2. Synthesis of fossil fuel production plansand projections from major producers
This section presents a synthesis of the fossil fuel production plans and projections of countries reviewed in
Chapter 4 (China, United States, Russia, India, Australia,
Indonesia, Canada, Germany, Norway, and the United
Kingdom), as well as those of several other top producers
where documentation is publicly available (Brazil, Argentina, Mexico, and Kazakhstan). The values are drawn from

Table 3.1
Comparison of projected fossil fuel production in 2030 under national plans and projections versus IEA’s New Policies Scenario in 2030, a
widely used marker of how fossil fuel markets are expected to develop under policies and ambitions aimed at ensuring NDC achievement.
Countries indicated in bold* are used to derive the global trajectory of national plans and projections shown in Figure 3.2. A dash (-) meansthat the country’s production of that fuel is small and so is not reviewed here. See Appendix A for data sources.

Coal (million tonnes coal equivalent/yr)

Gas (billion cubic meters/yr)

Plans & projections

NPS

Plans & projections

NPS

Plans & projections

NPS

2700

2600

4.1

3.2

300

260

USA*

450

400

22.0

18.0

1100

1000

Russia*

350

310

11.0

11.0

790

770

India*

1100

710

1.1

0.9

76

58

Indonesia*

360

310

–

–

76

82

Australia*

570

430

–

–

160

180

Canada*

–

–

6.2

5.7

180

170

Norway*

–

–

1.8

2.2

100

110

Brazil

–

–

5.6

4.3

49

39

Argentina

–

–

1.5

0.7

150

77

Mexico

–

–

3.2

2.4

63

38

Kazakhstan

–

–

2.4

2.4

–

–

China*

11

Oil (million barrels/day)Based on data from Oil Change International’s Shift the Subsidies Database under a Creative Commons Attribution-NonCommercial 4.0 International License.

The Production Gap: 2019 Report25

national plans, strategy documents, or projections published by governments and affiliated institutions.
As detailed in Chapter 2, these production plans and projections signal a level of global fossil fuel production that
far exceeds the Paris goals. Moreover, as shown in Table
3.1, nearly every national plan reviewed aims for production levels beyond those that would meet the global fossil
fuel demand implied by the NDCs — which themselvesrepresent a level of ambition far short of the Paris goals.
In order to estimate the global production gap discussed
in Chapter 2, we first derived an aggregate trajectory of
global fossil fuel production between 2015 and 2040 using
the national projections of the eight largest producer countries reviewed in this report (China, United States, Russia,
India, Australia, Indonesia, Canada, and Norway). Together,
these countries accounted for around 60% of global fossil
fuel production in 2017, both in terms of energy and extraction-based CO2 emissions.12 Next, for other countries,
production is projected assuming the same proportional
share of global production for each fuel as in the NPS;
this helps to account for the fact that some regions are
expected to enter natural declines in production, whileothers ramp up — due to, for example, new discoveries
and development.
The IEA NPS, which is roughly consistent with the NDCs
countries have submitted to date, would lead to global
warming of around 2.7–3°C by 2100 (Abeysinghe et al.
2019), illustrating that existing policies and targets are
insufficient to meet the Paris Agreement goals. As shownin Figure 3.2, fossil fuel CO2 emissions — estimated using
global fossil fuel production plans and projections —would lead to emission levels that exceed the IEA NPS
by 12% in 2030; this is not only far in excess of levels
consistent with 2°C and 1.5°C mitigation pathways, but
exceeds even the 2.7–3°C level associated with the NPS.
Taken together, the national coal, oil, and gas productionplans and projections for the eight countries we analysed
exceed their respective projections under the IEA NPS by
17%, 10%, and 5% in 2030 (not shown).
While many countries publish national fossil fuel production plans and projections, few, if any, have provided
assessments of how their projected production plansalign with domestic and international climate goals. In
fact, as shown in Chapter 4, governments continue to12

Figure 3.2
Global estimate of fossil fuel production from national plans andprojections, in terms of extraction-based CO2 emissions. Values
shown are compiled from sources and figures cited in the country
reviews in Chapter 4. The rest of the world is scaled by the relative
share of production by fuel in IEA NPS for the years shown.

Global fossil fuel production
GtCO2/yr

40

30

20

10

0
2015

2020

2025

2030

2035

2040

China

India

CanadaU.S.

Indonesia

NorwayRussiaAustralia

Rest of World

actively promote, support, and invest in expanded fossil
fuel extraction and trade, using subsidies, public finance,and other means. Expected future production levels are
considerably higher than what would be consistent withthe achievement of NDCs, not to mention the Paris goals.
These measures, taken together, risk undermining both thestated climate ambitions of individual countries, as well as
the globally agreed climate objectives.
Many countries appear to be banking on export markets
to justify major increases in production (e.g. the UnitedStates, Russia, and Canada) while others are seeking tolimit or largely end imports (e.g. India and China). The net
result could be significant over-investment, increasing therisk of stranded assets, workers, and communities, as well
as locking in a higher emissions trajectory.

The government projections of Russia and India included two scenarios of fossil fuel production, and we use the average of these values in our analysis. For Russia, whereavailable projections do not extend to 2040, values are extrapolated from 2035 onward, based on rates of growth in IEA NPS. The 2015 and 2017 global fossil fuel production
values derived from the national plans and projections differ slightly from estimates under the IEA NPS, and have not been harmonized.

26

The Production Gap: 2019 ReportBut there are also some potentially promising signs andopportunities. A number of smaller producing countries
are already taking steps to limit further fossil fuel development, while leading international finance institutions are
increasingly limiting or ending their lending to fossil fuelproduction.
Countries seeking to align fossil fuel production withclimate goals can pursue a range of policy approaches
to do so. From limits on new extraction to the removalof subsidies and the adoption of just transition plans,meeting the Paris goals may require that such “supply-side” policies become an increasing part of countries’
planning for climate change and broader sustainable development. International forums — such as the UN climatechange process — and non-state actors can also play avaluable role in catalysing the winding down of fossil fuelproduction in line with climate goals.
These opportunities to accelerate climate action are
discussed in the final two chapters.

The Production Gap: 2019 Report27

4
Support for fossil fuelproduction in key
producer countries

Key Messages
This chapter reviews government support, planning, andprojections for fossil fuel production in 10 key countries: seven
top fossil fuel producers (China,
United States, Russia, India,
Australia, Indonesia, and Canada)
and three significant producers
with strongly stated climate ambitions (Germany, Norway, andthe United Kingdom).

28

The Production Gap: 2019 Report

Together, these surveys illustrate
how a combination of ambitious
plans for expanding production,
subsidies to producers, direct
investment in infrastructure, andother government supports underpin the continued expansionof fossil fuel production, widening the global production gap.

4. Support for fossil fuel production in key producer countries
This chapter surveys fossil fuel production plans and support mechanisms across 10 key countries.
The first seven — China, the United States, Russia, India, Australia, Indonesia, and Canada — areamong the nine top global producers in terms of extraction-based CO2 emissions, as shown in Figure 3.1.13 The final three — Germany, Norway, and the United Kingdom — represent significant producers with strongly stated climate ambitions.

The country surveys in this chapter draw on national
plans and strategy documents, projections publishedby government and affiliated institutions, and studies bygovernment, research, and intergovernmental institutions.
Together, they illustrate how a combination of ambitious
plans and targets, subsidies, and other support policies
underpin the continued expansion of fossil fuel production, which in turn widens the global production gap,
making the emissions gap harder to close.
This chapter shows trajectories of fossil fuel production from the most recently available national plans andprojections. Most countries foresee increases, while a few
expect overall declines despite active government support
for maximizing production (e.g. the United Kingdom foroil and gas). Differences in trajectories reflect a variety offactors beyond government support, including: reserves
and resources; extent of depletion; levels of infrastructure
investment for extraction and transport; relative costs ofextraction; changes in domestic demand; and access tointernational markets, among others.
Consequently, it is challenging to assess what 1.5°C- and2°C-compatible pathways for fossil fuel production mightlook like at a national level. While some studies have estimated future coal, oil, and gas production by country or
region under climate constraints (IEA 2018a; McGlade andEkins 2015; Solano-Rodriguez et al. 2019), the underlying
models rely exclusively on the relative costs of production
to determine the national or regional distribution of production, and their results differ in quantitatively non-negligible ways. Arguably, other important factors also comeinto play in determining the pace at which countries needto wind down production to be in accordance with the Paris Agreement (Article 4.3) — in particular, each country’s
unique capabilities, responsibilities, and circumstances.

13

Further research could take these factors into account in
identifying equitable, effective, and cost-efficient production pathways at national scales, much as research
has illuminated similar pathways for emissions (Climate
Action Tracker 2019; Holz et al. 2019; Kartha et al. 2018).
Such production pathways would provide guideposts forgovernments seeking alignment with Paris goals, and for
civil society organizations seeking to encourage action andtrack progress.

Most countries foresee increases, whilea few expect overall declines despite
active government support for maximizing production.

The other two top producers, Saudi Arabia and Iran, were not included due to limitations in data availability.

The Production Gap: 2019 Report29ChinaChina is the world’s largest coal producer, accounting for nearly half (43%) of
global production in 2017 (3159 of 7320
million tonnes, or Mt) (IEA 2019a). Coal
production more than doubled from 2000
to 2013, dropping briefly from 2013 to2016 before resuming growth (IEA 2019a).
While China is the world’s seventh leading
oil producer, it imports around two-thirdsof its consumption (IEA 2019a). Its latest
Five-Year Plan encourages the expansionof domestic oil exploration and extraction,and it continues to subsidize domestic
coal production (The People’s Republic ofChina 2016a). China is also a top natural
gas producer, ranking sixth in 2017. The
country’s gas production increased byover 400% (from 1.0 to 5.0 exajoules(EJ)/year) from 2000 to 2017, though it
remains a net importer (IEA 2019a).
Chinese government support for fossil
fuel supply takes many forms:
j The central and provincial governments provide over a dozen subsidies tocoal and coal-bed methane production— including tax relief, direct investment,
research and development support, andcompensation for mine shutdowns —totalling over CNY 35.7 billion (USD 5.8
billion) in 2013 (Xue et al. 2015). Oil andgas production also benefits from tax
breaks, refunds, and exemptions estimated at USD 669 million in 2013 (Denjean etal. 2015).
j The central government currently
provides a direct subsidy of CNY 0.2 to
0.3 per cubic metre (m3) (USD 0.8 to 1.2/
MMBtu (million British Thermal Units))
for shale gas and coal-bed methane
extraction, with provincial and local
governments providing matching funds,
and is considering its extension for theupcoming 14th Five-Year Plan (China
Ministry of Finance 2012, 2016; NEA 2016;
State Council 2018). Shale gas extraction
also receives tax abatement and refunds,
as well as exemptions on mineral rights
taxation (Xinhua Net 2019).
j State-owned enterprises (SOEs) in
the oil and gas industry, such as Sinopec,
China National Petroleum Corporation(CNPC), and the China National Offshore
Oil Corporation (CNOOC), invested anaverage of USD 22 billion per year in
upstream exploration and capital expenditure in 2013 and 2014 (Denjean et al.

2015). SOEs receive preferential loan rates
and terms to finance their production.
j CNOOC and CNPC are exempted fromland-use tax in cities and towns, reducing
costs and “leading to excessive production of fossil fuels” (G20 Peer-review
Team 2016).

Government plans and projections
suggest that coal production could
increase to 3,900 Mt in 2020 and thendrop slowly thereafter, as shown in Figure4.1. This is in line with government intentions to cap domestic coal use. However,since China accounts for nearly half ofglobal coal production today, its leadership in planning for a more rapid coalphase-out remains central to the goals of
the Paris Agreement.
Sinopec expects China’s oil production
to remain at roughly 4 million barrels
per day. On expectations of increased
demand, Sinopec projects natural gas
production to continue its rapid growth,more than doubling current levels by
2040, although still leaving the country
as a major importer.

Figure 4.1
Chinese government outlooks for coal, oil, and gas production. For coal, production levels beyond 2020 are estimated from consumption
projections, assuming imports account for 7% of consumption based on the 2010-2018 average. Sources: China Energy Group and LBNL
0The People’s Republic of China 2016b

Coal

EJ/yr

80

Mt/yr

EJ/yr

4,000

80

Oil

mb/d

40

EJ/yr

Gas

bcm/yr

80
2,000

60

3,000

30

60

60
1,500

40

2,000

20

40

40
1,000

20

0
2005

30

2020

1,000

20

0

0
2005

2035

The Production Gap: 2019 Report

2020

2035

10

20

0

0
2005

500

2020

2035

0

United States
The United States produces more oil andgas than any other country, surpassing
Saudi Arabia for oil in 2015 and Russia
for gas in 2012 (IEA 2019a). After China,
the United States is the second largest
producer of coal (IEA 2019a).
For decades, the United States has
encouraged fossil fuel production throughtax incentives, regulatory reform, undervalued leases of federal lands, low royalty
rates, and research and development
support (Vietor 1984; Wang and Krupnick
2015; Warner and Shapiro 2013). In recent
years, U.S. presidents have supported
increased production through strategies
termed “all of the above” energy development (Obama 2014) and, most recently,“energy dominance” (The White House2017). This has included the lifting of the
four-decade-old ban on crude exports in2015, which has played an instrumentalrole in the continuing boom in U.S. oil
production (Blas 2019).
The United States supports fossil fuel production in numerous ways, for example:
j The federal government reports 16
subsidies to coal, oil, and gas production,such as immediate depreciation of many
capital expenses and a “percentage
depletion” allowance that reduces
taxable income (U.S. Government 2015).

j Research indicates that federal andstate subsidies boost investor returns
enough to be a decisive factor for development on up to half of all new oil fields,
depending on prevailing oil prices. Gas
development may be similarly subsidy-dependent (Erickson et al. 2017).

continue its decline, the rapid rise in oil
and gas production will push total U.S.
extraction-based CO2 emissions 40%
above 2005 levels by 2025, in contrast
with the 26–28% decline in territorial
emissions targeted in the country’s NDC(U.S. EIA 2019).

j Significant federal support of oil andgas research and development contributed to the hydraulic fracturing technologythat enables the current expansion of
unconventional oil and gas extraction in
the United States and beyond (National
Research Council 2001; Wang and Krupnick 2015).

The United States expects to become anet exporter of fossil fuels in 2020 andincrease net exports throughout the next
decade. In fact, the IEA expects the United States to account for 70% of the risein global oil production and 75% of the
expansion in liquefied natural gas (LNG)
trade over the next five years (IEA 2019b).

j Companies can lease public, government lands and waters for fossil fuelextraction, often paying below-market
rates. About 40% of all coal, 17% of all oil,and 14% of all gas produced in the UnitedStates is from federal lands and waters(Merrill et al. 2018; U.S. EIA 2015).

In recent years, the U.S. government has
taken some national policy actions to
restrict fossil fuel supply, though thesehave not been supported by the current
administration. The U.S. Department of
the Interior has discussed using a carbon
budget to set a “declining schedule” ofcoal permits on federal lands (BLM 2017),
the Obama administration removed
offshore waters from oil and gas development citing climate risks (The WhiteHouse 2016), and ongoing Congressional
proposals provide templates for future
action (Huffman et al. 2016; Merkley et al.
2015).

As shown in Figure 4.2, without policychange, the current boom in U.S. oiland gas production is expected tocontinue. The U.S. Energy Information
Administration projects that oil and gas
production will increase to 30% above
current levels by 2030 (U.S. EIA 2019).
While coal production is expected to

Figure 4.2
U.S. government outlooks for coal, oil, and gas production. Sources: IEA 2019a; U.S. EIA 2018, 2019

EJ/yr

Coal

Mt/yr

EJ/yr

2,000

40

Oil

mb/d

Gas

bcm/yr

25
40

1,200

40
20

1,500
30

EJ/yr

30

900

30
15

1,000
20

20

600

20
10

500

10

0
2005

0
2020

2035

10

0
2005

5

0
2020

2035

300

10

0
2005

0
2020

2035

The Production Gap: 2019 Report

31

Russia
Russia is the world’s second largest producer of natural gas, third largest producer of oil, and sixth largest producer of coal
(IEA 2019a). The country exports about
half of its oil and coal, as well as about athird of its natural gas (IEA 2019a). The oiland gas sector is estimated to contribute
between 10% and 20% of Russia’s GDP
and almost half of federal government
revenues (IEA 2014; Ministry of Energy of
the Russian Federation 2017; Economic
Expert Group 2019).
Russia’s energy policy aims to retain its
fossil fuel export shares in global markets
through trade with Europe and expandingflows to the Asia-Pacific region, especially China (President of the RussianFederation 2019). To support these goals,
the Russian government uses directbudgetary transfers, funds from government-owned financial institutions andstate-owned enterprises, tax preferences,and various regulations (Gerasimchuk
2012; Ogarenko et al. 2015). For example:
j Federal subsidies to fossil fuel production totalled RUB 440 billion (USD 7.5
billion) in 2017, a conservative estimatebased on an analysis from the Organisation for Economic Co-operation and Development (OECD) of budgetary support
and tax expenditures (OECD 2019). The
vast majority (98%) of these subsidies

were through tax breaks, especiallythrough a reduced rate of the extraction
tax on new and mature higher-cost fields(OECD 2019).
j Through price regulations, Russia provided subsidies worth another USD 12.1
billion to domestic gas consumption in2017 and an unquantified amount of support to the consumption of Russian gas
abroad (Gerasimchuk 2012; IEA 2018b),
spurring investments in gas production
and trade infrastructure.
j Majority state-owned Russian financial
institutions provided at least USD 10.1
billion in finance for the fossil fuel industry
between 2013 and 2015, partially at subsidized rates (Doukas et al. 2017).
j Oil, gas, and coal companies benefit
from subsidized access to transport infrastructure, such as through preferential
railroad tariffs for coal (Khusainov 2018),
as well as through ports, icebreakers andpipelines (Gerasimchuk 2012; Lunden andFjaertoft 2014).
j Russia is piloting a tax regime switch
for oil fields (one based on profit rather
than outputs and exports) aimed at
reducing tax burdens and stimulating oil
output (by 0.9 million tonnes per year),which may be expanded (Reuters 2018;
Yepryntseva and Palees 2019).

The Russian government recognizes its
production plans face challenges fromincreasing competition in energy export
markets and decarbonisation trends (Ministry of Energy of the Russian Federation
2017; President of the Russian Federation2019). Accordingly, the Ministry of Energy’s draft energy strategy developed bothan “optimistic” and a “conservative” scenario for future production. As illustrated
in Figure 4.3, Russia expects to sustain
oil production close to current levels by2035 in both cases. Under its optimistic
scenario, by 2035, coal and natural gas
production would increase from 2015
levels by 32% and 38%, respectively;
under its conservative one, coal production would drop 5% and natural gas
would rise 20%. Russia’s largest oil andgas companies also have their own plans
to increase production; Gazprom plans toincrease gas production by as much as
40% between 2017 and 2020 (Gazprom
2018a, 2018b).
Russia’s total extraction-based CO2 emissions would rise by 6% and 24% above
1990 levels by 2030 under the conservative and optimistic scenarios, respectively.
This is in contrast with Russia’s NDC
target of reducing territorial emissions by
25–30% during that same period (RussianFederation 2015).

Figure 4.3
Russian government outlooks for coal, oil, and gas production. Sources: IEA 2019a; Ministry of Energy of the Russian Federation 2017.

EJ/yr

Coal

Mt/yr

30

1,200

EJ/yr

Oil

mb/d

15

30

EJ/yr

30

Gas

bcm/yroptimistic

800
25

25

optimistic

1225conservative

900

20

15

600

20

conservative

15

10

10

300

5

3

5

0
2005

0
2020

400

6

10
conservative

600

20

15

optimistic

32

9

2035

The Production Gap: 2019 Report

0
2005

0
2020

2035

200
5

0
2005

2020

2035

0

IndiaIndia is the world’s fourth largest coal producer, and also the world’s second largest
coal importer, reflecting the country’s
significant level of coal consumption (IEA
2019a). The country’s coal production
has more than doubled in the last two
decades, totalling 724 million tonnes in2017 (IEA 2019a). With over 75% government ownership, Coal India is the world’s
largest coal mining company, producing
84% of India’s thermal coal, and is a major
employer in many parts of the country(Tongia and Gross 2019).
India produces far less oil and gas thancoal, on an energy basis (EJ). While itseeks to increase production of both, it isexpected to remain a major importer incoming decades, especially for oil.
India supports fossil fuel production invarious ways, including:j The government provides subsidies
across the energy value chain to increase
both energy production and consumption,
totalling INR 1.5 trillion (USD 23 billion)
in fiscal 2017. That year, subsidies to oiland gas totalled INR 370 billion (USD 5.5
billion); those to coal were INR 160 billion(USD 2.4 billion), largely for production
through concessional duties and tax
breaks (Soman et al. 2018).

j India also supports coal through INR
740 billion (USD 11.3 billion) in publicfinance and the equivalent of INR 250
billion (USD 3.8 billion) through postponements in the implementation of environmental standards and other policies(Worrall et al. 2018).

India becomes a net coal exporter), butalso that coal demand from the power
sector will continue to rise steeply forthe next two decades, which is uncertain
given the increasing competitiveness of
solar and wind (Marcacci 2018).

j A number of state-owned industries
are involved in the production of coal, oiland gas, as well as in the transportation
and refining of oil and natural gas.
j It is important to note that these supports exist in the context of other costs
and interactions faced by coal, such as
the coal cess (tax) described in Chapter 5
and cross-subsidisation of passenger rail
prices by coal freight.

India’s Draft Energy Plan is not approvedin its final form, but it is used for thisoverview, as it is the latest national planning document. This plan foresees coalproduction increasing between 2015
and 2040 by 200% under a business-asusual scenario, and by 250% under an“ambitious” scenario that seeks to reduce
imports (NITI Aayog 2017; PIB 2018),
as shown in Figure 4.4. India’s steep risein coal production is predicated on thenotion that not only will imports be largely
displaced (under its ambitious scenario,

Figure 4.4
Indian government outlooks for coal, oil, and gas production. BAU: business-as-usual. Sources: IEA 2019a; NITI Aayog 2017

EJ/yr

Coal

Mt/yr

40

EJ/yr

Oil

40
ambitious

30

2,500

mb/d

EJ/yr

20

40

Gas

bcm/yr

1,000
2,000

30

15

30

BAU

750
1,500

20

20

10

20

5

10

500

1,000
10

10

250

500
ambitious

ambitious

0
2005

0
2020

2035

0
2005

BAU

2020

2035

0

0
2005

BAU

2020

2035

0

The Production Gap: 2019 Report33Indonesia
Indonesia is the world’s fifth largest
coal producer and exports over 80%
of its production, making it the second
leading exporter, just behind Australia(IEA 2019a). By contrast, oil production
peaked in the mid-1990s, and Indonesia
became a net importer of oil in 2006 (IEA
2019a). The country’s natural gas production increased by around 50% between
1990 and 2017, making it the world’s 12thlargest producer in 2017 (IEA 2019a).
The central government has undergone
a paradigm shift from viewing oil and gas
as export commodities to seeing themas strategic domestic resources, a shiftthat is also beginning to occur with coal(Braithwaite and Gerasimchuk 2019).
After a major expansion of coal production in the early 21st century (IEA 2019a),
the government now aims to direct anincreasing fraction of future production todomestic energy needs through a policyof Domestic Market Obligation. Under thispolicy, producers must deliver a specificamount to coal plants at a capped price(Braithwaite and Gerasimchuk 2019;
Notonegoro 2018).

Indonesia’s 2014 National Energy Policy
foresees a tripling of the use of domestic
coal by 2050 for electricity production(IEA 2016), while its 2018 Energy Outlook
projects an increase in coal production
by over 50% by 2050 (PPIPE and BPPT2018), primarily due to growing domestic
demand.
Government support for fossil fuel production includes several measures:j Indonesia provided IDR 5 trillion(USD 400 million) or 0.05% of GDP in
subsidies for fossil fuel production between 2014 and 2016 (Braithwaite
and Gerasimchuk 2019).
j Subsidies for oil and gas extraction
include exemptions and reductions inimport duties and taxes, in income taxes
on capital goods and equipment, andin land and building taxes (MEMR and
MoF 2019).
j Subsidies to the coal sector averaged
IDR 10.5 trillion (USD 800 million) in 2014
and 2015 (Attwood et al. 2017).

j Thermal coal was exempt from export
tariffs from May 2012 to August 2015,
which totalled IDR 1.2 trillion (USD 91 million) in 2015 and IDR 2.6 trillion (USD 200
million) in 2014 in forgone government
revenue (Attwood et al. 2017).

Indonesia has successfully diversified
its economy as its oil production has
declined, maintaining constant growthand stable budget deficits (Braithwaite
and Gerasimchuk 2019). Revenue fromupstream oil and gas production has
dropped from 7% of GDP in 2001 to 1%
in 2016 (IMF 2004, 2018). However, as
shown in Figure 4.5, government projections envision gas production growing by
24% between 2020 and 2040. Likewise,
coal production is projected to grow by
29% during this period (PPIPE and BPPT2018). Both increases are driven by theneed to meet expected growth in nationalenergy demand, which is partially fuelledby planned developments of household
gas distribution networks and of coalbased industry (PPIPE and BPPT 2018).

Figure 4.5
Indonesian government outlooks for coal, oil, and gas production. Historical production values are not shown for coal because of amismatch between the reported 2017 values in the Indonesia 2018 Energy Outlook (418 Mt) and IEA statistics (488 Mt). Sources: IEA
2019a; PPIPE and BPPT 2018

Coal

EJ/yr

Mt/yr

12

Oil

mb/d

12
500

10

400

8

300

6

2

100

2

0

0
2005

2035

The Production Gap: 2019 Report4Gas

bcm/yr

12
300

8
200
6

6

4

EJ/yr

10

8

200

2020

6

10

4

0
2005

34

EJ/yr

600

2

4

100

2

0
2020

2035

0
2005

0
2020

2035

Australia
Australia is not only a major fossil fuelproducer, but also the world’s leading exporter of coal (IEA 2019a) and the second
largest producer and exporter of LNG(IGU 2018). With government backing,and proposed major new investments inmines and port facilities, Australia’s coaland gas outputs and exports could continue their rapid rise (Office of the Chief
Economist 2019). Proposed large coalmines and ports — if fully completed —would represent one of the world’s largest
fossil fuel expansions (around 300 Mt
per year of added coal capacity) (Buckley
2019a; Department of the Environment
and Energy 2018). The rise of hydraulicfracking has also opened the door to
discussions on tapping into the country’s
vast resources of unconventional (shale)gas (Westbrook 2018).
Australia supports increased fossil fuelproduction through several measures:j Tax-based subsidies total more than
AUD 12 billion (USD 9 billion) per year
(Market Forces 2019). This includes thefuel tax credit scheme, which allows fossil
fuel companies to claim tax credit on theirfuel use (Australian Taxation Office 2017),
and a budgeted AUD 1.7 billion (USD 1.3
billion) for accelerated depreciation for oil
and gas assets (Australian Department of
the Treasury 2015).
j Geoscience Australia, a government
agency, absorbs sector risk by financing
and conducting resource exploration,
which was worth AUD 100 million (USD
75 million) in fiscal 2017 (Department ofIndustry, Innovation and Science 2018).
j The government takes various steps
to support increased coal production, including, for example, fast-track approval,
private road construction, and reduced
royalty payments for Adani’s recently
approved Carmichael coal mine project in
the Galilee Basin (Buckley 2019b).

Government projections show coalproduction growing another 10% by 2024
and 34% by 2030, relative to 2018 levels(Office of the Chief Economist 2019;
Syed 2014). As shown in Figure 4.6, thegovernment also envisions gas production
growing 20% by 2024 and 33% by 2030
relative to 2018 levels (Office of the Chief
Economist 2019; Syed 2014).
Under these projections, Australia’s
extraction-based emissions from fossil
fuel production would nearly double(a 95% increase) by 2030 compared to2005 levels. However, its NDC targets a
reduction in territorial GHG emissionsof 26–28% over the same period (Government of Australia 2016).

j Recent legislation increased government support for investment in new overseas infrastructure projects from AUD 2
million to AUD 1.2 billion (USD 2 million to
USD 900 million) to accommodate Australian coal and gas exports (Parliament ofAustralia 2019; Hasham 2019).

Figure 4.6
Australian government outlooks for coal, oil, and gas production. Sources: Office of the Chief Economist 2019; Syed 2014

EJ/yr

Coal

Mt/yr

20

750

EJ/yr

Oil

20

mb/d

EJ/yr

10

20

Gas

bcm/yr

500
600

15

8
15

15
6

450
10

10
4
5

2

150

0
2005

2020

2035

0

300

10

300
5

400

0
2005

2020

2035

0

200
5
100

0
2005

2020

2035

0

The Production Gap: 2019 Report35CanadaCanada is the world’s sixth largest oil
producer and fourth largest natural gas
producer (IEA 2019a). In coal production,
it ranks just outside the world’s top 10(IEA 2019a). The fossil fuel sector currently
generates about 8% of Canada’s GDP,
though this has been in decline since1997, when it generated 10%. Production levels, however, have risen (Hughes2018). The government views fossil fuelexports as critical for Canada’s economic
growth — the current Prime Minister has
stated that expanding fossil fuel export infrastructure is “of vital strategic interest to
Canada” (Prime Minister of Canada 2018).
Canada has encouraged the productionof oil and natural gas through several
government measures, including tax incentives, regulatory reform, research anddevelopment support, and, most recently,
direct public investment. For example:
j Federal subsidies for fossil fuel production (including a 100% deduction for
exploration expenditures) were approximately CAD 1.6 billion (USD 1.2 billion) per
year from 2013 to 2015 (Touchette andGass 2018). As they are linked to oil prices
and exploration activities, a decline inboth led to a significant drop in subsidies
over the 2016–2018 period (Touchette

and Gass 2018). While some incentive
programs have ended, subsidy values arestill expected to increase with oil prices.
j Subsidies at the provincial level canalso be significant. Oil, gas, and coalsubsidies in Alberta, for example, totalled
CAD 2 billion (USD 1.5 billion) in fiscal year
2017–2018, with the vast majority comingfrom royalty adjustment (Environmental
Defence and Gass 2019).
j In 2018, the national government
purchased the Trans Mountain Pipeline
for CAD 4.5 billion (USD 3.5 billion) andit has offered to indemnify the pipeline
expansion project for a private buyer toenable increased oil sands production forinternational export markets (Departmentof Finance 2018).

Though Canada plans to address domestic emissions by putting in place anation-wide carbon price, fossil fuel production is expected to grow progressively,
largely driven by oil sands expansion.
Canada’s Energy Future 2018 projects oil
production to increase 60% from 2017
to 2040 (National Energy Board 2018).
Natural gas production is also on track toincrease 34% during that time (National

Energy Board 2018). In contrast, as afounding member of the Powering Past
Coal Alliance, Canada has committed to acoal power phase-out by 2030, accompanied by measures to support coal workers
and communities (Environment and Climate Change Canada 2017). Thermal coalproduction is thus expected to decline byroughly 90% from 2017 to 2040 (National
Energy Board 2018).
While Canada reported a 2% reduction
in 2017 emissions relative to 2005 levels(Environment and Climate Change Canada 2019), its NDC target is to reduce territorial emissions 30% below 2005 levels
by 2030 (Government of Canada 2017).
Ongoing fossil fuel production could
create challenges for meeting this goal,
as upstream oil and gas production alone
accounts for 27% of Canada’s territorial
emissions (Environment and Climate
Change Canada 2019). Furthermore, extraction-based CO2 emissions from fossil
fuel exports nearly doubled from 2000 to2015, and now exceed Canada’s domestic
CO2 emissions from all sources (Environment and Climate Change Canada 2019;
Lee 2018).

Figure 4.7
Canadian government outlooks for oil and gas production. Canadian coal production is small (~1 EJ/yr) and not shown. Source: National
Energy Board 2018.

EJ/yr

Oil

mb/d

12

EJ/yr

Gas

bcm/yr

12
300

6
9

9

200

4
6

6

2

3

0
2005

36

The Production Gap: 2019 Report

0
2020

2035

100

3

0
2005

0
2020

2035

Norway
Norway is the largest oil and gas producer
in Europe outside Russia, with extensive
offshore production. While oil production
has declined since a 2001 peak, gas
production has increased by almost
350% over the past three decades (IEA
2019a). Both are expected to rise incoming years, as shown in Figure 4.8,
before a longer-term decline.
Norway’s oil and gas policy emphasizes
maximum exploitation of economically
viable resources through technologicalinnovation in existing fields, increased
exploration in “mature” areas, and gradualexpansion in less-explored frontier areas— primarily in the Arctic (Norwegian
Ministry of Petroleum and Energy 2011).
The government supports expanded oil
and gas development through multiple
measures:j Norway awards new oil and gas
licenses through two different processes designed to encourage increased
exploration in frontier and mature areas,
respectively (Lahn 2019).
j The government is a direct investor
in the oil industry through passive ownership in many licenses and its controllingshare in Equinor (Lahn 2019).

j A 78% tax rate on the industry is a key
source of government revenue, but full
deductibility of exploration and development means the public shoulders alarge share of the risk in new oil and gas
developments (Lahn 2019).
j The current system of deductions ischaracterized by the Ministry of Financeas “too generous” compared to the ideal ofa neutral tax regime (Norwegian Ministryof Finance 2018). These tax breaks totalled
NOK 10.7 billion (USD 1.3 billion) in 2018
(Norwegian Ministry of Finance 2018),
and are categorized as subsidies by someanalysts (Aarsnes and Lindgren 2012).

While Norway’s territorial targets are
to reduce emissions by 40% from 1990
levels by 2030, and by 80–95% by 2050
(Norwegian Ministry of Climate andEnvironment 2017), it remains to be seen
whether these goals will lead to changes
in oil and gas policy or production. Emissions from oil and gas production haveincreased since 1990 and may continue
to increase despite Norway’s territorial
reduction targets, due to the ability to use
allowances purchased from the EU Emissions Trading System (EU ETS) to offset
the sector’s emissions (Lahn 2019).

At the same time, there is increasingawareness that future oil and gas policy
may be impacted by international climate
policy developments (Lahn 2019). In
response to this, some measures havebeen taken to minimize the economic
risks associated with declining fossil fueldemand. The Norwegian government
recently announced its intention to assess
future oil and gas investments against
an oil and gas price scenario in line with
Paris Agreement goals (Norway’s Climate
Risk Commission 2018; Norwegian
Ministry of Finance 2019a). While it is not
yet clear how this will be factored into
decision-making, previous analysis indicates some new oil developments may
be vulnerable to lower oil demand (Downand Erickson 2017; Rystad Energy 2013).
The government has also announced
the intention to divest its USD 1 trillion
sovereign wealth fund, which is built on oil
and gas revenues, from upstream oil andgas activities, in order to reduce Norway’s
oil price exposure (Norwegian Ministry of
Finance 2019b). The fund divested fromcoal energy in 2016, based on the sector’s
environmental impact.

Figure 4.8
Norwegian government outlooks for oil and gas production. Publicly available government projections of production beyond 2023 only show
oil and gas combined; projections beyond 2023 are split between oil and gas based on the ten-year average of the latest data (2014–2023).
Norway produces almost no coal (<0.01 EJ/yr). Sources: Norwegian Ministry of Finance 2019a; Norwegian Petroleum Directorate 2019.

EJ/yr

Oil

mb/d

6

3

4

2

EJ/yr

Gas

bcm/yr

6

160

120

4

80
2

1

2
40

0
2005

2020

2035

0

0
2005

2020

2035

0

The Production Gap: 2019 Report37Germany
Historically one of the world’s largest coalproducers and exporters, Germany has
now taken initial steps towards winding
down coal production and use, driven by
its “Energiewende” clean energy transition
agenda. With its last hard coal mine closing in late 2018 (driven by EU State aid
rules requiring the removal of subsidies
to their operation by 2018 (European
Union 2010)), the key debate is aroundthe speed and process for moving awayfrom brown coal (lignite) mining and use(Apunn 2019; Wynn and Coghe 2018).
As of 2017, Germany remains the world’s
largest producer of lignite (171 Mt), themost emissions-intensive type of coal
(IEA 2019a).
Germany has provided extensive government support to fossil fuel extraction
to date (Whitley et al. 2017). Recently,
however, it has begun shifting fossil fuelsubsidies to transition support for workers and mine rehabilitation, in line withinternational commitments and the domestic coal phase-out discourse (Schulz2019). Specifically:j Between 2005 and 2016, the German
government provided an average of EUR
2.4 billion (USD 2.8 billion) annually intransition support to the hard coal industry, including support for rehabilitation ofmining sites and for workers and communities, following the decision to close theindustry (in line with European Commission restrictions) (Whitley et al. 2017).
j The German Commission on Growth,
Structural Change and Employment(referred to as the Coal Commission)
has earmarked around EUR 40 billion(USD 47 billion) in government support
to compensate states affected by thephase-out of lignite. It is unclear what
proportion will go to mining (rather thanpower), as the Commission’s recommendations still need to be translated intolaw (Gençsü 2019).

A full transition away from coal is expected to play a central role in achieving
Germany’s long-term goal of an 80–95%
emissions reduction below 1990 levels
by 2050. The draft National Energy andClimate Plan (NECP) currently envisages
a 63% drop in coal production between
2015 and 2040 (BMWi 2018). However,
the Coal Commission has since proposeda full phase-out of coal-fired power generation by 2038 at the latest, with measuresthat include social and structural devel-

opment of lignite mining regions (BMWi2019; Schulz 2019). Germany’s Coal
Commission has brought together actors
from coal regions, industry, trade bodies,
environmental NGOs, academia, and communities affected by the expansion of coalmines, in order to chart a path to ending
German coal extraction and use while mitigating negative socio-economic impacts.
Germany joined the Powering Past Coal
Alliance in September 2019.

Miners from the Prosper-Haniel coal mine standnext to the Saint Babara sculpture a day before
the mine officially closed, at a religious service atthe Dom cathedral.

Figure 4.9
German government outlook for coal production. German oil and gas production is small (<1 EJ/yr each) and not shown. Source: BMWi 2018

Coal

EJ/yr

Mt/yr

2.5
250

200

2.0

150
1.5
100
1.0
50

0
2005

38

0
2020

2035

The Production Gap: 2019 ReportUnited Kingdom
The United Kingdom’s fossil fuel production lies primarily in offshore oil and gas,with estimated recoverable petroleum
resources of 10 billion to 20 billion barrelsof oil equivalent (OGA 2018). Under theUnited Kingdom’s policy of “maximizing
economic recovery”, it has stated an intent to extract “every drop of oil and gas”
(UK Parliament 2017). On the other hand,the country’s coal production and use has
been on a steep decline since the 1980s,
including a recent commitment to phaseout coal power by 2025 (Department for
Business, Energy, and Industry Strategy2018). It is one of the founding membersof the Powering Past Coal Alliance, alongwith Canada.
Though the UK government stated that it
does not provide any subsidies for fossil
fuels under its own definition, a recent
report by the European Commission
found that the United Kingdom has thelargest fossil fuel subsidies in the European Union (European Commission 2019). A
range of measures support the oil and gas
industry:j The United Kingdom issues new
exploration and production licenses every
year, alternating between offering matureand frontier areas. Leases generally last
30 years but are extendable (Muttitt et al.
2019).
j The United Kingdom offers investment
allowances, lowered tax rates for oil andgas, and support for decommissioning(Muttitt et al. 2019; Whitley et al. 2018).
j In the tax years 2015–16 and 2016–17,
the oil and gas industry received an average of GBP 176 million (USD 224 million)
more per year in government support
than it paid back in taxes (Muttitt et al.
2019).
j A public body, the Oil and Gas Authority, has a statutory mission of maximizing
extraction. It has created a strategy
to boost 2035 production revenue byaround 50% compared to baselines, andpromotes its achievement by, for example,
coordinating among companies on theiruse of infrastructure, sharing informationon costs, and intervening in supply chains(OGA 2019a, 2019b).

recent report by the Environmental Audit
Committee of the UK government statedthat “UKEF support for fossil fuel energy
projects is unacceptably high”, recommending that UKEF should set a strategy
for net-zero emissions by 2050, and pushother export credit agencies within theOECD to do the same (UK Environmental
Audit Committee 2019, p. 3).
Recently, the UK Committee on Climate
Change recommended that the United
Kingdom should raise its ambitions to net
zero emissions by 2050, deeming such atarget "necessary, feasible and cost-effective" (UK Committee on Climate Change
2019, p.8). Although the Committee’sreport contemplates mitigating emissions
from oil and gas production, it does notdiscuss how fossil fuel production itself
might be aligned with the net zero target.

j The United Kingdom provided anannual average of GBP 432 million (USD
550 million) in international public financefor upstream oil and gas in 2013 and 2014
through UK Export Finance (UKEF). A

Figure 4.10
UK government outlooks for oil and gas production. UK coal production is small (<0.1 EJ/yr) and not shown. Source: OGA 2019b

EJ/yr

Oil

mb/d

EJ/yr

2.0

4

Gas

bcm/yr

120
4

100
3

1.5

3

2

1.0

2

80

60

40
1

0.5

1
20

0
2005

2020

2035

0

0
2005

2020

2035

0

The Production Gap: 2019 Report39

5
Policy options
to close theproduction gap

Key Messages
Countries can begin to close theproduction gap by aligning theirenergy and climate plans.

Governments have a range ofpolicy options to regulate fossil
fuel supply, including limits on
new exploration and extraction
and removal of subsidies for
production.

Non-state actors and subnational governments canalso help facilitate a transition
away from fossil fuels, bymobilizing constituencies andshifting investment to lowercarbon options. Individuals andinstitutions have already pledged
to divest over USD 11 trillion fromfossil fuel holdings.

Several governments areplanning for a “just transition”
that aims to minimize disruption
for affected workers andcommunities.

40
40

The
The Production
Production Gap:
Gap: 20192019 Report
ReportSome countries are alreadydemonstrating leadership:
Belize, Costa Rica, Denmark,France, and New Zealand haveall enacted partial or total banson oil and gas exploration andextraction. Germany and Spain
are phasing out coal extraction.

5. Policy options to close the production gap
A key step toward closing the production gap is for countries to recognize the substantial discrepancy between fossil fuel production plans and global climate goals – and then to enact policies
that bring production plans in line with climate efforts. Their policy toolkit can include not only
“demand side” policies, such as renewable energy and energy efficiency measures, but also thosethat focus explicitly on reducing the supply of fossil fuels.

Accordingly, in this chapter, we outline the “supply-side”
policy options available, describe the benefits they could
offer, and highlight important lessons from early adoptersof such policies. We discuss the importance of incorporating processes that support a just transition away from fossil fuels. We conclude by discussing the role that non-state
actors can play in winding down fossil fuel production.

5.1. Supply-side climate policy
Policies to address fossil fuel supply are often missing fromthe climate policy toolkit. Most climate policy interventions
seek to address the consumption, rather than the production, of coal, oil and/or gas, through measures such as
pricing carbon, fostering alternative energy sources, andimproving energy efficiency. Climate policy need not belimited to interventions on the demand side, however. In
many other areas of public policy, governments recognizethat tackling supply and demand for a product at the sametime is the most effective way to limit its use (Green and
Denniss 2018). This is true for a diverse range of policy
goals, including efforts to reduce the consumption of
tobacco, the selling of illicit drugs, and the trafficking ofendangered species. The continued growth in fossil fuelextraction suggests that there may be value in similarly
seeking to limit the upstream production of such fuels, inaddition to their consumption (Green and Denniss 2018;
Lazarus and van Asselt 2018).
For governments interested in restricting fossil fuel supply
as part of their broader climate strategy, a range of policy
options exist (Table 5.1.). These “supply-side” climate policy
tools include economic instruments, such as fossil fuelsubsidy reform and taxation on the production or export offuels. Governments may also use their regulatory authority
to limit extraction, for instance by banning new permits
for exploration or extraction, or by limiting or rescinding

existing fossil fuel licenses. Policymakers can also turn totheir provision of goods and services, by redirecting publicfinance away from the fossil fuel sector, setting long-termgoals to wind down extraction, and developing strategictransition plans to support fossil-fuel-dependent workers
and communities. And governments can raise awarenessand increase transparency by requiring fossil fuel companies to report on their production plans, and by reportingon their own progress in closing the “production gap.”

For governments interested in restricting fossil fuel supply as part of theirbroader climate strategy, a range ofpolicy options exist.

The Production Gap: 2019 Report41

Table 5.1: Taxonomy of supply side policy
Category

Supply-side policy

Regulatory
approaches

Limit exploration, production, or export (e.g., via moratoria, bans, or quotas)
Prohibit development or limit permits for specific resources, infrastructure (oil pipelines and terminals, coalports, etc.), or use of certain technologies
Ensure comprehensive (upstream and downstream) emissions assessment in environmental impact reviewsof new fossil fuel supply projects

Economic
instruments

Remove fossil fuel producer subsidies
Introduce fees or taxes for fossil fuel production or export, and increase royalties

Government
provision of goods
and services

Assist workers and communities transitioning out of fossil fuel production
Divest state-controlled investment funds from companies involved in fossil fuel production
Restrict financing for fossil fuel supply projects through government-owned finance institutions (e.g. export
credit agencies, and national and multilateral development banks)

Information andtransparency

Require corporate disclosure of long-term climate-related risks associated with capital-intensive upstream
production and exploration (Carbon Tracker Initiative 2019a)
Set targets for reducing fossil fuel production, and report on progress alongside existing climate mitigationaccounts (e.g. by using an extraction based emissions accounting framework) (Steininger et al. 2016)

Source: Lazarus and van Asselt (2018), adapted from Somanathan et al. (2014) Table 15.2.

Some governments have already begun to enact policies
such as those outlined in Table 5.1, providing models forthe rest of the world to learn from and emulate (Figure 5.1).
The governments of Belize, Costa Rica, France, Denmark,and New Zealand, for instance, have all enacted partial
or total bans or moratoria on oil and gas explorationand extraction. Germany and Spain are phasing out coal
extraction, and working with workers and communities
to plan for an economic future without mining (MITEGO
2018; Wehrmann 2018). And more than 40 countries haveendorsed the need to reform fossil fuel subsidies (FFFSR
2019). These actions represent a growing momentum tolimit fossil fuel supply for climate and related sustainable
development reasons. Most of these policies and commitments have been enacted in the last five years (see online
Appendix C), signalling policymakers’ new focus on fossil
fuel production.
As noted in Chapter 1, policies to limit fossil fuel production can bring several benefits. Supply-focused measures
broaden the climate policy toolkit, which can increase thescale of emission reductions available at a given marginalcost. They can also help avoid “carbon lock in” by limiting
investment in long-lived infrastructure (i.e. entrenchedfossil fuel production with long pay-back horizons). Thiscan also decrease the risks and costs associated withstranded assets (Erickson et al. 2015) — risks that are

42

The Production Gap: 2019 Report

particularly pronounced for countries that are now deciding whether to follow a fossil-fuel-driven development
pathway (Bradley et al. 2018). Supply-side policies also
may have administrative advantages over other forms ofclimate policy: they target a narrower set of actors (fossil
fuel producers), and thus may be easier and less costly toadminister (Green and Denniss 2018).
Finally, there may be distinct socio-political advantages
to addressing fossil fuel supply, alongside other climate
policy measures. Fossil fuels are more tangible thanemissions, which helps to mobilize public support forclimate policy; people may find it easier to attribute costs
and benefits to specific, familiar energy sources, rather
than the more abstract emissions created from those
fuels when they are burnt (Ansolabehere and Koninsky
2014; Green and Denniss 2018). Addressing fossil fuelsupply also brings added co-benefits — such as reducing
pollution around extraction, processing, and transportation sites — that may appeal to affected communities(O’Rourke and Connolly 2003). That said, supply-side
constraints may encounter opposition from industry, communities and regions economically dependent on fossil
fuel extraction (Harrison 2015). Careful design of policies,
including supporting measures for affected communities
and industries, can increase the political viability ofsupply-side policy.

Figure 5.1 Examples of supply-side polices and actions taken by countries. Note that not all policies were adopted with a climatechange rationale, though they may potentially have mitigation impacts. For more detail, see online Appendix C.

NORWAYCANADA

DENMARKCHINAGERMANYFRANCEUNITED STATESBELIZE

ITALY
INDIA

SPAIN

NEW ZEALAND

COSTA RICA

Coal
Oil and Gas

BELIZE

DENMARK

Moratorium on offshore oil
exploration and drilling

Ban on exploration and drilling for oil, gas, and shale gas onland and in inland waters

CANADA
Phase-out of the accelerated
capital cost allowance for oilsands projects and the Atlantic
Investment Tax Credits for use
in oil and gas activities (subsidy
reform)Moratorium on offshore oiland gas activities in Canada's
Arctic waters and in designatedmarine protected areas

CHINA
Supply-side structuralreform (closure of coal mines)
and just transition support
measures

COSTA RICAFRANCENo new or renewal of exploration permits for conventional
and unconventional fossil fuels;
Phase-out of all oil and gas
production within the country
and its overseas territories
by 2040GERMANY
Phase out of subsidies fordomestic hard coal industry
by 2018
Just transition plan for thecoal industry: compensation forcoal mining provinces; compensation and training for coalminers

INDIA

SPAIN

Cess (tax) on coal production

ITALY
18-month moratorium on
offshore oil and gas exploration
permits

NEW ZEALAND

Closure of domestic coalmines with Just Transition plan(compensation and re-training)

UNITED STATESMoratorium on oil and gas
exploration in some areas of
the Arctic and Atlantic

Ban on new offshore oil andgas exploration permits
Establishment of a “JustTransitions Unit” with a focus
on supporting the region mostdependent on the oil and gas
industry

NORWAY
Certain offshore areas closed
for drilling (including Lofoten
archipelago and other coastaland sensitive areas and in the
Arctic)National moratorium on oil
exploration and exploitation

The Production Gap: 2019 Report43Box 5.1. Lessons from first movers: Limiting oil supply in Latin America andthe Caribbean
Some of the earliest efforts to limit the production ofarea (Government of Mexico 2016). And in December

oil and gas on environmental grounds originated in2017, the Belize government unanimously approved a

Latin America and the Caribbean. The most prom-

moratorium on petroleum-related activities in mari-inent moratorium effort is probably the Yasuní-ITT

time areas (Government of Belize 2017).

project, launched in 2007 in Ecuador, which soughtinternational compensation for banning the extraction of oil in a national park (Finer et al. 2010).

These governments have shown that starting withsmall steps — a temporary ban, or limits on extraction in a restricted area — can help build momen-

While this initiative was ultimately unsuccessful

tum for expanding constraints on production. While(Sovacool and Scarpaci 2016), later efforts to limit oil

climate change was occasionally raised as a motivat-

extraction without a condition of compensation fared

ing factor, the protection of biodiversity, ecosystembetter. In 2011, Costa Rica announced a temporary

services, and eco-tourism were the main rationales

moratorium on offshore oil exploration, which wasunderpinning all of these initiatives. An emphasis onlater extended to 2050 (Government of Costa Rica

the measures’ potential benefits helped increase the2019). In 2016, former Mexican President Enrique

viability of their adoption, suggesting more attention

Peña Nieto signed decrees banning oil and gas activ-

needs to be paid to the wider sustainable develop-

ities in areas of high natural value, amounting to ap-

ment benefits of closing the production gap.

proximately 1 million square kilometres of protected

5.2. Support for just transitions
Policies that constrain fossil fuel production — either
directly through supply-side policies, or indirectly by
reducing fuel demand — can be coupled with transition
support to aid those currently reliant on fossil fuel development for their livelihoods. All governments, as signatories to the Paris Agreement, have recognized the need to“[take] into account the imperatives of a just transition”
and the impacts of response measures; this implies theneed to plan to minimize disruption for workers, communities, and consumers who may be disproportionately
affected by a shift to a low-carbon economy (ITUC 2017;
UNFCCC 2016). Some countries have already embarked
on such planning. For example, the governments of Canada (Government of Canada 2018), Germany (Wehrmann2018), Spain (MITEGO 2018), Scotland (Scottish Government 2018), and New Zealand (MBIE 2018) are all developing or implementing new transition planning processes
and support programs to help oil, gas, and/or coal workers
and communities adjust as their industry declines.

44

The Production Gap: 2019 Report

While transitions away from fossil fuels will affect many
across society, two groups are typically the focus oftransition planning efforts in the fossil fuel production
sector: workers and fossil-fuel-dependent communities
and regions (Sartor 2018). Both workers and communities
want to be consulted on the transition and want meaningful social dialogue to take place concerning their future.
Once dialogue takes place and workers’ concerns areheard, a range of solutions can be negotiated to facilitate atransition that different parties perceive as fair.
Commonly employed transition provisions include: facilitating local development planning; ensuring workers’ existing legal entitlements (e.g. to pensions and healthcare) aremaintained; ensuring social protection and insurance measures for workers; supplementing local government revenues; creating job training programs; restoring industrialsites; and investing in new community facilities to revitalizesocial and economic development (Green and Gambhir
2019). There is no “one-size-fits-all” approach to transition
planning; the choice of transition support should reflectBox 5.2. Addressing supply and demand: New Zealand’s comprehensive
approach to climate policy
New Zealand is a relatively small fossil fuel producer.

to kick-start the managed transition (New ZealandHowever, the country faces similar challenges toGovernment 2018c).

those of most producing countries. Oil production
is highly concentrated in one region, Taranaki, andforms an important part of the regional economy,
accounting for 28% of the region’s economic output(Make Way for Taranaki 2017). The New Zealand government has recognized the challenge that the global
phase-out of fossil fuels represents for Taranaki, andthe need for a managed transition that protects jobs
and supports regions and local communities (New
Zealand Government 2018a).
In April 2018, the New Zealand government announced that it would cease granting offshore oiland gas exploration permits, a ban that was subsequently passed into law in the Crown Minerals(Petroleum) Amendment Act 2018 (New Zealand
Government 2018b). The policy protects existingjobs and exploration and extraction rights: it does notcover the country’s 22 existing offshore exploration
permits, and new onshore exploration permits canstill be granted. As Prime Minister Jacinda Ardern
highlighted, the policy aims to provide certainty forindustry and communities to plan for the future, andthe desires and opportunities that make the most sense
for individual workers and communities, as well as thegovernment capacity, institutions, and wider conditions in
the relevant jurisdiction (Green and Gambhir 2019). The
size and scope of these plans depends on the current footprint of the industry: countries and regions that are heavily
dependent on fossil fuel production will need extensive
industry transition plans, whereas more diversified economies may have relatively minimal transition needs.

The exploration ban fits within a wider, comprehensive climate strategy that aligns demand, supply,
and transition measures. In May 2019, the government proposed legislation that would set a target ofnet-zero carbon emissions by 2050, and establish
an independent climate change commission (New
Zealand Government 2019a). Alongside this policy,
the government has created a Just Transitions Unit toaid the transition process (MBIE 2018).
A key element of New Zealand’s climate strategy is
supporting the Taranaki region as it transitions its
economy away from fossil fuels. The government isinvesting NZD 20 million (USD 13 million) in local infrastructure and clean energy projects to diversify theregion’s economy (New Zealand Government 2018d),
and in 2019 it hosted a Just Transition Summit to
discuss the steps needed to realize a low-emissions
future (New Zealand Government 2019b). The government has also helped the Taranaki region to develop a
2050 Roadmap, co-designed with local communities
and stakeholders (Venture Taranaki 2019).

Providing assistance to those impacted by a transition
away from fossil fuels is almost certainly a necessary
precondition for ambitious climate policy. Absent a clear
plan to support those affected by a low-carbon transition,
governments are likely to face social and political resistance to any efforts to limit fossil fuel production or use.
Transition planning can build consensus for more ambitious climate policy, including for the types of supply-side
policies outlined in this chapter.

The Production Gap: 2019 Report45

5.3. The role of subnational and non-state actors
National governments are not acting alone to limit fossil
fuel production and support a just transition. Many cityand regional governments are putting in place policies toconstrain fossil fuel supply, and help communities moveinto alternative economic development models. Dozens ofmunicipalities, counties, and regional governments have,for example, enacted bans on hydraulic fracturing (Carterand Eaton 2016; KTWS 2018); subnational governments,
such as Scotland and Alberta, were also among the firstto announce just transition policies to support oil andcoal workers, respectively (Government of Alberta 2017;
Scottish Government 2018).
Beyond governments, a range of other non-state actors
are helping to facilitate the transition away from fossil
fuel extraction, including companies, investors, tradeunions, and civil society organizations. Through fossil fueldivestment campaigns and other efforts, civil society
groups and investors have placed social, political, andeconomic pressure on governments and companies tomove away from supporting fossil fuel production (Healy
and Barry 2017). To date, more than USD 11 trillion in fossil
fuel divestment pledges have been made by over 58,000
individuals and more than 1,100 institutions (Fossil Free2019).
Civil society has also been leading the call for governments and corporations to take action on fossil fuelsupply. More than 500 non-governmental organizations,for instance, have signed the “Lofoten Declaration” callingfor an end to fossil fuel development and the managed
decline of existing production (The Lofoten Declaration
2017). Collectively, campaigns like this are helping tochange the discourse, norms, and attitudes around ongoing fossil fuel production in a climate-constrained world(Cheon and Urpelainen 2018; Green 2018; Piggot 2018).

46

The Production Gap: 2019 Report

Fossil fuel companies could also play important roles
in closing the production gap. A handful of fossil fuelcompanies are already moving their investments towards
lower-carbon options. For example, in 2017, the Danish
Oil and Natural Gas company (DONG) sold off its oil andgas business, and announced a name change to Ørsted toreflect its exit from the fossil fuel business (Spector 2017).
While this is a step in the right direction, the industry as awhole has not yet signalled a commitment to a long-termtransition away from fossil fuels, with only 1.3% of oil andgas companies’ total capital expenditures (USD 22 billion)
invested in low-carbon energy since 2010 (Fletcher et al.
2018). Historically, fossil fuel industry associations aiming
to reduce emissions — such as the Oil and Gas Climate
Initiative and IPIECA (the oil and gas industry associationfor environmental and social issues) — have primarily
focused on improving the reporting and the emissions intensity of production, rather than on limiting investments
in projects that are incompatible with a 1.5°C or 2°C
pathway (Carbon Tracker Initiative 2019b; Grant 2018).
Going forward, these organizations could be instrumental
in managing an orderly wind-down of fossil fuel production by helping companies align their portfolios with Paris
Agreement goals and by moving away from investmentsthat could stand in the way of meeting the world’s climatechange objectives.
While such actions by civil society, governments, andsome businesses are promising, the shift away from fossil
fuel production and use is not yet happening at the speed
or magnitude needed to limit dangerous global warming(Muttitt et al. 2016). Greater ambition and coordination bystate, subnational, and non-state actors will be required toalign fossil fuel supply with Paris goals (Piggot et al. 2018).
The next chapter details how the policies and initiatives
outlined in this chapter might be scaled up internationally.

The Production Gap: 2019 Report47

6
Increasing
international
ambition and action

Key Messages
International cooperation canplay a central role in efforts towind down fossil fuel production.

The Paris Agreement provides
key opportunities for countries
to address fossil fuel production,
including through the global
stocktake, nationally determined
contributions, financing, andlong-term low greenhouse gas
emission development strategies.

International financial institutions
can shift financial support awayfrom fossil fuel production andtowards low-carbon energy.

Ensuring an equitably managed
decline in production is crucial tosuccess.

48
48

The
The Production
Production Gap:
Gap: 20192019 Report
ReportDrawing inspiration from models
such as the Powering Past Coal
Alliance, coalitions of leading
actors can work together to raise
ambition through joint targets
and actions that align future
fossil fuel production with global
climate goals.

6. Increasing international ambition and action
International cooperation plays an important role in catalysing supply-side policy. It can encouragecountries to adopt more ambitious policies by offering assurances of collective action. That collective
action can, in turn, increase policy effectiveness; since fossil fuels are traded internationally, supply-side measures are more effective when countries adopt them together. International cooperation
can also increase momentum for domestic action by sending a clear signal to policymakers, investors, consumers, and civil society that the world is shifting towards a low-carbon future. And it canhelp ensure that such a transition takes place in an equitable way.

This chapter summarizes how the UN climate process andother international institutions and initiatives can help tocatalyse supply-side ambition and action. We conclude by
discussing the importance of ensuring an equitable transition away from fossil fuel production, and key considerations that can support this effort.

6.1. Winding down fossil fuel supply through the
UN climate change process
As the foremost international forum for climate action, theUN climate change process (under the UN Framework
Convention on Climate Change, UNFCCC) is arguably
well placed to address the linkages between fossil fuelproduction and climate policy (Piggot et al. 2018). Yet
its consensus-based approach to decision-making alsopresents a challenge. Fossil fuels have historically been
kept from the UN climate regime’s agenda (Depledge2008), with the 2015 Paris Agreement omitting any
reference to fossil fuels. This omission reflects theconcerns of major fossil-fuel-producing and exporting
nations, whose governments have argued that they would
face economic challenges if stronger climate action were
to be taken (Chan 2016; van Asselt 2014).
There is a clear rationale for addressing fossil fuel supply
through the UN climate regime, however. As discussed in
Chapter 1, meeting the Paris Agreement’s goal of limiting
the global average temperature to well below 2°C above
pre-industrial levels — and pursuing efforts to stay below
1.5°C — will require the vast majority of proven fossil fuelreserves to remain unburned (McGlade and Ekins 2015;
Muttitt et al. 2016). Moreover, the Agreement aims to
make finance flows consistent with a pathway towards
low greenhouse gas (GHG) emissions and climate-resilient
development. This will require the redirection of the approximately USD 1 trillion that is invested annually in new
fossil fuel supply infrastructure (IEA 2018), and the USD

Delegates gather in the Chamber Hall at the Bonn Climate Change
Conference in May 2017. Photo by IISD/Kiara Worth (enb.iisd.org/climate/sb46/enb/8may.html)

24 billion to 70 billion that governments expend on fossil
fuel production subsidies each year (Chapter 3).
Fossil fuel phase-out, fossil fuel subsidy reform, anddivestment from fossil fuels also repeatedly emerged as
topics in the 2018 Talanoa Dialogue, a process designed toenhance climate ambition through the UN climate regime.
Inputs into the Dialogue underscore that addressing fossil
fuel production “requires significantly more international
cooperation, and wider and deeper engagement of key
stakeholders” (UNFCCC Secretariat 2018, p.8).
The Paris Agreement creates various new opportunities tointegrate supply-side considerations into the UN climatechange process (Piggot et al. 2018). Seven such avenues
are discussed below. Importantly, given the relatively“bottom-up” nature of the Paris architecture, many of these
are not dependent on international consensus, and could
thus be pioneered by one country or a group of countries.

The Production Gap: 2019 Report49Box 6.1. Leakage and supply-side policy
There is a popular misconception that reducing

in response to price increases (i.e. low supply elas-production in one location will simply lead to anticity), the more effective a cut in fossil fuel supply

equal amount being produced elsewhere — a game

becomes at reducing carbon dioxide emissions. Forof “perfect substitution” that would, if true, negate

example, studies using elasticities from the econom-

the emission reductions and other benefits of sup-ics literature have shown that for oil, each barrel

ply-side actions (Roberts 2015). However, this argu-

left undeveloped in one region will lead to 0.2 to 0.6

ment of perfect substitution defies basic economics

barrels not consumed globally over the longer termof supply and demand. If there is less available of a

(Erickson et al. 2018).

commodity — such as oil — its price will increase,meaning less of it will be consumed. In principle,
limits to oil production in one area could be “undone”
by coordinated increases elsewhere, such as by theOrganization of the Petroleum Exporting Countries(OPEC). However, OPEC’s ability to effectively control
production and, in turn, long-term prices, is limited
and declining (Baffes et al. 2015; Van de Graaf 2017).

as well. Energy efficiency policies, for example, canlead to lower fuel prices, somewhat diminishing theirbenefits. Therefore, reducing demand and supply intandem — through linked policies and targets —offers the advantage of neutralizing the potential forleakage, and increasing the effectiveness of eachtype of policy. Indeed, a coalition of countries acting

Using elasticities of supply and demand, we cantogether to limit both demand and supply can coun-gauge the extent of leakage and demonstrate theteract global fossil fuel price change that could oth-effectiveness of supply-side climate policy. The lesserwise undermine the effectiveness of their climate

fossil fuel producers are able to increase extraction

policies (Asheim et al. 2019).

Global stocktake
Starting in 2023, and every five years thereafter, the Paris
Agreement’s global stocktake will assess collective progress made towards the long-term goals of the treaty. The
outcomes of this exercise should help Parties to the Paris
Agreement strengthen their climate action and support,
and increase overall ambition. Given the importance ofaddressing fossil fuel supply for meeting the Paris Agreement’s objectives, the global stocktake could assess theextent to which countries and other actors are winding
down fossil fuel production and limiting their support
for extraction-related activities. This assessment could
facilitate learning by highlighting Parties’ best practices
and successes, as well as the barriers they faced whilepursuing a wind-down of fossil fuel supply. Information to
support such assessments could be sourced from Parties,
scientific assessments (like those of the Intergovernmental Panel on Climate Change or IPCC), internationalorganizations (like the International Energy Agency), andsubmissions from non-state actors. To assist in monitoring
the alignment of fossil fuel production with Paris goals,

50

The same principles hold with demand-side policies

The Production Gap: 2019 Report

Parties could voluntarily adopt extraction-based emissions accounting — alongside the IPCC’s existing territorial emissions accounting approach, which is currently usedin the climate change regime (Box 3.1).

Nationally determined contributions
Central to the achievement of the Paris Agreement’s longterm goals is the requirement for Parties to communicate,every five years, their nationally determined contributions(NDCs) to climate action. Countries currently include avariety of emissions reduction targets and policies in their
NDCs. They could add targets and measures to align theirfossil fuel production with Paris goals (Piggot et al. 2018;
Verkuijl, Jones, et al. 2019). This would help enhance theclimate ambition of such plans and socialize the importance of taking both demand- and supply-side action.
Countries could adopt a range of supply-side policies inthis regard, including: moratoria on new fossil fuel infrastructure; removal of subsidies for fossil fuel producers;
fossil fuel production and export taxes; and divestmentof public funds from fossil fuel holdings (See Chapter

5). However, only two countries — India and Nigeria —currently include supply-side measures in their NDCs,
according to an examination of NDCs from 57 of the top
fossil-fuel-producing nations (Verkuijl, Jones, et al. 2019).
The upcoming 2020 deadline for Parties to communicate
new or updated NDCs offers an important window ofopportunity for countries to include more supply-side approaches, as part of wider efforts to boost global climate
ambition through these plans.

fossil fuel production levels. The first such opportunity to
do so under the new transparency framework will be in
2024, when the first round of national “biennial transparency reports” is due. Countries could also report suchinformation under the existing transparency framework,
under which several reporting rounds are still anticipated.
Moreover, in the review process, Parties can ask eachother questions about the role of fossil fuel production in
implementing and achieving NDCs.

Long-term low-emissions development strategies

Financing and capacity-building

Long-term low GHG emission development strategies(LEDS) are national plans for transitioning to a lowcarbon economy by 2050. As part of the Paris outcome,Parties are invited to voluntarily submit such plans by
2020. These plans typically include scenario planningand modelling to reduce territorial emissions, both inspecific sectors and in the economy as a whole. They
thereby play an important role in informing short- andmedium-term action and in helping to provide politicalcertainty regarding countries’ low-carbon development
trajectories (Espinosa 2018). Alongside such information,
countries could use their LEDS to map out their fossil
fuel extraction and infrastructure development pathways
over a longer time frame, in a way that is consistent with
global climate goals, and meets the just transition needsof fossil-fuel-dependent workers and communities. The
LEDS submitted so far (April 2019) by fossil-fuel producing
countries do not include this information (Verkuijl, Jones,
et al. 2019). However, incorporating supply-side planning
into LEDS can help countries to avoid a more costly anddisruptive transition away from fossil fuel extraction
further down the line. It further sends a strong politicalsignal that countries are considering the impacts of fossil
fuel production in their climate change planning.

In Article 2.1(c), the Paris Agreement aims to make financeflows consistent with a pathway towards low GHG emissions and climate-resilient development. Discussions on
how to put this objective in practice will offer a clear opportunity to discuss how to wind down support for fossil
fuel production. The Paris Agreement further stipulates
that developed country Parties shall provide financial resources to assist developing country Parties with respect
to both mitigation and adaptation. Governments and otherfunding agencies could support developing countries
with just transition funds that help to retrain workers infossil-fuel-dependent communities (Rosemberg 2017;
UNFCCC 2016). In parallel, countries’ technical and institutional capacity to wind down fossil fuel extraction could
be enhanced through UNFCCC Technical Expert Meetings
and the Paris Committee on Capacity-building, and international coalitions such as the NDC Partnership and LEDS
Global Partnership.

Transparency and reporting
The Paris Agreement established an enhanced transparency framework to help build confidence and improve implementation of both climate action and support (Winkler
et al. 2017). At the 2018 Katowice Climate Change Conference, countries agreed to identify indicators to trackprogress towards the implementation of their respective
NDCs. Such indicators can be qualitative or quantitative,
and could include information such as the percentageof renewable energy use or production and the share offossil fuel in primary energy consumption (UNFCCC 2018).
In recognition of the importance of winding down fossil
fuel production for meeting climate goals, Parties could
also provide information on their current and projected

Forum on the impact of the implementation of
response measures
Many countries are grappling domestically with the question of how to plan a just and equitable transition awayfrom fossil fuel production. With its focus on “economic
diversification and transformation” and “just transition of
the workforce, and the creation of decent work and quality
jobs” (UNFCCC 2015), the UNFCCC’s forum on the impactof the implementation of response measures offers a platform where relevant information, experiences, and bestpractices can be shared internationally (Jenkins 2019).

Showcasing action by subnational and local
governments, civil society, businesses, and investors
Non-state actors and subnational authorities play a vitalrole in promoting a transition away from fossil fuel production (Chapter 5). Parties, with the backing of the UNFCCC
Secretariat, could expressly support and spotlight civil society efforts to wind down extraction. For example, Parties
could ensure that supply-side efforts taken by regions and

The Production Gap: 2019 Report51cities inform and strengthen national transition plans, andare reflected in NDCs and LEDS. The steps that subnational governments, civil society, businesses, and investors
are already taking to address fossil fuel supply could also
feature more prominently in the work of the Marrakech
Partnership for Global Climate Action, which currently
focuses almost exclusively on demand-side approaches. They can also be shared through the Global Climate
Action database and yearbook, which captures non-stateand subnational climate commitments and progress.

6.2. Winding down fossil fuel supply throughother institutions
The previous section details various ways in which the UN
climate process can advance international cooperation
on supply-side climate policies. But governments also canpursue various options to address fossil fuel production
outside of the UNFCCC context.
First, international cooperation can be pursued throughnew coalitions. Several possible models exist in thisregard. For instance, Harstad (2012) suggests that a coalition of the willing could buy up and close high-cost coal
fields through a system of tradable extraction rights. Building on this proposal, Collier and Venables (2014) suggest
this could be financed through redirecting the economic
rents from oil production. Richter et al. (2018) show that a

52

The Production Gap: 2019 Report

coordinated coal tax adopted by a coalition of major coalproducers or exporters could reduce emissions and leavethese countries with welfare gains. While these contributions suggest that new supply-side-orientated coalitions
may yield climate and economic benefits under certain
conditions, it may be difficult to attract the participation ofmajor fossil fuel producers from the start.
However, coalitions that have emerged in recent years
show that they need not necessarily start with major fossil
fuel producers and exporters. Instead, international cooperation “is likely to be contingent on a coalition of earlymovers taking unilateral steps to limit or reduce fossil fuelsupply (i.e. ‘leading by example’) and then persuading or
incentivising other states to adopt similar restrictions”(Green and Denniss 2018, p. 83). Several initiatives haveemerged that are arguably aimed at “socializing” otherstates to the idea of restricting fossil fuel supply (Green2018a). For instance, Anote Tong, then-President of thesmall island state Kiribati, proposed a “no new coal mines
moratorium”, which was supported by several Pacificisland nations (Pacific Island Development Forum 2015).
Another example of a related, though demand-side-oriented, coalition is the Powering Past Coal Alliance (PPCA),
which aims to phase out existing coal-fired power plants.
The PPCA quickly grew from an initiative by two countries — Canada and the United Kingdom — to a coalition

Table 6.1
Commitments by multilateral development banks to end fossil-fuel-extraction-related support. Unless otherwise noted, restrictions apply
to direct financing but not indirect financing (e.g., via financial intermediaries).

Year

Institution

PolicySource2009

Asian Development Bank

Will not finance oil and gas exploration. Will not fund oilfield development projects, but will consider supporting
the development of “marginal and already proven” fields
if economically sound. Will not directly finance coal minedevelopment “except for captive use by power plant.”

https://www.adb.org/sites/default/
files/institutional-document/32032/
energy-policy-2009.pdf

2012African Development Bank

Will not finance oil and gas exploration.

https://www.afdb.org/fileadmin/uploads/afdb/Documents/Policy-Documents/Energy_Sector_Policy_of_the_
AfDB_Group.pdf

2013World BankGroup

Will only finance coal mining in “rare circumstances”.

http://documents.worldbank.org/curated/en/745601468160524040/pdf/795970SST0SecM00box377380B00PUBLIC0.pdf

2017World BankGroup

Will not provide direct financing for upstream (exploration and production of) oil and gas after 2019. (In exceptional circumstances, consideration will be given tofinancing upstream gas in the poorest countries, where
there is a clear benefit in terms of energy access for thepoor and where the project fits within the countries’
Paris Agreement commitments.)

https://www.worldbank.org/en/
news/press-release/2017/12/12/
world-bank-group-announcementsat-one-planet-summit

2018

European Bankfor Reconstruction and Development

Will not finance thermal coal mining or coal-fired electricity generation capacity, any upstream oil exploration,
or upstream oil development projects except in “rareand exceptional” circumstances, where the projects
reduce GHG emissions or flaring.

https://www.ebrd.com/power-andenergy/ebrd-energy-sector-strategy.pdf

2019European Investment Bank

Energy lending policy phases out direct and indirect
financing of energy projects reliant on fossil fuels by
2021. This includes upstream oil or gas production, coalmining, and infrastructure dedicated to coal, oil, andnatural gas.

https://www.eib.org/en/press/
all/2019-313-eu-bank-launchesambitious-new-climate-strategy-andenergy-lending-policythat includes more than 30 countries, as well as subnational authorities and businesses. As noted in Chapter
4, the Alliance now counts Germany, the world’s eighthlargest coal producer, among its members. Its success inattracting participation is in part due to the low barriers
for joining (Green 2018b; Jewell et al. 2019; Blondeel et al.
forthcoming).
Ideas have also been put forward for new coalitions thatwould include commitments to restrict the supply offossil fuels, such as a “fossil fuel non-proliferation treaty”(Newell and Simms 2019), “fossil fuel free zones” (Green2018c), and “supply-side NDCs” (Asheim et al. 2019). As
fossil fuel infrastructure on the ground can be relatively

easily observed via satellite, a key advantage of approaches such as these, compared to those targeting more
abstract emissions reductions, is the ease with which
commitments to address fossil fuel production can bemonitored and verified (Green 2018b).
Second, international cooperation can take place throughexisting international forums (van Asselt 2014). A casein point is the issue of fossil fuel subsidies. The impetus
for addressing such subsidies did not come from the UN
climate process, but rather from high-level commitments
by the G20, as well as capacity-building and information-gathering activities by international organizations
such as the International Monetary Fund, the World Bank,

The Production Gap: 2019 Report53and the Organisation for Economic Co-operation andDevelopment (Van de Graaf and Blondeel 2018). Reflecting the broader sustainable development benefits of fossil
fuel subsidy reform, all countries have now agreed to takeaction through the adoption of Sustainable Development
Goal (SDG) Target 12.c (UN General Assembly 2015).
Other international institutions, such as the World Trade
Organization, could further contribute to supporting such
reform efforts by negotiating new rules that discipline fossil fuel production subsidies that also distort international
trade, or by improving transparency (Verkuijl, van Asselt,
et al. 2019).
Third, nation states, acting through international financial
institutions, can shift financial support away from fossil
fuel production. Some development banks have alreadytaken steps in this direction. The World Bank Group, forinstance, announced in 2017 that it would end its direct
financial support for upstream oil and gas, following asimilar commitment for coal mining. Similar commitments
have also been made by several other multilateral development banks (Table 6.1). To help developing countries
meet their energy needs, this would require support for
low-carbon energy to be scaled up in parallel.

6.3. Toward an equitably managed decline infossil fuel extraction
While climate equity has long been debated with respect
to fossil fuel consumption (Fleurbaey et al. 2014; Gardineret al. 2010), the study of equity impacts is more nascent
when it comes to fossil fuel production (Bradley et al.
2018; Caney 2016; Green and Gambhir 2019; Kartha etal. 2016, 2018; Le Billon and Kristoffersen 2019; Lenferna 2018). However, the equity issues raised by reducing
fossil fuel production are no less consequential than thoseraised by reducing demand. If fossil fuel production is to
decline at a rate commensurate with meeting the Paris
goals (Chapter 2), millions of workers who are directly
involved in extracting fossil fuels would need to shift todifferent jobs. Communities economically dependent
on fossil fuel production-related activities would have tosustain their livelihoods in new ways. Provision of affordable, reliable, and modern energy might, in some cases,
become more difficult. National economies that are
fuelled by domestic fossil resources would need to shift
to alternative resources. And governments that depend
heavily on revenues from domestic fossil fuel extraction
would need to diversify and develop alternatives for funding public services.

54

The Production Gap: 2019 Report

These equity consequences are not only compellingfrom a moral standpoint but are politically important
as well. Climate change is a commons problem, andan effective response requires global engagement andwidespread cooperation that is robust enough to support
a major global transformation. This is unlikely if the pathforward is not broadly seen as fair by the nations whose
participation is needed.
Insights from the transitions literature can help to inform
how these equity questions might be fairly addressed(Muttitt and Kartha forthcoming). A country’s ability tophase out extraction while meeting the needs of workers
and communities depends in part on the scale of thetransition required and the capacity for support. Countries or regions where a transition would be least sociallydisruptive could thus be best positioned to take the leadby winding down extraction earlier and faster.
A country’s ability to wind down production also depends
on the resources (financial and otherwise) available tosupport a smooth transition, which may be limited inlower-income producing countries. Since the costs ofprematurely winding down extraction are incurred partly
for the global common good, an equitable approach
would ensure such countries are supported internationally. Importantly, this support should not be for the purposeof compensating for foregone revenues, but rather foraiding in economic diversification and for ensuring a justtransition for communities and workers.
It is important not to ignore the fact that winding down extraction can also come with significant domestic benefits.
Extraction and processing can be associated with deeply
inequitable impacts, often in the form of human rights violations and local ecological damage (Amnesty International 2016, 2017; Rowell et al. 2005). An approach to aligning
climate and equity considerations could thus be to link
the wind-down of fossil fuel extraction with human rights
and environmental agreements, by prioritizing the winding
down of production in the places where human rights andenvironmental concerns are greatest.
Political economic factors will undoubtedly result in pressure to set aside these equity considerations. However,in the words of the Intergovernmental Panel on Climate
Change (IPCC 2014, p. 5), outcomes “seen as equitable
can lead to more effective cooperation”.

In summary, winding down fossil fuel supply is an important step towards achieving international climate change
goals. International cooperation can play a key role incatalysing such efforts. Within the UN climate change
process, the Paris Agreement creates various new opportunities to support supply-side efforts through enhanced
transparency, ambition, and learning. Looking beyond the
UN climate regime, supply-side action can also be supported through new coalitions, and existing international

processes and institutions. Inspiration can be drawn frominitiatives such as the Powering Past Coal Alliance, as wellas international commitments to address fossil fuel subsidies. Ultimately, such efforts will be most likely to succeed
if they are deemed to be fair and equitable. Internationallyagreed temperature limits, insights from the transitions
literature, and existing human rights and environmental
agreements can offer a starting point for informing thischallenging — but urgent — task.

Tung Bua Tong Mexican sunflower field in Mae Moh Coal Mine, Lampang Province, Thailand.

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Chapter 2
Alvarez, R. A., Zavala-Araiza, D., Lyon, D. R., Allen, D. T., Barkley,
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