Oil Change International

Exposing the true costs of fossil fuels

Shift the Subsidies Methodology

Here are answers to some common questions about Oil Change International’s Shift the Subsidies database and the methodology behind it. Please reach out at shiftthesubsidies@priceofoil.org if you have additional questions about the data or its proper use.

How are projects classified as Fossil Fuel, Clean, or Other?

Each project is classified into a category and sector as outlined here, based on the description of the project and project documents.

Fossil Fuel. Projects classified as “Fossil Fuel” include any oil, gas, or coal production or exploration projects, as well as projects supporting the development or transmission of fossil fuel power. This category also includes any policy reforms that provide incentives for fossil fuel development and investment.

Clean Energy. Projects classified as “Clean Energy” include energy sources that are both low-carbon and have low impacts on the local environment and human populations. Some energy efficiency and some renewable energy – energy coming from naturally replenished resources, such as the sun, wind, rain, and tides, and geothermal energy – is included as “Clean” energy. This category also includes any policy reforms that provide incentives for clean energy development and investment.

Other. Projects classified as “Other” include projects not classified as “Fossil Fuel” or “Clean,” which can happen for multiple reasons. The development of some “renewable” sources – notably large hydropower, biofuels, and biomass – can have significant impacts on the local environment and human populations that make it difficult to consider them “clean.” These energy sources, along with nuclear power, incineration, and other forms of power that are not fossil fuel but not “clean,” are included in the “Other” category. Many transmission / distribution and energy sector policy reforms that cannot be be specifically linked to any specific source of energy with available documentation are also classified as “Other.”

 


 

When is a project classified as energy access for the poor?

Project descriptions and documents are evaluated to determine whether or not the project targets increased energy access for the poor. The following indicators are verified in project documents to evaluate whether projects address energy access for the poor:

  • The project focuses on a targeted number of new electricity connections or energy services – such as clean cookstoves – to low-income households.
  • The project focuses on electricity for services important to the poor, such as health clinics, schools, or telecommunications.
  • The project focuses on improving the reliability of electricity services in an area that largely serves low-income households and / or electricity services important to the poor that currently have problems with intermittency or unreliability.
  • The project focuses on provisions to make energy affordable for the poor – e.g., effective, transparent safety nets to ensure that poor people can afford energy for basic needs, such as subsidies targeted at energy access, not energy consumption (as opposed to provisions composed solely of measures aimed at cost recovery, such as tariff increases).
  • The project focuses on productive energy uses in energy-poor communities, such as providing energy to small-unit farmers, small and medium enterprises, and labor-intensive industries.
  • The project involves power grid extension to new peri-urban or rural areas (as opposed to simply feeding into the existing grid system).
  • The project involves rural, off-grid solutions for providing energy services.

 


 

How is the finance amount determined?

The finance amount is the amount committed from the financial institution on the date that the loan, grant, or guarantee was approved by the institution. If it can be determined from project information that only a portion of the project or loan went to energy, then only that percentage will be included as the finance amount.

The amount is entered in U.S. dollars. If currency conversion is required, the U.S. dollar amount is calculated based on the exchange rate on December 31 of the approval year, using the rates published on X-Rates’ exchange rates calculator.

We recognize that there are different ways of quantifying subsidies. For example, some might argue that a “subsidy” from a development bank should only reflect the difference in the below-market interest rate and the subsidized interest rate for the project loan amount. However, most financing institutions do not make publicly available the financing terms, interest rates, or other details about financial transactions, so determining the favorable financing terms for each project is extremely difficult. In addition, in many cases, the energy project would not be able to obtain adequate finance without this public assistance, and would thus not go forward at all without it. These are just two examples that illustrate the difficulty in quantifying the exact subsidy for a given project, and highlight the need for increased transparency from public institutions.

By tracking the overall amount of international financial institution and bilateral financing going to entities for energy projects, the Shift the Subsidies atabase accurately reflects trends in the types of energy being supported with public money.

 


 

How can I use and learn more about the Shift the Subsidies database?

The data in the Shift the Subsidies database is available for use under a Creative Commons Attribution-NonCommercial 4.0 International License. If using the finance data, please attribute as being from “Oil Change International’s Shift the Subsidies Database.”

For access to the data, please contact the database team: shiftthesubsidies@priceofoil.org