Dirty energy subsidies
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Last August, the UN Environmental Programme reported that “around $300 billion or 0.7 per cent of global GDP is being spent on energy subsidies annually.” These subsidies are particularly important because most are devoted to fossil fuels. They artificially reduce the price of those fuels, thereby increasing consumption and dramatically influencing greenhouse gas emissions. The UNEP press release from 2008 continued:
The lion’s share is being used to artificially lower or reduce the real price of fuels like oil, coal and gas or electricity generated from such fossil fuels.
Cancelling these subsidies might reduce greenhouse gas emissions by as much as six per cent a year while contributing 0.1 per cent to global GDP.
This week, leaders of the G20 states agreed to phase out subsidies on fossil fuels, though they did not announce an agreed timetable and they included the prospects of exemptions to aid their poorest citizens with energy credits.
The Washington Post reported the G20 statement, which was apparently pushed by the Obama administration:
“We commit to rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption,” the statement said. “As we do that, we recognize the importance of providing those in need with essential energy services, including through the use of targeted cash transfers and other appropriate mechanisms. This reform will not apply to our support for clean energy, renewables and technologies that dramatically reduce greenhouse gas emissions.”
David Roberts of Grist notes that current “green” energy subsidies and tax credits in the USA are dwarfed by comparable subsidies and credits to the fossil fuel producers.
Various environmental interest groups had been pushing for this subsidy cut for years, including the U.S. Climate Emergency Council.
By contrast, of course, the petroleum industry has strongly supported fossil fuel subsidies and can be expected to fight hard to block implementation of this G20 agreement. They link the subsidies to jobs, growth and national security interests.
In any case, this is good news on the road to Copenhagen.
Thanks for another interesting post! Interesting to hear that this was pushed by Obama – he seems to be getting quite a lot of stick from environmental groups at the moment… and his UN speech hasn’t done much to stop the criticisms – this from the founder of 350.org seems to sum up the frustrations:
“Had this speech been given two years ago, it would have been a completely remarkable moment for an American President. But because two years ago we did not hear this speech, the targets President Obama speaks of are no longer sufficient. Due to a lack of leadership, inaction has only made this situation worse — targets must now be strengthened for both our long and short term goals. We have studied the science and have heard the scientists — we must commit to bringing our CO2 levels down to 350 parts per million.”
I think most environmentalists would agree that this issue is a “no-brainer.” Cut subsidies to fossil fuels and use the savings to fund green energy. It stops encouraging GHG emissions and potentially results in new technologies that will reduce emissions even more. Plus, it does not bust the budget — it potentially reduces spending. Faster, please!
Thanks for bringing out this important issue. The G20 has certainly identified dirty energy subsidies as cause for concern, while at the same time on the climate front many of the leaders are advocating for large-scale public-private investment into carbon capture and storage and cleaner coal. While these technologies may foster a more environmentally-friendly energy model, do they not represent a shift in dirty subsidies as they do not discourage consumption nor encourage sustainable practices?
Andrew, I agree that subsidizing carbon capture and clean coal does not discourage consumption nor encourage sustainable practices. I suppose the best that can be hoped is that the techniques are effective and can help serve as a bridge to a future of alternative energy sources. Personally, I would rather put my money elsewhere — see the post I wrote today about other costs of the status quo.