Climate Crisis: The Ongoing Case of Big Subsidies

Pollution over Mexico CityOne of the most recurring talking points in the Climate Change debate is the issue of renewable energy. Particularly, those who take issue with proposed changes for dealing with the problem continue to cite how solar, wind and tidal power are not viable replacements at this juncture. While this talking point is a convenient way of dismissing needing reforms, it neglects two self-evident realities.

For one, it ignores the immense amount of progress being made in the fields of renewable energy. Whereas inefficiency and high costs remained as stumbling blocks in previous decades, an exponential drop in costs and a rise in efficiency has made solar increasingly attractive for power companies in recent years. Wind and tidal are in similar situations, with countries like Scotland and the United Arab Emirates leading the way in making them profitable.

airpollutionSecond, it ignores the fact that developed nations continue to stymie growth in renewables by the continued way in which they commit billions to subsidizing oil and coal. According to a new report from the Overseas Development Institute, public subsidies for fossil fuels totaled $523 billion in 2011. That’s six times the level of support for the renewable energy industry, despite those technologies being less mature than oil and coal.

Among richer countries, the top 11 heaviest carbon emitters spent $74 billion in subsidies in 2011, with Russia, the United States, Australia, Germany, and the United Kingdom leading the way. In the U.S., these included a $1 billion fuel tax exemption for farmers, $1 billion for the Strategic Petroleum Reserve, and $500 million for fossil fuel R&D.

oil_slickIn so doing, these governments are:

…shooting themselves in both feet [by subsidizing] the very activities that are pushing the world towards dangerous climate change… [and] creating barriers to investment in low-carbon development.

According to the British think-tank, this works out a spending of $112 per adult in these nations. But of course, the richest nations are not the only offenders, which nations like Pakistan, Egypt, and Indonesia spending more than twice as much on fossil fuel subsidies as on health. The ODI says the poorest 20% of households typically receive just 7% of overall handouts.

pollution_powerplantBut the ODI may be underestimating the true size of the subsidies in the U.S., depending on how you look at it. Earlier this year, the International Monetary Fund calculated subsidies at $502 billion, a figure which includes the true cost of carbon emissions calculated at a price of $25 a ton. By that measure, global subsidies equal $1.9 trillion.

The report also advises that governments should cut handouts to oil and coal as soon as they can and begin looking after the genuinely poor:

Phasing out fossil fuel subsidies would create a win-win scenario. It would eliminate the perverse incentives that drive up carbon emissions, create price signals for investment in a low-carbon transition and reduce pressure on public finances.

solar_cell1A timely and sound recommendation, and one which cuts to the heart of the matter. In order to address the problem of Climate Change, we must not only adopt better methods for meeting our needs, we must acknowledge the truth of the issue. At the same time, we must acknowledge how ending these subsidies, or redistributing them, would alter the current balance of power on the whole issue of energy.

It’s one thing to claim that alternative methods are unviable when the playing field is level, but since it is not, the argument is essentially hypocrisy. By continuing to finance fossil fuels and coal, we are ensuring that clean energy will remain underdeveloped as an alternative, and hence undermining any chance it has at becoming a true alternative.

So the next time someone tells you that solar or other means of renewable energy are at least 50 years away, or that gas and coal are the only economical means of meeting our energy needs, be sure to ask them why we need to spend half a trillion dollars on them annually.


6 thoughts on “Climate Crisis: The Ongoing Case of Big Subsidies

  1. I’m actually listening to a NPR report discussing the issues you raise in this very well reasoned and argued essay. Just know you are one of many voices seeking reason and to present the truth of what is possible.

  2. Funny you should write about this. I just heard this past weekend a segment in NPR about these subsidies and which companies are the biggest generators of carbon emissions for the last say, 100 or so years. I’m sure you’d be quite familiar with them. I sure was not surprised at all! Good read!

  3. woot! hullow, sir Matt Williams… what a well-argued article, so right on. haven’t read an essay on this issue recently that puts things as succinctly and as level-headed as your write up just did. 🙂 thanks for sharing, regards… 🙂

  4. Apparently you don’t live in Ontario. Energy prices in Ontario are set to sky rocket 62% over the next 5 years to pay for our green energy initiatives. I think there is a severe discrepancy between what npr is advertising and what really is. Further to this, these windmills only have a 20 year life span, they require oil to maintain, they cause property values to drop and kill wild life. The only renewable green energy I have really any faith in is water.

    1. I did live in Ontario, and I’ve heard quite a few complaints about the situation, as performed by Dalton McGuinty. However, this case does not prove the rule about green energy, it only shows what mismanagement and incompetence can cause.

      And this information does not come from NPR, it comes from the Overseas Development Institute and the IMF, an institution that is often criticized as being as conservative and committed to the status quo.

      If you are interested in the issue. I could recommend some reading on the progreess being made in solar, wind and tidal; you’ll be surprised by what you find.

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