Fossil Fuels Get $550 bn Christmas Present from Taxpayers

by Zachary Shahan.

Fossil fuels have dominated the global energy market and even the global economy for a long time. You would think that such mature industries wouldn’t need government subsidies — their annual revenue and profits are mind-boggling. However, with money comes power. And that money-power has a stranglehold on governments of the world such that it convinces governments to give them even more money in subsidies.

Another recent study comes to the conclusion that the total annual subsidies fossil fuel companies get from governments in the developed world comes to about half a trillion dollars. This follows a 2010 study from the International Energy Agency that found fossil fuel industries got $550 billion in annual subsidies.

It almost sounds like a joke — some of the richest companies in the world get $500 billion in government handouts. Just picture the rich, old, white men laughing their buns off about the way they have the most powerful governments in the world wrapped around their pinkie finger… or at least wrapped around the fingers that sign checks for our politicians’ election campaigns.

The latest study on this matter, Time to change the game, finds that the average resident of the world’s richest countries donates $112 a year to fossil fuel companies in the form of subsidies.

What are those subsidies for?

Well, as a press release about the new study notes, “these subsidies create perverse incentives favouring investment in carbon-intensive energy.” Yep, we’re encouraging the use of fossil fuels that harm our health, our climate, and our environment rather than using that money to transition away from these harmful sources and towards a truly clean energy economy.

The proposal from study author Shelagh Whitley is that G20 nations phase out fossil fuel subsidies completely by 2020. Whitley states:

The rules of the game are currently biased in favour of fossil fuels.

The status quo encourages energy companies to continue burning high-carbon fossil fuels and offers no incentive to change. We’re throwing money at policies that are only going to make the problem worse in the long run by locking us into dangerous climate change.

Here are just a few of the staggering statistics from Time to change the game:

  • The average subsidy provided by rich governments for every tonne of carbon is $7. This is the same as the current cost of carbon in the EU carbon trading system – meaning the carbon price may as well not exist.
  • Domestic subsidies in rich countries outstrip international climate finance provided to help address climate change in developing countries by a ratio of 7:1.
  • In some countries – India, Pakistan and Bangladesh – fossil fuel subsidies are more than double the level of spending on health services.
  • In countries such as Egypt, Pakistan, Morocco and Bangladesh, fossil fuel subsidies outweigh the national fiscal deficit.

Yep, you’ve got coal in your stocking, thanks to subsidies that have no place in a free market. Oddly, “free market idealists” never seem to complain about this matter.

Notably, G20 countries have agreed to phase out fossil fuel subsidies, with leadership on this matter actually coming from President Obama. An agreement made in September regarding the methodology for a new peer-review process of evaluating fossil fuel subsidies. This followed a 2009 agreement to phase out such subsidies. Obviously, though, they aren’t rushing through the process… 4 years and we’ve got an agreement on a peer-review process?

For more uplifting fossil fuel info, check out: Top 10 Toxic Ingredients Used In The Fossil Fuel Industries.

All images via the Overseas Development Institute

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This article, Fossil Fuels Get Half-A-Trillion-Dollar Christmas Present From Taxpayers, is syndicated from Clean Technica and is posted here with permission.

Fossil Fuels Receive $500 Billion A Year In Government Subsidies Worldwide

by Guest Contributor

Oil, gas and coal received more than $500 billion in government subsidies in 2011.
Oil, gas and coal received more than $500 billion in government subsidies in 2011.

Originally published on ClimateProgress

Producers of oil, gas and coal received more than $500 billion in government subsidies around the world in 2011, with the richest nations collectively spending more than $70 billion every year to support fossil fuels.

Those are the findings of a recent report by the Overseas Development Institute, a think tank based in the United Kingdom.

“If their aim is to avoid dangerous climate change, governments are shooting themselves in both feet,” the report, headed by ODI research fellow Shelagh Whitley, said. “They are subsidizing the very activities that are pushing the world towards dangerous climate change, and creating barriers to investment in low-carbon development and subsidy incentives that encourage investment in carbon-intensive energy.”

While the report acknowledges there is currently no globally agreed definition of what constitutes a subsidy, it cites the World Trade Organization’s approach: “a subsidy is any financial contribution by a government, or agent of a government, that confers a benefit on its recipient.”

Germany, for example, provided €1.9 billion in financial assistance to its hard coal sector in 2011, according to the report. That same year, the U.S. created a $1 billion fuel tax exemption for farmers and invested $500 million for fossil energy research and development. The top 11 “rich-country emitters” — the biggest being Russia, the United States, Australia, Germany and the United Kingdom — are estimated to have spent $74 billion on subsidies in 2011.

That total amount outweighs the support provided to developing countries to reduce their greenhouse gas emissions by seven to one, the report found.

Fossil fuel subsidies were actually created to benefit the poor. According to ODI, governments often justify giving tax breaks and freebies to energy companies in order for those companies to provide energy access to those who can’t afford it.

Generally, however, that winds up not being the case. Citing a report by the International Monetary Fund, ODI said only seven percent of the benefits from fossil fuel subsidies in developing countries reached the poorest 20 percent of people between 2005 and 2009. In contrast, more than 40 percent of those subsidies benefited the people in richest 20 percent of people during that time.

Fossil fuel subsidies. Image Credit: Overseas Development Institute
Fossil fuel subsidies. Image Credit: Overseas Development Institute

Subsidies for gasoline were the most unequal, with the report citing less than five percent of those subsidies reaching the poorest people and more than 60 percent benefiting the richest. Fossil fuel subsidies for liquefied petroleum gas, more commonly known as propane, had similar numbers. Kerosene subsidies were found to have been pretty much evenly distributed.

Oil subsidies. Image Credit: Overseas Development Institute
Oil subsidies. Image Credit: Overseas Development Institute.

Subsidies to fossil fuels are also making it difficult to compete with artificially low energy prices, therefore discouraging private investors from putting money into clean energy technologies. What’s more, the growing number of countries that provide subsidies to both fossil fuels and clean energy may actually be negating the impact of climate finance and other clean-energy incentives, according to the report.

ODI is calling on the G20 countries to phase out all subsidies to coal and to oil and gas exploration by 2015, and end fossil fuel subsidies entirely by 2020. The process won’t be easy, the report noted, finding that citizens across the globe are generally misinformed about what they or others receive in terms of subsidies. Additionally, special interests are dominating the playing field, making it difficult to come to a consensus.

According to the Center for Responsive Politics, individual and political action committees affiliated with oil and gas companies have donated $239 million to candidates and parties since 1990. But the U.S. isn’t the only moneyed country where special interests assure that fossil fuel subsidies reign on, according to the report.

In India, for example, federal and state governments incur great expense in order to provide the country’s powerful farm industry with “cheap or free” electricity, the report said. That, along with the fact that agricultural incomes are tax-exempt in India, provides farmers in that country with the funds to create a powerful lobby that “ensures that no government can hold on to power without holding on to [fossil fuel] subsidies.”

“The barriers to reporting on subsidies and to their removal are based on the multiple and often diverging interests of a wide range of stakeholders in both developed and developing countries,” the report said. “These include government officials, industry associations, companies, trade unions, consumers, social and labor political activists, and civil society organizations — all of whom need to be on board if subsidies are to be eliminated.”

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G20 Leaders Agree To Phase Out Inefficient Fossil Fuel Subsidies

by Zachary Shahan – Special to JBS News

Russian President Vladimir Putin at this month's G-20 summit. Image Credit: Government of Russia
Russian President Vladimir Putin at this month’s G-20 summit.Image Credit: Government of Russia

Earlier this month, G20 leaders meeting in St Petersburg, Russia decided to phase out the use of HFCs. This got a lot of attention (at least among green media), and rightfully so. However, another big decision made in St Petersburg seems to have bypassed most radars. The G20 leaders also agreed to phase out “inefficient” fossil fuel subsidies. Such a move would cut approximately $500 billion in annual governmental expenditures while also reducing greenhouse gas emissions (compared to business-as-usual emission projections) 10% by 2050.

Environment News Service, on the day of the meeting (September 20), wrote:

All the G-20 leaders agreed to phase out inefficient fossil fuel subsidies. Building on the commitment they made at the Pittsburgh G-20 Summit in 2009 to phase out these subsides, G-20 Leaders today agreed on the methodology for a new peer-review process of fossil fuel subsidies, an important step in combating climate change.

The International Energy Agency estimates that eliminating subsidies – which amount to more than $500 billion annually – would lead to a 10 percent reduction in greenhouse gas emissions below business-as-usual by 2050.

As part of the St. Petersburg Declaration released today at the close of the summit, the G-20 leaders stated;

“We reaffirm our commitment to rationalise and phase out inefficient fossil fuel subsidies that encourage wasteful consumption over the medium term while being conscious of necessity to provide targeted support for the poorest.”

“We welcome the development of a methodology for a voluntary peer review process and the initiation of country-owned peer reviews and we encourage broad voluntary participation in reviews as a valuable means of enhanced transparency and accountability. We ask Finance Ministers to report back by the next Summit on outcomes from the first rounds of voluntary peer reviews. Recognising the importance of providing those in need with essential energy services, we ask Finance Ministers to consider, in conjunction with the relevant international institutions, policy options for designing transitional policies including strengthening social safety nets to ensure access for the most vulnerable.”

Now, personally, I’d consider all fossil fuel subsidies to be inefficient, but I’m guessing that G20 leaders have some fossil fuel subsidies in mind that they would consider efficient. Otherwise, why the dubious language?

Also, I imagine they aren’t going to include externalities – even though they should — and I’m not seeing a timeline for the phase-out. I assume that isn’t yet set.

We’ll see what comes of all this, but it looks like a step in the right direction.

h/t Green Car Reports

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This article, G20 Leaders Agree To Phase Out “Inefficient” Fossil Fuel Subsidies, is syndicated from Clean Technica and is posted here with permission.

About the Author

Zachary Shahan is the director of CleanTechnica, the most popular cleantech-focused website in the world, and Planetsave, a world-leading green and science news site. He has been covering green news of various sorts since 2008, and he has been especially focused on solar energy, electric vehicles, and wind energy for the past four years or so. Aside from his work on CleanTechnica and Planetsave, he’s the Network Manager for their parent organization – Important Media – and he’s the Owner/Founder of Solar Love, EV Obsession, and Bikocity. To connect with Zach on some of your favorite social networks, go to ZacharyShahan.com and click on the relevant buttons.

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3.1 GW Of Fossil Fuel Power Plants To Be Shut Down In Germany — No Longer Competitive

by Dr. Karl-Friedrich Lenz  — Special to JBS News

This article was originally published on Lenz Blog.

RWE has announced in their latest report on their first six months results (press release in German) that they plan to take 3.1 GW of fossil fuel generating capacity off the market.

The reason they give for that is that wholesale electricity prices are way down in Germany as a consequence of more renewable in the mix. They would be losing money if they needed to sell at these low prices. They don’t, since most of their business is fulfilling contracts from the past couple of years, which still have higher prices, but that effect will be gone soon.

Welt has an excellent article giving some background on this (in German).

They show an interesting graphic, which I hesitate to reproduce here for copyright reasons.

We learn from that: Prices have gone down from the mid term average of around EUR 55 a MWh to less than EUR 40. They estimate the minimum price necessary for gas generation as EUR 70, for coal as EUR 60, for lignite as EUR 45, and even for nuclear power after the plants have already paid back their investment as EUR 40, including a tax on nuclear fuel.

With prices below EUR 40 on the wholesale markets, operators like RWE may want to mothball their nuclear capacity even before they are required to do so by the 2011 law on the nuclear phase-out.

German Green Party Member of Parliament Hans-Josef Fell’s most recent mail newsletter has some very interesting comments on this development.

For one, he notes that this is great news. If RWE can’t even run fossil fuel power plants that have paid back their investment already at these low wholesale market prices, it follows that it doesn’t make any sense to start building new fossil fuel capacity now. Any new plant would need to earn back its capital cost, which is of course impossible.

He also notes how to deal with supply shortages. Under German law, the grid operators are legally liable to guarantee stability of supply. They will need to pay RWE or other owners of mothballed fossil fuel capacity for keeping their plants ready in case they are needed as backup on a windless November evening.

Image Credit: Coal power plant in Germany courtesy Shutterstock

America’s Updated Energy Strategy

by John Brian Shannon

President Obama visited the Argonne National Laboratory today in Argonne, Illinois, to give a major speech on the future of American energy. A new, USD $2 billion dollar program called the energy security trust was announced which gives focus to the administration’s plans for more renewable energy and proposes lower subsidies for fossil fuels.

Much of the resulting policy statement is based upon information supplied to the administration by the nonpartisan, Securing America’s Future Energy (SAFE) which represents senior business and former military leaders on both ends of the American political spectrum.

Here are the main points of the energy security trust – more detailed information is available by clicking here and here. And you can read the transcript of the President’s speech today in Argonne, Illinois, as compiled by the Chicago Sun-Times here.

By 2020, the President and Energy Secretary Steven Chu want the US;

  • To double the present level of U.S. renewable electricity generation
  • To double American energy productivity (by 2030)
  • To cut energy waste in the U.S. by half over the next twenty years
  • To invest in technology promoting energy efficiency & reduced waste
  • To cut net oil imports in half by the end of the decade
  • To enable safer production & cleaner electricity from natural gas
  • To promote safe & responsible oil and natural gas development
  • To assist the Nation’s truck fleets to adopt natural gas & alternative fuels
  • To improve energy efficiency through the Better Buildings Challenge program
  • To help U.S. states cut energy waste, improve efficiency & modernize grids
  • To streamline Interior Department regulations for faster project permitting
  • To work with the G20 & other fora to phase-out fossil fuel subsidies worldwide
  • To work with the IEA & others to strengthen energy security
  • To promote energy efficiency & development & deployment of clean energy via Clean Energy Ministerial & other international fora
  • To promote safe & secure nuclear power in nations pursuing nuclear energy
  • To design a responsible nuclear waste strategy for the U.S.

As the President continues to pursue his ‘all-of-the-above’ energy strategy, it should be noted that significant progress has been made. As President Obama stated in his speech today,

“We produce more oil than we have in 15 years. We import less oil than we have in 20 years. We’ve doubled the amount of renewable energy that we generate from sources like wind and solar. We have tens of thousands of good jobs to show for it.

We’re producing more natural gas than we ever have before with hundreds of thousands of good jobs to show for it. We supported the first new nuclear power plant in America since the 1970’s. And we’re sending less carbon pollution into the environment than we have in nearly 20 years. So we’re making real progress across the board.” – President Barack Obama

All of this is adding up to huge changes in the American energy sector and for the producers, consumers and investors of energy, the energy map in 2020 will bear scant resemblance to our present-day energy model. And that means that seven years from now, the air in and around large U.S. cities will be the cleaner for it.

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