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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Wind Power: Healthy and Growing!

Wind Power: Healthy and Growing! | 04/02/13
by John Brian Shannon John Brian Shannon

Global wind power growing at an exponential rate

For example, China has now installed more wind turbines than any other country. China began 2011 with 41.5 gigawatts of installed wind power capacity and is adding more wind turbines to their grid almost daily.

And by 2015 (one year ahead of schedule) China’s citizens will enjoy 100 gigawatts of clean, wind powered electricity. Wind power surpassed nuclear energy in 2012, to become China’s 3rd largest source of electrical power.

By 2020, they plan to have 200 gigawatts of wind power, which will displace many billions of tons of airborne emissions from coal-fired power plants.

Screen-shot-2012-11-29-at-8.28.09-PM

The United States is second with 47 gigawatts of wind power capacity (at the end of 2011) and must add 305 gigawatts of wind power by 2030 to reach the goals set out in the U.S. Department of Energy 2008 report 20% Wind Energy by 2030 (downloadable PDF) which predicted that wind power could meet 20% of all U.S. electricity demand by 2020.

The use of wind power in the United States has expanded quickly over the last several years. Construction of new wind power generation capacity in the fourth quarter of 2012 totaled 8,380 megawatts (MW) bringing the cumulative installed capacity to 60,007 MW.[1]

This capacity is exceeded only by China.[2] For the 12 months from November 2011 to October 2012, the electricity produced from wind power in the United States amounted to 137 terawatt-hours, or 3.4% of all generated electrical energy.[3]

The United States produced enough electricity from wind in the 12 months [prior to] November 2012 to power over 11 million US households annually[4] or meet the total energy demands of Poland.

The U.S. wind industry generates tens of thousands of jobs and billions of dollars of economic activity.[9]

Wind projects boost local tax bases, and revitalize the economy of rural communities by providing a steady income-stream to farmers with wind turbines on their land. – Wikipedia

Wind_Power_Generation_and_Percentage

Wind energy has grown exponentially in the last decade, with an average increase of 29.7%/year. At an exponential growth of 29.7%, the U.S. would obtain 20% from wind by 2020. — Image courtesy of Wikipedia

If you think that only large countries can use the wind to create clean and fuel-free electrical energy, read: Denmark Sets Goal of 100% Renewable Energy by 2050. Denmark has proven to the world that when citizens back government efforts towards sustainable energy — the transition to 100% green energy is possible. The Danes are making it look easy.

It is time to harness that wind and produce clean electricity from it, create jobs and make profit by it, while enjoying the benefits of clean air as more wind farms displace fossil-fuel power plants!

The following information is courtesy of Wikipedia, click to read here:

Complementary power

Solar power tends to be complementary to wind. On daily to weekly timescales, high pressure areas tend to bring clear skies and low surface winds, whereas low pressure areas tend to be windier and cloudier. On seasonal timescales, solar energy peaks in summer, whereas in many areas wind energy is lower in summer and higher in winter.[nb 3][95]

Thus the intermittencies of wind and solar power tend to cancel each other somewhat.

In 2007 the Institute for Solar Energy Supply Technology of the University of Kassel pilot-tested a combined power plant linking solar, wind, biogas and hydrostorage to provide load-following power around the clock and throughout the year, entirely from renewable sources.[96] 

Pumped-storage hydroelectricity or other forms of grid energy storage can store energy developed by high-wind periods and release it when needed.[103]

Cost trends

Wind power has low ongoing costs, but a moderate capital cost. The marginal cost of wind energy once a plant is constructed is usually less than 1-cent per kW·h.[113] This cost has reduced as wind turbine technology improved.

The National Renewable Energy Laboratory projects that the levelized cost of wind power in the U.S. will decline about 25% from 2012 to 2030.[112]

Clean Energy: How To Get There From Here!

by John Brian Shannon

Everyone knows more electricity is needed in developed nations and electrical needs in developing nations are skyrocketing. No problem there — everyone deserves to live a good lifestyle and enjoy our modern technology to the fullest.

The problem occurs in the means used to generate that electricity. Some kinds of electrical power generation cause huge billowing clouds of pollution 24-hours per day, every day of the year.

All of this adds up to astronomically high costs for electrical power producers and users, which can be measured in several different ways.

For instance, new conventional nuclear  power plants can cost up to $20 billion dollars each. Added to that cost, is the cost incurred to store thousands of tons of (so-called) spent nuclear fuel. Some spent fuels must be stored in air-conditioned bunkers for up to 20,000 years, with never more than 36 hours of A/C interruption. The costs of that are so high, they can’t even be calculated.

New coal plants cost about $250 million dollars/per hundred megawatts. A hundred megawatts isn’t much, by the way – enough to power 16,000 power-hungry A/C homes in the U.S. or about 29,000 homes in China. Some coal-fired power plants cost upwards of $1 billion dollars. The cost of the coal must be added to the equation from day one – the price of which rises and falls typically between $80.00 and $160.00 per ton, plus the significant transportation costs. It may interest you to know that China burned 3 billion tons of coal last year, emitting 7.2 billion tons of CO2 and other toxic gasses. Approximately 410,000 Chinese people die every year as a result of pollution-related deaths.

Natural gas power plants are clean, they cost a little more than comparable coal plants and the only real drawback is they emit huge volumes of CO2. Unlike coal, they emit little in the way of other toxic gasses or soot. Again, a costly and continuous and supply of natural gas must be available every day of the year.

No matter which choice is made, the construction of electrical generation power plants incurs high costs to nations — and the cheapest options come with the highest fuel and health-care costs.

In the United States, nuclear power receives significant subsidies on the order of $3.50 billion per year on average and oil and gas receive $4.86 billion subsidy dollars per year on average.

fossil-fuel-subsidies-490x407

We can see from the chart above that in the United States most forms of electrical power generation are heavily subsidized. Who could afford electricity otherwise?

If solar, wind and geothermal energy were subsidized at the same per kilowatt rate as Oil & Gas, Coal, or Nuclear — total U.S. emission levels would drop dramatically and Americans would be breathing much cleaner air.

National health-care costs would drop, acid rain damage would decrease to near zero, crop damage from power plants would become a thing of the past and meeting international agreements such as the Kyoto Protocol would become boringly simple.

To have the enjoyment of breathing clean air and the other benefits listed above, all governments should calculate the highest subsidy they pay per kilowatt hour and then begin paying ALL electricity providers that same per kilowatt hour subsidy.

Solar power, wind power and geothermal would then become ultra-competitive with coal, N-power and Oil & Gas. Every large rooftop area, such as big box retail outlets like IKEA stores for one good example, could assist national power production and air-quality goals by lowering demand on the grid and potentially adding power to it, while helping to enhance the health of citizens.

One nation has already begun such a program and is right on schedule. Denmark has decided that all energy, including transportation energy(!) will come from renewable sources by 2050 and they have made substantial progress in only a few short years.

Even with the patchwork and grossly unlevel subsidy regimes in place in the United States, this transition is already occurring. Organizations from the U.S. Navy, to IKEA and WalMart, some cities and towns, the Big Three auto manufacturers and many more businesses and organizations, are converting their unused rooftop spaces and vacant land into clean power stations — thereby tapering the need for behemoth, pollution-spewing power plants.

If governments standardized the subsidies they already pay for Oil & Gas, Coal and Nuclear power (instead of paying billions of dollars to some power providers — whilst paying pennies to others) we would all breathe a lot easier.

We need oil & gas, coal, natural gas and conventional nuclear power to feed our grids, what I’m  advocating for is directly comparable subsidies for all electricity providers, including green energy — and there are no real reasons why such subsidy levelization couldn’t soon happen in every country.

ABOUT JOHN BRIAN SHANNON

I write about green energy, sustainable development and economics. My blogs appear in the Arabian Gazette, EcoPoint, EnergyBoom, Huffington Post, United Nations Development Programme, WACSI — and other quality publications.

“It is important to assist all levels of government and the business community to find sustainable ways forward for industry and consumers.”

Green Energy blog: http://johnbrianshannon.com
Economics blog: https://jbsnews.wordpress.com
Twitter: @JBSCanada