Quantcast
Channel: SOLARFEEDS » fossil
Viewing all articles
Browse latest Browse all 6

Fat Subsidies for Fossil Fuels

0
0

The next time that someone complains that solar energy is tooexpensive and will never be competitive with coal, oil or natural gas,throw a few of these numbers their way: $72 billion – that’s how much money the US government spent between 2002 and 2008 on subsidies for fossil fuels according to a report by the Environmental Law Institute. That’s over $10 billion a year. And how much of that — you wonder — was spent to subsidize renewable energy over the same period? $29 billion – and half of that, was spent on ethanol subsidies alone. Uncle Samspent twice as much to subsidize fossil fuel production and consumptionand only 15% was spent to subsidize the renewable energies that reallycan change the way the world generates electricity (solar, wind,biomass, etc.).

Subsidies are one of many policy instruments used by government toattain economic, social and environmental objectives. Certainlysubsidies, for example, to defray low income heating oil expenses meetclear social and economic objectives. But one of the largest fossil fuel subsidizes arises from a convoluted foreign tax credit, whichessentially gives oil companies favorable tax treatment for royaltiesthey pay to foreign governments for rights to drill. That single subsidy accounts for over $15 billion dollars in lost tax revenue over thestudy period. Other than improving the bottom line for oil companies,it’s hard to define a clear economic, social or environmental objectivethat loophole meets.

Fossil fuel subsidies don’t stop at the US borders either. A 2010 Internal Energy Agency (IEA) report estimated that almost $700 billion a year is spent tosubsidize the production and consumption of fossil fuels worldwide.That’s roughly the equivalent to 1% of the world’s gross domesticproduction. The IEA also estimates that if those subsidies were phasedout by 2020, it would result in a reduction in primary energy demand atthe global level of 5.8% and a fall in energy related carbon dioxideemission of 6.9%, compared with a base line with no change in subsidies. Among other things, subsidies can distort markets and cause overconsumption of fossil fuels. For example in the former Soviet Union,electricity prices are much lower than their cost. As a result, percapita energy consumption is very high and energy efficiency is verylow. Makes sense. You can’t value what you don’t pay for.

Of course, fossil fuel subsidies form the cornerstone of manyeconomic development and quality of life initiatives, especially in thedeveloping world. Unraveling a worldwide web of subsidies and directassistance will not be accomplished quickly or easily, but let’s call aspade a spade. The oil, coal and natural gas industries are heavily,heavily subsidized worldwide. That’s what makes them so “cheap.” Giventhe cost of fossil subsidies, the damage these fossil fuels cause to the planet, and the danger we face as a nation relying on so much importedoil, solar energy looks cheaper all the time.

Some might argue that the stimulus bills evened the playing field, by focusing some money on clean tech energy investments. But thedifference is that the fossil fuel subsidies are permanent, deeplyembedded benefits. Stable policy attracts long term, lower costinvestment whereas one time, temporary incentives creates risk anduncertainty, leaving investors and financiers nervous about making clean energy commitments.

When the fossil fuel industries give up their $700 billion a year,we’ll stop asking for solar subsidies. Until then, it just makeseconomic sense to incentivize the type of energy generation that society actually wants and needs.

Source


Viewing all articles
Browse latest Browse all 6

Latest Images

Trending Articles





Latest Images