Global fossil fuel subsidies dwarf renewables aid

Bill Opalka

renewablesbiz.com

Renewable energy received about $66bn in subsidies in 2010, which is one-twelfth of what fossil fuel got in government aid in 2012, according to a new report.

Global fossil fuel subsidies are estimated at between $775bn and more than $1tn in 2012, according to new research conducted by the Worldwatch Institute (www.worldwatch.org) for its Vital Signs Online service. 

The report concedes that while total subsidies for renewable energy are significantly lower than those for fossil fuels, they are higher at per kilowatt-hour costs. That is especially true if externalities are not included in the calculations, write report authors from Worldwatch's Climate and Energy team.

Estimates based on 2009 energy production numbers placed renewable energy subsidies between 1.7¢ and 15¢ per kWh, while subsidies for fossil fuels were estimated at around 0.1-0.7¢ per kWh. Unit subsidy costs for renewables are expected to decrease as technologies become more efficient and the prices of wholesale electricity and transport fuels rise.

The U.S. National Academy of Sciences estimates that fossil fuel subsidies cost the United States $120bn in pollution and related health care costs every year. But these costs are not reflected in fossil fuel prices.

"These so-called hidden costs, or externalities, are in fact very real costs to our societies that are not picked up by the polluter and beneficiary of production but by all taxpayers," said Alexander Ochs, Director of Worldwatch's Climate and Energy program and report co-author. "Local pollutants from the burning of fossil fuels kill thousands in the U.S. alone each year, and society makes them cheaper to continue down their destructive path."

According to projections by the International Energy Agency (IEA), if fossil fuel subsidies were phased out by 2020, global energy consumption would be reduced by 3.9% that year compared with having subsidy rates unchanged. Oil demand would be reduced by 3.7m barrels per day, natural gas demand would be cut by 330bn cubic meters, and coal demand would drop by 230m tons of coal. Overall, carbon dioxide emissions would be reduced by 4.7% in 2020 and 5.8% in 2035. 

Further highlights from the report: 

•    Global production subsidies total an estimated $100bn per year, and consumption subsidies add to roughly $675bn.

•    In 2010, developing countries spent roughly $193bn, or 47% of all fossil fuel consumption subsidies, on oil, while industrial countries spent roughly $28bn.

Since 2007, roughly 80% of spending on consumption subsidies occurred in countries that are net exporters of fossil fuels, the report says.