Fossil fuel subsidies cause more use of materials that warm the planet. We need to STOP giving extra money to fossil fuel companies as tax breaks and outright subsidies! These policies encourage greater usage and worsen our planetary environment. Many nations provide subsidies in the name of helping the poor, but is that accurate? Which income groups do subsidies help more?
Fuel Subsidies most benefit the Rich
Look at the graphic to the right. Note that the poorest people receive very little of the subsidies provided for gasoline and LPG. The rich use the most carbon based fuels so receive the most benefit. In the USA, substitute gasoline with “jet fuel and gasoline” and the graphic probably fits similarly. Prof. Kevin Anderson simplified how the top 10% globally can be approximated. He suggests they are: ►Academics ►Business Leaders ►Policy Makers ►Frequent Fliers
Look next to the graphic of the 2017 EIA forecast. It specifically shows that jet fuel and LPG grow as the other materials remain level. Again, these are the areas where subsidies most benefit the upper income groups.
Unlike a Carbon Fee & Dividend plan that most helps those who use the least, subsidies accrue to those who use the most fuel. Isn’t that opposite what we know needs to happen so as to slow/ stop and then reverse recent growth in CO2 ppm? That same link has a graphic showing the wealthiest top 20% of the people generate 68% of the CO2.
Fossil Fuel Subsidies Are HUGE
In the USA alone the estimate is in excess of $70 BILLION/ yr in fossil fuel subsidies (enough to cover most Harvey and Irma costs in 3-5 years.)
It isn’t just the USA, most countries have subsidies in one form or another.
The US portion of that $US 5.3 TRILLION/yr – using a 2016 social cost of carbon of $130/ton CO2 and 7.75 Gigaton produced is $747 Billion. This is what we could be cycling through the economy as Carbon Fee Dividends, but which are sorely needed already to address infrastructure decay and replacement. As the climate destabilizes, these numbers grow.
G-20 nations supply/ report their subsidies differently. The number below is immediately at odds with the USA subsidies chart shown near the top.
Are Fuel Subsidies Good Government Investment?
What really are we getting for these subsidies? We are making the effective profits of the companies bigger, but at the cost of many better investment options, options that would not be as destructive to the viability of the planet.
Social Costs of Carbon
Recent news of the leaked vapors and unhealthy nature of those leaks to the air and water around Houston are just a focused example of leaks from pipelines, trains and trucks that occur daily in the USA and globally. Carbon extraction and use increases frequency of asthma. Fracking and mountaintop coal extraction irreparably pollute soil and aquifers plus adding earthquake damage too. Ecuador has an ongoing lawsuit against Chevron, Gulf states vie against BP, Indonesia has sued PTTEP, and Nigeria has sued Shell in the UK … each over damage to their lands and watershed. Meanwhile the CO2 levels mount, adding to the strength and range of locations for severe storms.
The social costs are real, ongoing and increasing. Instead of only fighting these in court, or subsidizing fuel consumption, set a fee on carbon as it is extracted from mines or comes out at a wellhead. Be sure to count the leaks and waste ponds too. Imposing the current appropriate fee immediately is very disruptive economically. Increasing the fees annually gets to the levels needed as outlined in an “Experts Consensus Report”, a transition tactic James Hansen has proposed. SIGNIFICANTLY, the expert economists saw a HIGHER Social Cost of Carbon than anything the government has considered. Bottom line – James Hansen is correct in calling for a CARBON FEE & DIVIDEND. (Start at a number and increase it annually by $10/tonne of CO2 – roughly 0.35 tonnes CO2/barrel of oil)
No One Silver Bullet
We need to BOTH stop subsidies and add a price to carbon. This induces people and corporations to shift away from materials that are adding to the warming. Stopping subsidies adds to the federal treasury immediately. The “fee & dividend” option is a revenue neutral way to soften the impact on those with less options to switch quickly to renewable energy alternatives.
* THE 2015 IMF Working paper and link to PDF that reports global energy subsidies are in the range of $US 5.3 TRILLION/yr! One quick screen capture from that paper confirms the above analysis is largely verifiable
One perverse aspect of subsidies not yet mentioned, It’s these excessive amounts of cash that supply the means for these companies to lobby for even more tax cuts and special mark-ups… and to support climate denial think tanks such as the Heritage Foundation. :-O Amazingly convenient for them, and destructive for us all.
More discrepancies as to what the total amount of subsidies – but the economic tipping point for many of the US fields is a direct result of subsidies.
“The authors then assumed a minimum rate of return of 10 percent for a project to move forward. The question then becomes “whether the subsidies tip the project from being uneconomic to economic,” clearing that 10 percent rate-of-return threshold.
“The authors discovered that many of the not-yet-developed projects in the country’s largest oil fields would only be economically feasible if they received subsidies. In Texas’s Permian Basin, 40 percent of those projects would be subsidy-dependent, and in North Dakota’s Williston Basin, 59 percent would be, according to the study.
“Subsidies “distort markets to increase fossil fuel production,” the authors concluded. “Our findings suggest an expanded case for fossil fuel subsidy reform,” the authors wrote. “Not only would removing federal and state support provide a fiscal benefit” to taxpayers and the budget, “but it could also result in substantial climate benefits” by keeping carbon the ground rather than sending it into a rapidly warming atmosphere.”
https://insideclimatenews.org/news/03102017/high-oil-subsidies-ensure-profit-undermine-climate-change-goals
This post in Scientific American adds some impressive stats:
“In the 2018 study, emissions reductions from subsidy removal were calculated by the researchers to be five hundred million to two billion metric tons of carbon dioxide per year by 2030. This figure is by no means “small.” It amounts to roughly one quarter of the energy-related emission reductions pledged by all of the countries participating in the Paris Agreement (four to eight billion tons). Hundreds of millions of metric tons of CO2 reductions is nothing to sneeze at, particularly when it can be achieved by a single policy approach that also brings strong fiscal, environmental and health benefits.”
https://blogs.scientificamerican.com/observations/fossil-fuel-subsidies-must-end/
and the paper in Nature that was finally published in Feb 2020 after being submitted in Nov 2018. https://perma.cc/KTF4-239S