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Renewable energy production like Windspire vertical wind turbines does not receive equitable subsidies. (photo: Corvar152 via Flickr)
NewScientist tackled the International Energy Agency’s annual World Energy Outlook report which was released today. NS environmental reporter Michael Marshall pointed out that enormous subsidies have been paid out for fossil fuels by governments around the world, to the tune of $312 billion in 2009.
Of course this figure doesn’t include other externalities required to support fossil fuel exploration and production, specifically petroleum. The figure would be much, much higher if the cost of military and security resources protecting petroleum was included in the total subsidies. We’re talking about an astronomical sum of money to support our global addiction to fossil fuels.
However, the IEA report
suggests that governments should agree to eliminate all fossil fuel subsidies by 2020. This, it says, is a “triple-win solution”, because it would improve energy security, decrease greenhouse gas emissions and cut government costs.
Getting rid of the subsidies would cut global energy demand by 5 per cent, and carbon emissions by 5.8 per cent, by 2020, the report says. Clearly, that’s only a fraction of the emissions cuts required to stave off dangerous climate change, but it’s a significant fraction – and an easy cut to make, says the IEA.
The reduction in energy demand would come from realization of the true price of fossil fuels. How much gasoline would you buy if the real price, something between $5 and $15 per gallon, were charged at the pump? How rapidly would our choices in transportation change? How much would automobile manufacturing change?
The other problem highlighted in the IEA’s report is the inequity in subsidies for renewable energy compared to fossil fuels. For every five dollars in subsidies that fossil fuels receive, only one dollar in subsidies is offered to renewable energy development and production.
Clearly the entire world needs to do some resetting of its energy investment priorities and soon, if we are to make any headway on carbon dioxide emissions and the rate of climate change stemming from fossil fuel consumption.
What do you think? How should we handle the disparity in subsidies between fossil fuel and renewable energy sources?
16 Comments
Let’s talk about the real costs of “externalities” in the fossil fuel market. The costs are indeed staggering but I’m afraid the $5 to $15 a gallon estimate is way short of what an uncorrupted market would charge.
Let’s take the three biggies: military spending, global warming and groundwater contamination.
The military costs the US more than $1.1 trillion each and every year. How much of that should “burden” the cost of fossil fuels is not the easiest data to obtain. Suffice it to say that a very significant portion of the military budget is used to procure oil, to keep oil producing nations “in line” with the dictates of the oil companies, and to guard oil pipelines and supply roots.
The US maintains more than 760 military bases around the world. Some put the figure above 1,000. Again, the costs are staggering. All those bases and troops aren’t overseas ferreting out terrorists. They are essentially a massive taxpayer-funded security force for Big Oil. We pay the bills; they take the profits.
How can anyone realistically determine how the cost of global warming’s future devastation should “burden” the price of oil and gas today? The calculations clearly must be “best wild guess.”
But we do know what some of the damage is likely to be. We do know about rising oceans and the loss of some major coastal cities. We do know about the staggering costs of massive seawalls and sea gates like they’ve already built in the lowland countries of Europe. We do know that there will be massive disruptions to US agriculture and severe water shortages in some areas and floods in others that will force relocations of millions of US citizens. We do know that the impact is likely to cause severe medical problems throughout the population.
How much will all this cost per gallon? Good luck figuring all that out. In my view, fossil fuels will likely be many, many multiples of the current cost. The sky’s the limit; literally.
And lately we have learned a little about “fracking.” Whatever the “profits before people” oil and gas companies have been up to, and they refuse to disclose the chemicals they’re using, the fracking process is clearly toxic to our water supplies. How much will that cost to remedy? And let’s not even get delve into the insanity of losing the Gulf of Mexico and the environmental and economic costs of addressing that catastrophe.
The oil and gas industry are among the very worst global citizens. The pollute; they cause wars and catastrophic environmental destruction. The real costs, most of them hidden from public view, are really beyond measure and calcultion.
For those who see the plus side of higher fossil fuel costs, you may need to rethink your program. Rationing fuel by price is NOT something anyone should support. Yes, super-high fuel prices will make alternative energy more economically viable. But, the fair way to redirect consumption of any “limited resource necessity” is by per capita rationing and not by price. In this country, transportation and home heating are necessities for millions of Americans. No one should be denied access to necessities just because they’ve become too expensive. Necessities are necessities. “Necessitous men are not free men.” Let’s make sure that we never ration necessities by price.
We need a national campaign of conservation. We need drastic cuts in our energy usage. We need to put an end to the “if I can afford it, I have a right to it” mentality. We need to spend more on alternative fuel research than we spend on the military. I see no call to action from either party.
A compelling comment indicating the public is only allowed to see far less of the iceberg’s tip than previously thought. Ruh-roh.
Ironically, the military spends more on renewable and sustainable energy, both in purchasing proven solar and wind power generators and in R&D, than any other government entity. The Pentagon brass were the first people to start driving Priuses, and forward operations bases are powered with solar and wind collectors. The Navy’s testing a 50-50 mix of algae biofuel and diesel in its fighter jets; that technology is likely to find its way into commercial jets inside of a decade if not much sooner.
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Very astute points. Looking at Big Oil’s ongoing domination of the congressional delegation here, I fear the actual costs of our fossil fuel industry are baby steps in the country’s retreat from a sustainable economy under those influences.
“Looking at Big Oil’s ongoing domination of the congressional delegation…” The history of America’s fugitive slave laws is rather enlightening. It highlights the slave owner’s domination over congress and protection of private property rights of the slave-owner to the detriment of the republic while obliterating the life liberty and pursuit of happiness of people considered property, in complete servitude to the master, leveraged by law!
Wasting .80 cents of every dollar spent on gasoline is a form of leveraged servitude. It is ironic America fails to make the connection between the “energy” of the slave exploited for the benefit of the of the landowner, and the and the extraction of wealth/liberty by corporations in exchange for a monopolized form of potential energy, which wastes “vast economic value,” which could be, lets say applied towards a better quality of life? Ask folks on fixed income what happens to their quality of life, when the cost of energy rises, which like a tsunami rumbles through the society causing untold pain and destruction? Such was the effect of $147.00 per barrel oil! Protect those oil corporations like the slave owners? Dumber than dead dirt!
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The 5 to 15 dollars per gallon of gasoline actually does take into consideration the externalities — but that’s based on GLOBAL gasoline consumption and GLOBAL externalities on an annual basis.
The U.S. has not paid anything close to the real cost of gasoline; one only needs to compare the price of gas anywhere across Europe to that in the U.S. to see there’s a massive disconnect. And we already know the U.S. spends more on defense than the next 14 countries combined — the cost of defense simply doesn’t make it to the pump, only our wallets.
Externalities aside, what EXACTLY are the US government DIRECT SUBSIDIES to the oil industry? Show us a copy of a check written by an agency of the federal government to Marathon Oil.
Wouldn’t those be the tax breaks given to the most profitable industry in the world?
It allows the “hands off” approach that way.
Subsidizing does not necessarily require direct checks made it to the bearer
Rayne,
Do you think it would be possible to create a non-profit that could somehow offset the difference in the short term to encourage more use of and transition to effective renewable energy sources? Just sidestep government. The non-profit subsidizing could even be set-up almost the way an EEM (energy efficient mortgage) is set up.
Eventually, the total savings in use of renewable energy would become the payoff as fossil fuel costs rise and become scarce.
All excellent points. But there’s one great big one that is missing: We appear to have hit peak oil. That is, globally, the maximum amount of oil that can be extracted from the ground is already being extracted. From now on, demand will exceed supply most of the time. We’re on the price roller-coaster predicted back in the 1960′s already.
Prices spike, demand drops, price drops. Demand goes back up to where it was or higher, prices hit a new high, demand drops, prices drop. BUT the overall price of oil keeps rising over time. The hard, brutal fact is that the world has started to slowly run out of oil. Once an oilfield is dry, it stays that way. Most of the easily accessible oil is gone; what is left is horribly expensive to tap, and getting harder. They’re trying to come up with a plan to drill in the ARCTIC, for goodness sake.
Eventually, an unknown number of years from now, but probably no more than ten or twenty according to the model, there just won’t be enough oil to go around. Since our whole economy is based on oil, this will force some major changes in everything from lifestyles to transportation systems to agriculture to systems of government.
I’m not being alarmist, just realistic. And the sooner we start using alternatives to oil, the better off we will be in the long run. The reverse equally applies.
One specific subsidy is on deep water drilling, the oil companies get higher payment for deeper, and more hazardous, drilling.
http://articles.latimes.com/2010/may/25/nation/la-na-oil-spill-subsidies-20100525
It comes down to funding; a nonprofit has to compete for charitable donations with many other nonprofits. It’s not really a good way for a nation to set its priorities, by relying on charity to do it for them. Only those who can afford to make donations will fund it, and they’ll dictate the terms through economic power.
If moving away from fossil fuels is a national priority, it should be funded that way, just as our other national priorities are funded. It should be something that all Americans support, not just those who can afford a little disposable income. It’s an investment in our nation’s future, after all.
Having said that, there are nonprofits and coalitions which are doing their best to encourage alternative and renewable energy alternatives.
Repower America and CleanEnergyWorks are just two.
Excellent points. But, since it took a Civil War to stop the same pattern then, I have my doubts that it will take anything less to stop what’s going on with oil now.