A sum of money granted by the state or a public body to help an industry or business keep the price of a commodity or service low.
At the time when we first understood that greenhouse gas pollution will have severe consequences for the life of future generations of humans, we started looking for ways to lower greenhouse gas emissions. Alternative energy sources, which are coincidentally renewable at the same time, were not competitive with non-renewable sources, like coal and oil, in the terms of price per energy unit.
The way to overcome this issue was to give energy subsidies that would help green sources of energy be more competitive on the market. In theory, investors backed with this support would choose more frequently the green sources over dirty ones that pose imminent danger for life as we know it.
Knowing the dangers of not acting, and understanding the consequences of continuing with the old, detrimental habits in the same way, one would expect that all governments of the world, scared by the visions of a dystopian future, would instantly change their policies in favour of green energy sources. But, contrary to what we may think reasonable decisions are, that change has not happened. Even worse, studies are showing that we are giving subsidies to the oil and coal industries more than ever before.
In a report from November 2015, called, “Empty promises - G20 subsidies to oil, gas and coal production,” *1 the key findings on national subsidies for fossil fuel production are as follows:
- Russia had significant national subsidies for fossil fuel production: nearly $23 billion annually, on average, between 2013 and 2014.
- The US government provided more than $20 billion in national fossil fuel production subsidies each year, despite calls from President Barack Obama to eliminate industry tax breaks.
- The UK continued to encourage offshore oil and gas in the North Sea, resulting in average national subsidies to fossil fuel production of $9 billion annually between 2013 and 2014.
- Australia and Brazil provided national subsidies averaging $5 billion annually between 2013 and 2014.
- China provided national subsidies of just over $3 billion annually, on average, between 2013 and 2014, including tax breaks for oil, gas, and coal producers.
Total subsides for dirty energy sources in 2014 were a staggering US $5.18 trillion (post-tax)*3, and the breakdown looks like this:
To put the number in better perspective, read the article “How Much Would it Cost to Replace All Energy Sources with Solar?,” which effectively explains how much money and time we need to solve all our energy-related problems.
On top of all this, we have to consider that, in the US alone, a significant amount of money is devoted to nuclear power, where radioactive waste management is an ongoing issue that will be left behind for many future generations to oversee.
Now, if the news was not bad enough, cumulative subsidies between 2005 and 2009 were US $17 billion for corn ethanol production, which is considered a green energy source. But, corn ethanol does not solve carbon emissions, it is not cost effective (EROI = 1.3), is not a green source of energy, and, additionally, it damages the environment by destroying bio diversity. Regardless of all the facts, even now, we are still giving tax breaks and subsidies for it.
Subsidies are one of the most powerful tools of governments. By creating good policies, governments have the power to change our future for the better. During the decision process regarding economic benefits, government has to take into account the future climate and environmental impact. This is not an easy task, especially when we consider that changing governments can have different approaches regarding energy subsidies. *4
Furthermore, different belief systems about human impact on climate change, coming from politicians that are in denial, can lead to disastrous outcomes.
Floods in Germany, France, and China; heavy droughts in California and Brazil; and tornados in countries that never had them before are good reminders about what happens when we misjudge our role in nature and what will continue happening, if we continue with the same policies.
Notes & References:
Empty promises - G20 subsidies to oil, gas and coal production (pg.40)http://priceofoil.org/content/uploads/2015/11/Empty-promises_main-report.2015.pdf
How large are global energy subsidies?http://www.brookings.edu/events/2015/05/18-global-energy-subsidies-imf
Global Energy Subsidies: An Updatehttp://www.imf.org/external/np/fad/subsidies/