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Page added on July 30, 2010
Fossil Fuel Subsidies Are 12 Times Support for Renewables
Global subsidies for fossil fuels dwarf support given to renewable energy sources such as wind and solar power and biofuels, Bloomberg New Energy Finance said.
Governments last year gave $43 billion to $46 billion of support to renewable energy through tax credits, guaranteed electricity prices known as feed-in tariffs and alternative energy credits, the London-based research group said today in a statement. That compares with the $557 billion that the International Energy Agency last month said was spent to subsidize fossil fuels in 2008.
“One of the reasons the clean energy sector is starved of funding is because mainstream investors worry that renewable energy only works with direct government support,” said Michael Liebreich, chief executive of New Energy Finance. “This analysis shows that the global direct subsidy for fossil fuels is around ten times the subsidy for renewables.”
Countries from the U.S. and Germany to Brazil and China are trying to boost power derived from crops, the wind and the sun in order to lower emissions of greenhouse gases while increasing the security of energy supplies. The Group of 20 nations a month ago renewed a commitment to phase out fossil fuel subsidies “over the medium term.” No target date was set.
The single most expensive clean energy subsidy last year was Germany’s feed-in tariff, which cost ratepayers $9.6 billion, New Energy Finance said. Across Europe, such tariffs amounted to $19.5 billion.
The U.S. in 2009 provided the most clean energy subsidies, at $18.2 billion, according to New Energy Finance. China provided about $2 billion of support, a “deceptive” figure because the country’s state-owned banks also provide “much crucial support” through low-interest loans, the group said.
3 Comments on "Fossil Fuel Subsidies Are 12 Times Support for Renewables"
Ron Steenblik on Sun, 1st Aug 2010 3:39 am
Good that somebody has finally taken the time to estimate subsidies to renewable energy, but to put those numbers against the IEA estimates is to compare apples with oranges. First of all, the subsidies to renewables are mainly to enable PRODUCERS to compete. The $557 billion in subsidies estimated by the IEA are not those going to producers (though some may be required in addition), but those benefitting CONSUMERS through lower prices — e.g., through forcing domestic producers of natural gas to sell their fuel to domestic consumers at a lower price, rather than exporting the fuel and obtaining a higher price.
Second, when comparing subsidies, it is misleading to list only absolute amounts. Very often, the amounts per unit of energy delivered vary considerably. For example, in the United States, the tax breaks favoring oil and gas producers are a fraction (per gallon) of those going to biofuel producers. That there are any tax breaks for fossil-fuel producers is problematical, but to discuss them without comparing them in energy terms is to feed the illusion that shifting those subsidies alone will be enough to give renewable energy a huge boost.
KenZ300 on Mon, 2nd Aug 2010 1:48 am
Oil, gas, and coal have been the beneficiaries of favorable tax policy for decades. It is time to level the playing field and help local energy development gain a foothold in the market.
Wind, solar and biofuels are gaining in efficiency and lowering their cost each year. As they continue to ramp up their production and research and development their cost to produce energy will go down making them more competitive.
China is investing heavily in the technologies of the future. Will we compete in the global marketplace?
For economic security and national security reasons we need to invest in local sources and diversify our energy resources. Local wind, solar and biofuels plants provide jobs and a secure source of energy for the future.
Ron Steenblik on Mon, 2nd Aug 2010 8:32 pm
Ken, please define “we” and “invest”. The crucial question is whether it should be consumers or taxpayers who pay for energy investments. While it is appropriate for governments to help fund R&D, it only hides from consumers the true cost of their consumption if the effect of public policy is simply to make renewable-energy able to compete with the low cost of fossil fuels rather than to tax fossil fuels according to the externalities they generate.
It is a truism that the less efficient an energy technology is, the more jobs are created to produce a given amount of energy. So, by that logic, we should be subsidizing the collection of clean, renewable ear wax. From the perspective of the whole economy, however, we must be careful to ensure that we are getting the most clean energy for our buck.
If you think subsidizing biofuels generates net job increases for the economy, read, “Input Outrageous: The Economic Impacts of Modern Biofuels Production”, by Dave Swenson (Department of Economics, Iowa State University): http://nercrd.psu.edu/Biofuels/Swenson.pdf