A recent Editorial Board article by Bloomberg labelled fossil fuel subsidies as the world’s dumbest policy ever. The delay by G20 leaders in eliminating fossil fuels goes beyond any form of logic or rationale. It’s quite frankly beyond comprehension. The G20 consists of 20 of the largest economies in the world — 19 countries and the EU.

canada-fossil-fuel-subsidies-desmog-canada-oil-change-international

Credit: DeSmog Canada.

Dumbest Policy Of Our Times

Einstein’s quote about insanity is much overused and frankly getting a little boring but nowhere does it apply better than with the open-ended financial support of the oil-gas-coal sector.

Insanity is doing the same thing over and over again and expecting different results. (Einstein).

So let’s break this down. The G20 leaders and the rest of the world (195 countries in total) signed the Paris Agreement in December of 2015. Under the agreement, governments are obligated to implement domestic measures to meet their emissions-reduction targets (Intended Nationally Determined Contributions – INDC).

Canada committed to reducing its emissions by 30 percent below 2005 levels by 2030. The US target is 28% by 2025 whereas the EU contribution is 40% by 2030 below 1990 levels.

Just to be perfectly clear. Parties to the Paris Agreement have agreed to and committed to reducing greenhouse gas emissions, predominantly carbon emissions. They have agreed to different results. In spite of that, we continue to subsidize fossil fuel companies for the production of fossil fuels and for the exploration for new reserves — doing the same thing.

The world needs to reduce emissions but we are subsidizing the production of more emissions. We need less but our tax dollars are paying for more. I cannot think of any other government action where less is needed but more is encouraged. That would be like trying to reduce crime by loosening the laws that control it.

Our governments continue to subsidize fossil fuels, the very source of the problem that has gotten us in this predicament in the first place. While the Paris Agreement is intended to reduce emissions, we press on with fossil fuel subsidies. This is by far the dumbest policy of our times.

The G20

At its latest meeting, the G20 only went so far as to “reaffirm our commitment to rationalise and phase-out inefficient fossil fuel subsidies .…We … look forward to further progress in the future,” the G20 said.

This recent reaffirmation follows a previous commitment in 2009 to end fossil fuel subsidies. Now seven years later, there is nothing to show for it.

In referring to subsidies as “ridiculous outlays”, the Bloomberg piece further said:

They fuel corruption, discourage efficient use of energy and promote needlessly capital-intensive industries.

They sustain unviable fossil-fuel producers, hold back innovation, and encourage countries to build uneconomic pipelines and coal-fired power plants.

Last and most important, if governments are to have any hope of meeting their ambitious climate targets, they need to stop paying people to use and produce fossil fuels.

Sums Involved Are Enormous

Fossil Fuel Subsidies - The Dumbest Policy Of Our Times, boomer warrior

 

The International Energy Agency reports that fossil fuel subsidies amount to $493 billion for consumption subsidies in 2014. The UK Overseas Development Institute estimates that G20 countries alone paid out $450 billion as producer subsidies during the same year. A third body — the International Monetary Fund — includes unpaid climate and environmental externality costs in its fossil fuel subsidy estimates. The IMF places fossil fuel subsidies at greater than $5 trillion. This is a whopping $10 million per minute. Every hour. Every day.

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climate ironyRolly Montpellier is the Founder and Managing Editor of BoomerWarrior.Org. He’s a Climate Activist and a blogger. He’s a member of 350.Org (Ottawa), Climate Reality Canada and Citizens’ Climate Lobby (Ottawa). Rolly has been published widely in both print and online publications. You can follow him on FacebookTwitterLinkedin and Pinterest.

6 COMMENTS

  1. This is indeed the dumbest policy of our times. The tragedy is it seems to be a world wide trend. Future generations may be very unforgiving. Eliminating all energy subsidies – including that for renewable energy – would be superior because fossil fuel always gets 8 to 12 times the benefits that renewable energy gets.

    There is a huge cost to using fossil fuels quite apart from climate change. World wide global subsidies are $5.3 trillion dollars (£3.4tn) a year, equivalent to 10 million dollars a minute, according to a startling new estimate by the International Monetary Fund. The $5.3 trillion dollar subsidy estimated for 2015 is greater than the total health spending of all the world’s governments. (see reference 2507 and those below) The costs to the United States alone is between ten and fifty two billion dollars a year and does not include health costs mentioned below as externalities.

    These subsidies include tax breaks, incentives for production on federal lands (such as royalty fees that haven’t been adjusted in 25 years) and tax deductions for clean-up costs. If state subsidies for oil, gas and coal production are also included, the total value climbs to $21.6 billion for 2013. It is estimated that the world will spend an extra $8 trillion over the next 25 years to prolong the use of non-renewable resources, an estimate that may be way too conservative in light of the IMF’s estimate of 5.3 trillion dollars in 2015 alone mentioned above. That cost would be completely eliminated by eventually transitioning instead to 100% renewable energy. (100% renewable energy is technically feasible. See below “We Can Do It If We Want To.”)

    More than just the costs of massively subsidizing the failed fossil fuel business model is involved. There are also externalities – such as healthcare costs due to pollution, government guaranteed loans, environmental destruction through mountaintop removal for coal, tar sands oil drilling, fracking for natural gas, and wars for oil and uranium. Also consistently ignored is the price for adjusting to the effects of global climate change – even if possible – is far far greater than the cost of stopping global warming at this stage.

    Unlike the climbing costs of fossil fuels, the cost of renewable energy is declining and has been for decades. One should compare the total costs of fossil fuels with the total costs of renewable energy.

    See references 146, 725, 762, 771 – 775, 809 – 812, 832, 875, 900 – 904, 1013, 1037 – 1039, 1128, 1157, 1158, 1201, 1313 – 1325, 1479, 1480, 1530, 1533-1551, 1585, 1631, 1666, 1683-1684, 1725-1727, 1752, 1772-1778, 1788, 1813-1824, 1833-1834, 1836-1837, 1906-1907, 1961, 1966-1968, 2053, 2104-2121, 2140, 2180, 2222, 2227-2234, 2248, 2309,2329, 2335, 2336, 2389-2392, 2394, 2395, 2399-2412, 2420, 2425, 2460, 2487, 2506-2512, 2526-2529, 2551-2554, 2598, 2600, 2642-2653, 2679, 2688, 2695, 2717-2719, 2739-2753, 2762 of this article: http://www.newprogs.org/the_environment_under_the_democratic_republican_uniparty

    • Ed – thank you for your comments and for adding this excellent information.

      It does boggle the mind that we continue to support the very practices that make it impossible to reduce emissions – the very purpose of the Paris Agreement. I simply cannot get my head around this. The same kind of sick logic can be seen with the expansion of fossil fuel infrastructure, like the Dakota pipeline. Such large capital investments lock us into decades of oil energy use. Why build a pipeline if you’re not going to increase production?

  2. Another analogy would be that fossil fuel subsidies are like paying farmers to grow more tobacco. Subsidies for farmers to switch to another crop, yes, but not to produce a product with enormous health costs which are a huge burden on society.

  3. Politically, most parties vie for voters to elect a government based mostly on fundamental needs. Housing, health, energy consumption, transportation, jobs, food cost and availability and schooling. Look at any one of these issues and it will produce a political debate that often borders on violent wrangling.

    Most political parties will bend to subsidising any corporate venture that will produce end results that are the cheapest possible for the end user (the voter), even while still bringing the heftily applied taxes applied to the same subsidised products, back into government coffers. It is an insidious cycle. Subsidies should be abolished, but the kicker is that taxes will drop on fuel, but will go up on everything else. A financial conundrum.

    • You raise an excellent point which I’d not thought about much.

      In Canada, the taxes on fuel for vehicles are very high – great source of revenue for governments. The more we use, the more revenue there is. And one could say that these taxes help finance the subsidies. What subsidies do is artificially keep the price of oil products down. There’s no incentive to use less and to use mass transit for example. The automobile is the predominant choice for Canadians.

      So subsidies keep prices low which encourages more consumption which generates more revenue for governments which can afford to provide subsidies. Wow!

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