Putting the hand brake on fossil fuel subsidies

» By | Published 25 Jan 2012

In a recent interview, the chief economist at the International Energy Agency (IEA) Fatih Birol pointed out that “fossil fuel subsidies are a hand brake as we drive along the road to a sustainable energy future. Removing them would take us half way to a trajectory that would hold us to 2C.”

Mr. Birol is of course referring to the fuel subsidies that governments around the world give towards lowering the price of fossil fuels, such as the $409bn spent by 37 governments in 2010. He is also referring to the fact that these subsidies encourage the use of polluting substances, and that eliminating the subsidies would go a long way towards achieving the goal of limiting global warming to 2 degrees.

Renewables lose out when subsidies boost consumption of fossil fuels. According to the IEA, in the same year as fossil fuels received $409bn, renewables received $66bn. Birol and the IEA said that a phase-out of subsidies would avoid 750m tonnes of CO2 a year by 2015, potentially rising to 2.6 gigatonnes by 2035. This would provide half of the emissions reductions needed to ensure that global warming, a certain amount of which is already unavoidable, would not go beyond 2C, ‘considered the limit of safety by many scientists’ as pointed out by the Guardian.

Figures show that fossil fuel producing countries are often those that give the largest consumption subsidies, such as Saudi oil or Russian gas. According to Fatih Birol, this is because these countries see fuel subsidies as a way to “share out” the benefits of energy exports among their population. However, IEA data shows that the poor in these countries receive a disproportionately low amount of such subsidies.

While rich countries may have cut subsidies for their populations, they still give massive support to producers through tax credit and government underwriting, estimated by the OECD to be $45-75bn annually between 2005 and 2010. Coal, the most polluting of the three main fossil fuels, receives 39% of this support.

The media is becoming more aware of the issue of fossil fuels subsidies. Recent articles in the Guardian and Washington Post covered the topic, and powerful online advocacy group 350.org asked its 180,000 friends and followers “What do you think about 350.org taking on ending fossil fuel subsidies as our next campaign?” The response was overwhemlingly positive.

Categories: Climate change