The B-20 Summit of global business leaders took place earlier this week in Mexico. In this blog post, cross-posted from the World Economic Forum’s blog, Ditlev Engel, CEO of Vestas Wind Systems, and Simon Upton, Director Environment at the OECD, argue the case for an end to fossil fuel subsidies…
If we are serious about reducing the use of fossil fuels, why would we make them artificially cheaper? But, that is what we are doing through inefficient fossil fuel subsidies. Many industrialized countries, for example, still support their coal mining industries to the tune of several billion euros a year while developing countries often spend considerable resources to keep domestic fuel prices below world prices. Eliminating such measures and inefficient fossil fuel subsidies more generally would help reduce fiscal imbalances, increase real incomes, and reduce greenhouse gas emissions and the overall cost of climate change mitigation. It would thus eliminate a key barrier to the faster deployment of clean energy. A portion of the funds saved from ending such subsidies could also be redirected to support access to energy by all and other policy priorities.
UK newspapers have again picked-up on the issue of government subsidies to wind power saying that one Cabinet Office minister – Oliver Letwin – backs an end to subsidies to onshore wind farms by 2020. But the Guardian reported that Mr. Letwin’s comments have “irritated” Ed Davey, the UK climate change secretary, who last week set out his backing for wind energy.
It makes me wonder – how do politicians and media can get away with talking about removing subisidies from renewables without even mentioning the existence – let alone withdrawal – of much larger subsidies for much more established energy technologies? It is hard to understand.
“At a time of austerity, Greek citizens cannot afford to support practices which prolong energy dependence. The choice of importing oil and gas versus producing renewable energy within the EU, and encouraging clean energy exports among Member States, is obvious”, Greek Energy Minister George Papakonstantinou told Wind Directions magazine recently.
He also rebutted the myth that renewables are expensive, saying it was a view he didn’t share, “especially in regard to proven and tested technologies such as wind and solar PV, whose investment costs have been lowered significantly in the last few years.
European politicians need to endorse a new binding 2030 target for renewable energy sources if they want to take advantage of the EU’s position as global technological leader in onshore and offshore wind power. That was the message Wednesday from Stephane Bourgeois, Head of Regulatory Affairs at the European Wind Energy Association (EWEA) in Brussels, following the European Commission’s Communication on “Renewable energy: a major player in the European energy market.”
Every day newspapers are full of the latest Eurozone crisis. In 2010, Tom Murley from private equity firm HgCapital described the economy to Wind Directions as having had the equivalent of “open-heart surgery”. Today, he says: “Depending on what happens with the Eurozone we may be wheeling the economy back into surgery again.”
The offshore wind energy industry is particularly vulnerable to the current squeeze. Banks are now having to pay more for the long-term loans the sector requires, so they are becoming more reluctant to offer them.