Published on June 11th, 2010 | by Zachary Shahan3
$550 Billion in Fossil Fuel Subsidies
June 11th, 2010 by Zachary Shahan
A new report out by the International Energy Agency (IEA) makes it clear that if we just stopped subsidizing the fossil fuel industry (or, at least, subsidized it a lot less) we could significantly cut climate change pollution.
The report found that the global fossil fuel industry receives approximately $550 billion in subsidies every year. The report was released at a meeting of G20 finance ministers in Busan, South Korea last weekend.
You would think that with increasing concerns about global warming and peak oil, subsidies would be decreasing, but the report showed that subsidies rose from $342 billion in 2007 to $557 billion in 2008.
Of course, these skew the energy market, and not in the way that we should to account for the environmental and health externalities of fossil fuels.
Obama’s Proposal to Start Phasing Out Fossil Fuel Subsidies
At the last G20 meeting in Pittsburgh, President Obama put forward the idea of phasing out fossil fuel subsidies, which garnered a considerable amount of support.
This report comes just prior to the next meeting of G20 leaders in Canada on June 26-27 where the issue is expected to be discussed further.
Hopefully, it will help to keep these key decision-makers from avoiding this topic any further.
Iran Leading the World in Fossil Fuel Subsidies
Iran led the pack with $101 billion in fossil fuel subsidies in 2008, accounting for approximately a third of the country’s budget.
“Chronic under-pricing of domestic energy in Iran has resulted in enormous subsidies and a major burden on the economy that is forcing reliance on imports of refined products,” the study concluded. “Steep economic, political and social hurdles will need to be overcome if Iran is to realise lasting reform.”
Energy Consumption and CO2 Emissions Would Drop Considerably if Subsidies Were Cut
The results of cutting fossil fuel subsidies, even slowly, would be considerable.
“The IEA predicted that phasing out subsidies over the next 10 years would lead to a 5.8 per cent cut in global energy demand – equivalent to the combined energy consumption of Japan, South Korea, Australia and New Zealand,” Andrew Donoghue of Business Green reports. “Global CO2 emissions would also be cut by about 6.9 per cent by 2020 if subsidies were withdrawn,” equal to the combined emissions of France, Germany, Italy, Spain and the UK.
More information on fossil fuel subsidies will be published in a November IEA report, The World Energy Outlook 2010. Additionally, the IEA intends to “create an online database to improve transparency around fossil fuel subsidies, which will include breakdowns by country, by fuel and by year.”
Image Credit: melancholic optimist via flickr/CC license