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Fossil Fuels

Published on November 11th, 2013 | by Guest Contributor


Fossil Fuels Receive $500 Billion A Year In Government Subsidies Worldwide

November 11th, 2013 by  

Originally published on ClimateProgress

Producers of oil, gas and coal received more than $500 billion in government subsidies around the world in 2011, with the richest nations collectively spending more than $70 billion every year to support fossil fuels.

Those are the findings of a recent report by the Overseas Development Institute, a think tank based in the United Kingdom.

“If their aim is to avoid dangerous climate change, governments are shooting themselves in both feet,” the report, headed by ODI research fellow Shelagh Whitley, said. “They are subsidizing the very activities that are pushing the world towards dangerous climate change, and creating barriers to investment in low-carbon development and subsidy incentives that encourage investment in carbon-intensive energy.”

While the report acknowledges there is currently no globally agreed definition of what constitutes a subsidy, it cites the World Trade Organization’s approach: “a subsidy is any financial contribution by a government, or agent of a government, that confers a benefit on its recipient.”

Germany, for example, provided €1.9 billion in financial assistance to its hard coal sector in 2011, according to the report. That same year, the U.S. created a $1 billion fuel tax exemption for farmers and invested $500 million for fossil energy research and development. The top 11 “rich-country emitters” — the biggest being Russia, the United States, Australia, Germany and the United Kingdom — are estimated to have spent $74 billion on subsidies in 2011.

That total amount outweighs the support provided to developing countries to reduce their greenhouse gas emissions by seven to one, the report found.

Fossil fuel subsidies were actually created to benefit the poor. According to ODI, governments often justify giving tax breaks and freebies to energy companies in order for those companies to provide energy access to those who can’t afford it.

Generally, however, that winds up not being the case. Citing a report by the International Monetary Fund, ODI said only seven percent of the benefits from fossil fuel subsidies in developing countries reached the poorest 20 percent of people between 2005 and 2009. In contrast, more than 40 percent of those subsidies benefited the people in richest 20 percent of people during that time.

fossil fuel subsidies

Image Credit: Overseas Development Institute

Subsidies for gasoline were the most unequal, with the report citing less than five percent of those subsidies reaching the poorest people and more than 60 percent benefiting the richest. Fossil fuel subsidies for liquefied petroleum gas, more commonly known as propane, had similar numbers. Kerosene subsidies were found to have been pretty much evenly distributed.

oil subsidies

Image Credit: Overseas Development Institute

Subsidies to fossil fuels are also making it difficult to compete with artificially low energy prices, therefore discouraging private investors from putting money into clean energy technologies. What’s more, the growing number of countries that provide subsidies to both fossil fuels and clean energy may actually be negating the impact of climate finance and other clean-energy incentives, according to the report.

ODI is calling on the G20 countries to phase out all subsidies to coal and to oil and gas exploration by 2015, and end fossil fuel subsidies entirely by 2020. The process won’t be easy, the report noted, finding that citizens across the globe are generally misinformed about what they or others receive in terms of subsidies. Additionally, special interests are dominating the playing field, making it difficult to come to a consensus.

According to the Center for Responsive Politics, individual and political action committees affiliated with oil and gas companies have donated $239 million to candidates and parties since 1990. But the U.S. isn’t the only moneyed country where special interests assure that fossil fuel subsidies reign on, according to the report.

In India, for example, federal and state governments incur great expense in order to provide the country’s powerful farm industry with “cheap or free” electricity, the report said. That, along with the fact that agricultural incomes are tax-exempt in India, provides farmers in that country with the funds to create a powerful lobby that “ensures that no government can hold on to power without holding on to [fossil fuel] subsidies.”

“The barriers to reporting on subsidies and to their removal are based on the multiple and often diverging interests of a wide range of stakeholders in both developed and developing countries,” the report said. “These include government officials, industry associations, companies, trade unions, consumers, social and labor political activists, and civil society organizations — all of whom need to be on board if subsidies are to be eliminated.”

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  • socraticsilliness

    sigh….low info voters…what subsidies? And please, show some intellectual integrity-tax write-offs aren’t subsidies, which are money gifts to entities.

    • Bob_Wallace

      Tax write-offs aren’t subsidies?

      If that’s you personal definition of subsidy then perhaps you understand that neither utility scale wind nor solar receive subsidies?

      Wind receives either a ITC (Investment Tax Credit) or a PTC (Production Tax Credit). A tax write down.

      Solar receives a PTC.

      Neither receive subsidies. Neither receive “money gifts”.

      Of course your definition of subsidies does not match the real world definition. And using the commonly acceptable definition of subsidies fossil fuels and nuclear have received massively more subsidy than have renewables. And most of the renewable money has gone to large corporate farms for corn ethanol.

    • A Real Libertarian

      Funny, low information voter describes you perfectly.

      In addition to not knowing what “subsidy” means, you don’t “low information voter” means:


      But then, you only know what Rush tells you to know.

  • Dudette

    Still, people should have their own will in researching how their lives can be better. Yes we have a government that supports us but again, being socially aware of what’s happening and doing something about it is a must. At first I was a bit doubtful if converting gas to propane would really fit my expectations but I’ve come to realized that yes, it is the answer for my longing prayers. It’s very affordable, convenient and is truly a lifesaver. I don’t need to spend too much on gasoline and I enjoy the perks of saving my precious time and energy. Just to share, try visiting this website that I found,http://gomowpropane.com/conversion-plans/. It’s a good reference for your concerns about propane conversions.

  • Wayne Williamson

    I’m just wonder where the title of this article came from, please show me where in the report it shows 500B.
    Look, I’m all for getting rid of the fossil stuff, just make sure your statements add up…I might have missed it…just want some verification…

  • Steeple

    Global agreement by 2015? Knock yourself out trying to get Russia and the OPEC members to go totally free market on their most strategic economic assets. Or to get China and India to drop fuel subsidies.

    We can surely eliminate them all in the US, but expect zero knock-on effect globally.

    Perhaps we should also get a global agreement to ban all forms of violence. Or to make sure all puppies get a hug every day.

  • beernotwar

    I have been highly suspicious of the ‘Grand Bargain’ the D.C. establishment seems to be in love with in which Social Security and Medicare cuts are on the table in exchange for increased revenue and cuts to things like oil and gas subsidies. However, given the threat of climate chaos from burning more fossil fuels, I’m thinking I ought to embrace the plan so long as it eliminates all fossil fuel subsidies. My retirement is really going to stink if Florida is under water when I’m finally ready to move there.

    • Bob_Wallace

      Stay where you are. Florida’s heat and the surf are coming to you.

  • Marion Meads

    How about the dirt cheap royalties of land leases from the government? And the cost that the taxpayers are subsidizing for the added cost of health care affected by smog and other emissions? It was reported that the number one killer of people through premature death and other diseases are caused by smog and air emissions from fossil fuel combustion. And the taxpayers have to shoulder all of this from increased premiums to government picking up the bill for those who can’t afford the healthcare in emergency rooms. I am not even counting the increased ferocity of storms and the more lethal freezing events, heat wave, flooding and drought.

  • wattleberry

    One thing governments hate above all else is disruption to their status quo whereby all that lovely revenue loaded on to fossil fuels so conveniently unavoidable will have to be replaced by alternative sources with all their political risks. No wonder they’re going to preserve the old order as long as they can.

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