Joe Manchin is perseverating about spending $3.5 trillion over 10 years for Joe Biden’s Build Back Better plan. “We can’t afford it!” he cries while cashing the $500,000 check he gets from the coal industry each year. But while he is beating his breast and proclaiming his piety, he never once objected to the $300 million a day the United States spent on its failed mission to punish Afghanistan for harboring Osama Bin Laden or the $2 trillion wasted on George W. Bush’s Iraq escapade. In sum, the US has squandered $6.4 trillion on wars in the Middle East and Asia since 2001, according to CNBC.
The latest analysis by the International Monetary Fund (IMF) claims that the fossil fuel industry (of which Manchin is a part) received $5.9 trillion in direct and indirect subsidies in 2020. That’s up from the $2 trillion the IMF estimated in 2014. Put that in your pipe and smoke it, King Coal Joe! That figure includes intangibles such as tax breaks, health care costs associated with breathing the pollutants they spew into the atmosphere, and environmental damages like more powerful storms, rising sea levels, drought, forest fires, and the like.
Those are all factors that have an economic cost but are not included in the price we pay for coal, oil, or unnatural gas. Economists refer to those costs as “untaxed externalities,” a fancy way of saying fossil fuel companies are benefiting financially from the fact that society does not require them to fully account for the damages caused when their products are consumed. It’s a “heads we win, tails you lose” situation.
The IMF says explicit subsidies that cut fuel prices accounted for 8% of the total and tax breaks another 6%. The biggest factors were failing to make polluters pay for the deaths and poor health caused by air pollution (42%) and for the heatwaves and other impacts of global heating (29%).
According to Yale Environment 360, the IMF report says, “Underpricing leads to overconsumption of fossil fuels, which accelerates global warming and exacerbates domestic environmental problems including losses to human life from local air pollution and excessive and road congestion and accidents. This has long been recognized, but globally countries are still a long way from getting energy prices right.”
The report finds that 47% of natural gas and 99% of coal is priced at less than half its true cost. Just five countries — China, the United States, Russia, India, and Japan — account for two thirds of subsidies globally. All five countries belong to the G20, which in 2009 agreed to phase out “inefficient” fossil fuel subsidies “over the medium term.” Apparently “medium term” is some time in the future when the Earth has warmed to the point that human habitation is nearly impossible for the vast majority of people.
Setting the price of coal, oil, and gas to reflect their true cost — a carbon tax is one way of doing precisely that — would cut carbon dioxide emissions by about a third and go a long way toward limiting global warming to only 1.5 degrees C. Such policies would create new revenues that amount to 3.8% of global GDP and prevent close to 1 million deaths from local air pollution yearly.
Proper pricing of fossil fuels would cut emissions by encouraging electricity generators to switch from coal to renewable energy. That in turn would make electric cars an even less expensive option for drivers than they are today.
But What About The Poor?
Many people believe any increase in the cost of fuels will have a disastrous effect on poor communities. Not so, the IMF report explains. “There would be enormous benefits from reform, so there’s an enormous amount at stake,” Ian Parry, an environmental policy expert and lead author of the report, told The Guardian. “Some countries are reluctant to raise energy prices because they think it will harm the poor. But holding down fossil fuel prices is a highly inefficient way to help the poor, because most of the benefits accrue to wealthier households. It would be better to target resources towards helping poor and vulnerable people directly.” In other words, keeping fuel costs low is like helping your needy relatives by making a donation to Oxfam.
With COP26 set to kick off in Glasgow in a few weeks, this is an issue that is of immediate concern. “To stabilize global temperatures we must urgently move away from fossil fuels instead of adding fuel to the fire,” Mike Coffin, senior analyst at Carbon Tracker, tells The Guardian. “It’s critical that governments stop propping up an industry that is in decline, and look to accelerate the low-carbon energy transition, and our future, instead.”
“The IMF report is a sobering reading, pointing to one of the major defects of the global economy,” says Maria Pastukhova of environmental group E3G. “The IEA’s net-zero road map projects that $5 trillion is necessary by 2030 to put the world on the pathway to a climate safe world. It is maddening to realize that much needed change could start happening now, if not for governments’ entanglement with the fossil fuels industry in so many major economies.” We think she is talking directly to you, Joe Manchin. “Fossil fuel subsidies have been a major stumbling block in the G20 process for years,” she said. “Now all eyes are on the G20 leaders’ summit in late October.”
International cooperation will be critical to allay fears that countries could lose competitiveness if their fossil fuel prices were higher, Ian Parry argues. And that’s a problem. Obviously, nations will be reluctant to be first movers if doing so will harm their economies and bolster the financial fortunes of others. Building international cooperation at COP26 will be hard, particularly when many poorer countries are still waiting for the financial assistance to convert to low-carbon technologies that was promised by wealthy nations in 2015.
The world community must come to understand the fossil fuel economy is built on a lie — one that says there are no economic costs to burning coal, oil, and gas. In point of fact, there are enormous costs. How much is keeping the Earth safe for humans to live worth? That’s the question King Coal Joe and his ilk need to be asking.
Featured image: fossil fuel divestment logo via 350.org