FOSSIL FUEL SUBSIDIES: PUBLIC ENEMY NO 1

Just before the opening of the Paris Climate Change summit, the British government announced it was cutting support for wind and solar power. This abrupt change of policy has caused the collapse of many solar companies and has had a negative effect on green energy investment. It also puts an end to a home energy efficiency scheme.

Jacqueline McGlade, chief scientist of the UN's environment programmes was highly critical. She told the BBC: "What I'm seeing worldwide is a move very much towards investment in renewable energy. To counterbalance that, you see the withdrawal of subsidies and tax breaks to fossil fuels. What's disappointing is when we see countries such as the United Kingdom that have really been in the lead in terms of getting their renewable energy up and going - we see subsidies being withdrawn and the fossil fuel industry being enhanced. It's a very serious signal - a very perverse signal that we do not want to create."

Other countries have also reduced their support for wind and solar - including, surprisingly, Denmark, a country of 5.8 million people, which was able to generate 40% of its energy from  wind turbines last year.  The budget cuts follow elections in June when the centre-left government was replaced by a rightist minority coalition. The cuts include less funding for the highly successful seeding programme for green technology projects. The Energy Technology Development and Demonstration Program started in 2007 and distributed money to 88 solar, wind and geothermal energy projects - one in every four considered. Budget cuts mean this support will now only be available for one in eight projects.

PUBLIC ENEMY NO 1

Let's return to Ms McGlade's words: "we see subsidies being withdrawn and the fossil fuel industry being enhanced." Like you probably, I was unaware that the use of fossil fuels is widely subsidised. Hereby hangs a tale.

Without at present going into the history of how all this came about, we begin this story with an 2008 agreements at a summit meeting between the world's largest economies - the Group of 20. They agreed to start phasing out these subsidies and, according the International Energy Agency (IEA), they have made some progress. In 2014, the estimated worldwide fossil fuel subsidies were $490 billion, down from $610 billion, as a result of the agreement.

Last month the IEA identified the elimination of fossil fuel subsidies as one of the single most effective steps to reduce global greenhouse gas emissions.. These subsidies, IEA's executive director Fatih Birol, are "Public Enemy No 1 in terms of sustainable development."

One the first day of the climate conference a quorum of countries, businesses and organisations called for 'aggressive action' to phase out these subsidies. "The huge sums involved globally," said Christiania Figueres, executive secretary of the UN Framework Convention on Climate Change, "could be better spent on schools, health care, renewable energies and building resilient societies.'

The simplest form of these subsidies is government spending to keep fuel prices low for their citizens. These direct subsidies are found mainly in the developing world and in oil-producing nations. In the US its different. They subsidise fossil fuel companies through various means including tax breaks and backing for exploration and production.

According to John Schwartz's piece in the New York Times the Organisation for Economic Cooperation and Development (OECD) have found 800 different ways in which rich industrial nations use taxpayers money to support the fossil fuel industries. 

Oil Change International describe themselves as 'a research, communication, and advocacy organization focused on exposing the true costs of fossil fuels and facilitating the coming transition towards clean energy.' They claim that governments are 'allowing fossil fuel producers to undermine national climate change commitment, while paying them for the privilege. The founder and executive director Stephen Kretzmann: "We have to stop using government funds to support the industry that is causing the problem.'

 The International Monetary Fund estimate the real cost as actually being $5.3 trillion - a figure that includes the costs of the effect these forms of energy use have on people's health, the environment and climate change. By contrast, the pledge given by advanced industrial nations to fight climate change is $100 billion a year by 2020.

There is another effect of using government subsidies to keep fuel prices low - it makes alternative energy sources less affordable. An 2014 IEA report on world energy stated: 'Fossil fuel subsidies rig the game against renewables and act as a drag on the transition to a more sustainable energy system.' 

In November this year a report by Oil Change and the Overseas Development Institute (ODI) found that the G20 nations as a whole are responsible for an annual $452bn (£297bn) in subsidies.

According to Damian Carrington in The Guardian: 'The UK is alone among G7 nations in dramatically increasing its fossil fuel subsidies despite have already pledged to phase them out. We have paid out £5.9bn to energy companies in Britain, a further £3.7bn to subsidise production in other countries including Russian, Saudi Arabia and China.

One of the authors of the report Shelagh Whitley said: "The UK has been cutting back support for solar power and energy efficiency, arguing that the burden was too high. Our figures reveal that in spit of supposed budget constraints, the government is giving ever increasing handouts to oil and gas majors."

Sources: 'On Tether to Fossil Fuels, Nations Speak With Money' by John Schwartz (New York Times/5th December 2015)


'UK becomes only G7 country to increase fossil fuel subsidies' by Damian Carrington (The Guardian /12th November 2015)