Creating a level playing field for Renewable Energy by removing Fossil Fuel subsidies is an excellent idea, as mooted by the International Energy Agency :-
“IEA reveals fossil fuel subsidies top $550bn : Report warns kick-backs for fossil fuels are skewing energy markets and holding back renewables investment : By Andrew Donoghue 08 June 2010 : The global fossil fuel industry currently enjoys subsidies worth more than $550bn (£382bn) a year, according to a major new report from the International Energy Agency (IEA) that will increase pressure on world leaders to phase out fossil fuel subsidies ahead of a crucial meeting of the G20 group of nations later this month. The research, which was released at a meeting of G20 finance ministers in Busan, South Korea over the weekend, reveals fossil fuel subsidies amounted to $557bn in 2008 – up from $342bn in 2007. Enormous subsidies are skewing energy markets and inhibiting the uptake of more sustainable energy sources, the IEA warned. “The IEA analysis highlights that the price signal from subsidy phase-out would provide an incentive to use energy more efficiently, and trigger switching from fossil fuels to other fuels that emit fewer GHGs,” the report said…”
“Fossil Fuel Subsidies Are 12 Times Support for Renewables, Study Shows : By Alex Morales – 29 July 2010 : Global subsidies for fossil fuels dwarf support given to renewable energy sources such as wind and solar power and biofuels, Bloomberg New Energy Finance said. Governments last year gave $43 billion to $46 billion of support to renewable energy through tax credits, guaranteed electricity prices known as feed-in tariffs and alternative energy credits, the London-based research group said today in a statement. That compares with the $557 billion that the International Energy Agency last month said was spent to subsidize fossil fuels in 2008. “One of the reasons the clean energy sector is starved of funding is because mainstream investors worry that renewable energy only works with direct government support,” said Michael Liebreich, chief executive of New Energy Finance. “This analysis shows that the global direct subsidy for fossil fuels is around ten times the subsidy for renewables.”…”
Here are some relevant documents :-
Barack Obama and the G20 first made a serious call for the removal of Fossil Fuel subsidies back in 2009 :-
“G20 agrees on phase-out of fossil fuel subsidies : 25 September 2009 : The world’s largest economies agreed on Friday to phase out subsidies for oil and other carbon dioxide-spewing fossil fuels in the “medium term” as part of efforts to combat global warming. But Group of 20 leaders at a two-day summit meeting here did not advance discussions about financial aid for developing nations dealing with climate change, exacerbating concerns that U.N. talks to form a new climate pact are in peril. Some $300 billion a year is spent worldwide to subsidize fuel prices, boosting demand in many nations by keeping prices artificially low and, thus, leading to more emissions. The agreement — backed by all of the G20 including Russia, India and China — was a victory for U.S. President Barack Obama, whose credentials for fighting climate change have been marred by dimming prospects that the U.S. Senate will pass a bill to reduce emissions before the December U.N. meeting…”
Seems like it’s a done deal…apart from an issue that should never be forgotten in all global negotiations : economic development.
India, for example, has a policy to keep down the price of diesel fuel – a strategy to promote economic development. They won’t be ready to cut subsidies :-
“Diesel subsidy withdrawal unaffordable, says minister : 04 February 2011 : New Delhi: India cannot afford to withdraw the subsidy on diesel and it has to continue till poverty disappears from the country, union Minister for New and Renewable Energy Farooq Abdullah said on Friday. Speaking at the Delhi Sustainable Development Summit here, Abdullah said India gives a lot of subsidy on diesel and, if withdrawn, it will only increase inflation. ‘Diesel subsidy has to continue till poverty disappears from the country,’ he said while reacting to Canadian parliamentarian Stephane Dion’s appeal to phase out diesel subsidy…”
The Americans and the Europeans calling for an end to fossil fuel subsidies could be interpreted as a lever to block the economic development of the Global South – as much of the price-fixing is conducted by developing nations.
It could be argued that the United States and “her allies” want to retain economic dominance – what better way than blocking economic progress in the Global South and making it appear to be a Climate Change measure ?
In addition, much of the financial support for energy projects in the Global South is indirectly awarded to the fossil fuel industry via the international aid cash coming from developed nations and the international agencies. And the fossil fuel producers and engineering companies are not going to be willing to let that source of revenue dry up.
If international aid for energy projects gets stopped, so does a lot of economic development until “technology transfer” of Renewable Energy can be ramped up :-
Before they came to power in the United Kingdom, the Conservative Party were strongly behind the proposals to stop international development loans going on dirty energy projects :-
“23 November 2009 : Andrew Mitchell: Ending Labour’s support for polluting energy projects : …we must end the use of the Export Credit Guarantee Department to promote ‘dirty’ fossil fuel power stations around the world, and instead make it a champion of green technology…”
This promise has not been kept, according to the Jubilee Debt Campaign :-
“Lord Green told: Britain’s exports must stop harming people and planet : 24 January 2011 : New report details string of ‘dodgy deals’ at export support body : As new Trade Minister Stephen Green embarks on a national tour to promote British exports, Jubilee Debt Campaign warns that Britain’s export support body is not up to the job : A report released by the organisation today exposes a history of backing projects by large corporations in a handful of controversial sectors. The projects have led to human rights abuses, environmental destruction and corruption in the developing world, and often failed to deliver even on their stated aims. Britain’s export promotion body, the Export Credits Guarantee Department (ECGD), has also undermined Britain’s international development goals by leaving countries like Kenya, Vietnam, Indonesia and Pakistan with £2 billion of debts from failed export deals – 96% of Third World Debt ‘owed’ to the UK today…The Coalition government has failed to act on its pledge to end fossil fuel subsidies through the ECGD, despite taking action to beef up the Department’s role…”
The key global development question remains – is cutting fossil fuel subsidies yet another (underhand) way of reducing international aid budgets ?
To deflect criticism, the spotlight will probably be turned on countries like Iran :-
“Getting the Prices Right – Cutting Subsidies Could Save Billions : 8 June 2010 : Global fossil fuel consumption subsidies in 2008 were much higher than previously estimated and totalled USD557 billion, according to IEA analysis…The IEA has undertaken an extensive survey to identify countries that offer subsidies that reduce prices of fossil fuels below levels that would prevail in an undistorted market, thus leading to higher levels of consumption than would occur in their absence. The survey identified 37 countries and it is estimated that these represent over 95% of global subsidized fossil‐fuel consumption…The IEA analysis has revealed that fossil fuel consumption subsidies amounted to $557 bn in 2008. This represents a big increase from $342 bn in 2007…Since 2008, a number of countries – including China, Russia, India and Indonesia – have made notable reforms to bring their domestic energy prices in line with world prices…The country with the highest subsidies in 2008 was Iran at $101 billion, or around a third of the country’s annual central 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. Iran’s leadership came to agreement in 2010 on a sweeping plan for energy subsidy reform; however, steep economic, political and social hurdles will need to be overcome if Iran is to realize lasting reform…”
Obama says we have to drop fossil fuel subsidies. The next thing you know, the inaccuracies start flying :-
“Manchin claims coal “doesn’t get a penny of subsidies” : In fact, the industry gets trillions of pennies : 4 February 2011 : Senator Joe Manchin (D-WV), the newest member of the Senate Energy and Natural Resources Committee, claimed today that the coal industry doesn’t receive any government subsidies, unlike every other form of energy. Brad Johnson debunks this absurd claim…”