Axing fossil fuel subsidies scant help on climate: study

fossil fuel
Credit: CC0 Public Domain
Getting rid of massive subsidies for oil, gas and coal will not significantly curb carbon pollution or speed the transition to a greener global economy, researchers said Wednesday, challenging widely held assumptions.

"Unfortunately, it is not the silver bullet many had hoped," they said in a statement.

"Removing fossil subsidies would only slightly slow the growth of CO2 emissions", which are on track to increase for at least another decade, they added.

"By 2030, emissions would only be one-to-five percent lower than if subsidies had been maintained."

For fossil fuel producers, subsidies can take the form of tax breaks, cheap loans, protection from competitors, or favourable trade restrictions. For consumers, they generally result in below-market prices for oil, gas or electricity.

The intergovernmental International Energy Agency (IEA) estimated the value of fossil fuel consumption subsidies in 2016 at about $260 billion (212 billion euros), down from $310 billion the year before.

Electricity and oil each accounted for just over $100 billion, with natural gas topping $50 billion. Coal subsidies were only about $2 billion.

On the production side, an analysis by the London-based Overseas Development Institute and NGO Oil Change International found upwards of $70 billion a year in national subsidies for the oil, gas and coal sectors.

The new findings, published in the journal Nature, clash head on with the common view that fossil fuel subsidies jeopardize the Paris climate treaty goal of capping global warming below two degrees Celsius (3.6 degrees Fahrenheit).

Gradual phase-out

Average global temperatures are already up 1 C since the mid-19th century, and are on track—despite voluntary, carbon-cutting pledges by virtually all the world's nations—to rise 3 C above that benchmark by 2100.

Fossil fuel giveaways, according to prevailing wisdom, encourage wasteful energy consumption, and discourage investment in renewable energy, such as solar and wind.

The G7 club of rich countries has long criticised "inefficient fossil fuel subsidies," and in 2016 took the unusually concrete step of setting a deadline: government financial support for coal, oil and gas should end by 2025, member nations said in a communique.

Even the G20—which includes China, India, Russia and Indonesia, all economies with large energy subsidies—has called for their gradual phase-out.

The new study suggests this is a recipe for disappointment.

Slotting different options for economic growth, technology trends, energy prices and other variables into complex models, the researchers projected fossil fuel use and CO2 emissions over the next several decades—with and without subsidies.

They found that removing them would only dampen energy demand by one-to-four percent up to 2030.

At the same time, emissions of CO2, the main greenhouse gas, would decrease by a modest one-to-five percent, regardless of whether oil prices are high or low.

Not a 'small effect'

Several factors account for what this unexpectedly weak impact, said lead author Jessica Jewell, a scientist at the International Institute for Applied Systems Analysis in Laxenburg, Austria.

The first is that subsidies apply almost entirely to oil, gas and the electricity they produce, and not coal—by far the dirtiest of fossil fuels.

"In some cases, the removal of subsidies causes a switch to more-emissions intensive coal," Jewell said.

And while the subsidies run into the hundreds of billions of dollars, that is still not enough—given the scale of global needs—to dampen demand even if they are withdrawn, she said.

Other scientists disagreed.

Peter Erickson, a Seattle-based research at the Stockholm Environment Institute, said the study underestimates the impact on CO2 emissions.

"The modellers did not address how fossil fuel subsidies affect decision-making in new oil or gas fields," he told AFP.

A recent study by Erickson in Nature Energy showed that subsidies such as tax preferences would nearly double US oil production through 2050, assuming a price of $50 a barrel.

He also questioned the conclusion that slashing up to four percent of global CO2 emissions is a "small effect," as claimed by Jewell.

"That is only 'small' compared to the gargantuan size of the climate problem," he said.


Explore further

To save climate, stop investing in fossil fuels: economists

More information: Jessica Jewell et al. Limited emission reductions from fuel subsidy removal except in energy-exporting regions, Nature (2018). DOI: 10.1038/nature25467
Journal information: Nature , Nature Energy

© 2018 AFP

Citation: Axing fossil fuel subsidies scant help on climate: study (2018, February 8) retrieved 19 August 2019 from https://phys.org/news/2018-02-axing-fossil-fuel-subsidies-scant.html
This document is subject to copyright. Apart from any fair dealing for the purpose of private study or research, no part may be reproduced without the written permission. The content is provided for information purposes only.
145 shares

Feedback to editors

User comments

Feb 08, 2018
In any case, the subsidies must end because they cause irrational market behaviour. The problem is that governments all over the world have painted themselves into a corner by buying votes with cheap energy. Subsidies are an easy way to pacify the people.

Most of the oil subsidies happen in poorer countries where the upper echelons buy peace by keeping fuel prices artifically low. But richer countries are not exempt:

The US for example subsidizes oil to the tune of $4.5 billion a year, but if you look at the breakdown, $1 billion is actually the strategic oil reserve, another $1 billion is farming subsidies, 0.6 billion goes to Low-Income Home Energy Assistance Program which is buying electricity and heating fuels to poor families... so approximately half the subsidies paid you can't really get rid of without causing serioius harm in the society.

Feb 08, 2018
The same problem applies to renewable energy subsidies, because by paying people and creating jobs through subsidy, the society structures itself around those subsidies - and then long after the subsidies have become unnecessary, any government that tries to remove them will face fierce opposition from the public.

So you're in a catch-22: people complain about the high taxes, and they also complain if you stop spending money unnecessarily. If you lower the taxes, you gain a little bit of popularity, but as you reduce spending, the public will vote you out of office and return the guy who keeps the spending up to protect their own jobs.

Everybody knows what's the right thing to do, but nobody wants to sacrifice -their- welfare in the present moment, asking "why me? Why not those guys?". Ask anyone if they'd quit their paying jobs so everyone could pay less tax, most people say "no".

Feb 08, 2018
Example:

https://www.forbe...71c83279

So why do we still have fossil fuel subsidies? Because almost nobody -- not even Bill McKibben -- wants to get rid of all of the programs that are classified as fossil fuel subsidies. I suspect McKibben would not advocate eliminating the Low Income Home Energy Assistance Program. Two of the most outspoken Democratic opponents of oil subsidies have strongly defended this particular program -- even though it is classified by the OECD as the 3rd largest petroleum subsidy. When Republicans tried to cut funding for the program, Sen. Chuck Schumer, D-N.Y., called the proposal an "extreme idea" that would "set the country backwards."

when President Obama tried to reduce funding for the program. Rep. Markey's office said: "If these cuts are real, it would be a very disappointing development for millions of families

Feb 08, 2018
Last year CNN did a story where they put together their own list of the so-called oil subsidies, and in their list the "largest single tax break" — amounting to $1.7 billion per year for the oil industry — is a manufacturer's tax deduction that is defined in Section 199 of the IRS code.

This is a tax credit designed to keep manufacturing in the U.S., but it isn't specific to oil companies.

It is a tax credit enjoyed by highly profitable companies like Microsoft and Apple, and even foreign companies that operate factories in the U.S.


Cut the oil subsidy, cut the manufacturing subsidy - whoops! Lost ten million jobs to China! These are the unintended consequences of government subsidy policies - and why they shouldn't exist in the first place.

Feb 08, 2018
The same problem applies to renewable energy subsidies, because by paying people and creating jobs through subsidy, the society structures itself around those subsidies - and then long after the subsidies have become unnecessary, any government that tries to remove them will face fierce opposition from the public.


It's just a question of externalities - fossil fuels are negative externalities, so you are right when you say 0.25% of world GDP being spend on them is irrational.

Subsidizing new tech is actually a good idea, https://pdfs.sema...f91.pdf, R&D is the engine of productive growth within an economy, but it is not spending for which the spender receives all the benefits. That a touch screen created the app economy, could not have been predicted by researchers finding see through electrically conducting screens..

Feb 08, 2018
It shows that nations like South Korea and Israel, who spend almost 5% of GDP on R&D, have strong growth. Renewable energy sources offer benefits to the general population of the planet (not even individual countries), that individual research institutions cannot take into account, and cannot price in fairly. Hence the need for subsidies..

The government should regulate industries and technologies according to their externalities, and tax/subsidize accordingly.. can make the whole process net out at $0, just to not affect the taxman - just have a purely relative re-adjustment of value within the economy, to take the third party into account!

Feb 08, 2018
It's just a question of externalities


The subsidies on renewable energy have externalities as well, because they're artifically pushing down energy prices which causes extra consumption of energy to less gainful purposes, therefore higher portion of the economy's output is spent in vain.

Subsidies cause inefficiency, and inefficiency causes poverty and related problems, so merely switching the target of the subsidies is switching one problem for another. Furthermore, as the renewables subsidies operate on a fundamentally different principle - they're paid explicitly per energy produced - they're very easily abused.

Just like in Texas, they're giving free electricity at night-time to sink the extra wind power, so they could keep collecting the federal subsidies. People basically waste it on heating their pools or having extra lights on, because it costs them "nothing", and other Americans are paying them to do it.


Feb 08, 2018


"Unfortunately, it is not the silver bullet many had hoped," they said in a statement.

"Removing fossil fuel subsidies would only slightly slow the growth of CO2 emissions"

Every bit helps. And the statement doesn't take into account that the money saved can go to other endeavours (e.g. renewables, where there's vastly more bang for the buck)

Feb 08, 2018
That a touch screen created the app economy, could not have been predicted by researchers finding see through electrically conducting screens..


Technically, the touchscreen didn't create the app economy. Apps on phones existed before, but in the US they were suppressed by the mobile carriers who wanted to monopolize the features on phones. They locked the phones out, removed the file browser, etc. even though phone operating systems like Symbian were designed to have apps, and you could simply download an .exe file and run it on the phone.

What created the app-economy was Apple who created the appstore and forced the carriers to accept that outsiders can put applications on the phones.

Outside the US though, apps on phones were already a thing before the iPhone, before the touchscreen, particularily for games.

Feb 08, 2018
And the statement doesn't take into account that the money saved can go to other endeavours (e.g. renewables, where there's vastly more bang for the buck)


Fossil fuel subsidies amount to 0.1 - 0.7 cents a kWh, while renewable energy subsidies are between 1 - 17 cents/kWh, or between 10 - 170 times higher than the actual amount of subsidy recieved by fossil fuel -energy-.

You don't get much bang for the buck from renewables subsidies, because the subsidies are ill-applied on the wrong things. The high amounts of subsidies paid for renewables, and other legal favors, are slowing down the development of renewable technologies because there's no pressure to improve.

For example, due to right-of-way laws, grid utilities must accept renewable energy before any other energy, and that causes a situation where the producers are not in competition with each other. As they're all guaranteed the same price, they don't have to care whether their supply meets actual demand

Feb 08, 2018
Source:
http://www.worldw...ies-rise

Although the total subsidies for renewable energy are significantly lower than those for fossil fuels, they are higher per kilowatt-hour if externalities are not included in the calculations.

Estimates based on 2009 energy production numbers placed renewable energy subsidies between 1.7¢ and 15¢ per kilowatt-hour (kWh), while subsidies for fossil fuels were estimated at around 0.1–0.7¢ per kWh.


So fossil fuels are actually subsidized an order of magnitude -less- than renewable energy already. Shifting the money from one to the other won't make a significant difference. The same money taken away from fossil fuels achieves less than 1/10th the amount of energy production increase in renewables.

Feb 08, 2018
Renewable's do not work 24/7 yet.
Where in the world do Renewable's work 24/7. Moscow, East coast of the USA?
During record snow and cold what would be the energy output of Renewable's

Feb 08, 2018
Why was 2030 their benchmark? 5% seems pretty good for 12 years, would it equate to 20% over 48 years?
As a singular policy, it's still seems pretty effective if you weight it towards the positive assumptions

Feb 08, 2018
Renewable's do not work 24/7 yet.
Where in the world do Renewable's work 24/7. Moscow, East coast of the USA?
During record snow and cold what would be the energy output of Renewable's


Iceland

https://en.wikipe..._Iceland

Feb 08, 2018
This is what happens when you let prols make their own choices. What you need is a benevolent dictatorship making the hard choices for the world.

Feb 09, 2018
these are NOT subsidies. They are normal business deductions and some gaming of the system by businesses in the form of tariffs and other anti competitive nonsense that SHOULD be ended. It is nothing more than the conflation of usual business write-offs being compared to outright cash being shoveled into the pockets of "green" boondoggles like windmills.

Oil (and gas) do not get any cash from the feds. They get write-offs like depletion allowance which all wasting asset industries like mining get. Corn ethanol, windmills, and solar all get gobs of federal cash thrown at them as well as favorite child special tax write offs that no other industries get.
-------------
Inigo Montoya: You keep using that word. I do not think it means what you think it means.

Feb 09, 2018
these are NOT subsidies.

Really? Upkeep of a huge military in order to invade oil rich countries so that the cheap oil can be had is not a subsidy but normal business parctice?
Call it what you will: a deduction, a subsidy, a tax...it all boils down to the same thing: you're paying for it.

Feb 09, 2018
Upkeep of a huge military in order to invade oil rich countries so that the cheap oil can be had is not a subsidy but normal business parctice?


The point of invading the oil countries is upholding the petrodollar system, where other countries must buy dollars to buy oil. It's a means of keeping the dollar's value artifically high, so the US government can keep issuing bonds and generate more debt to keep from going bankcrupt under the weight of all the political spending.

The US military spending is basically a huge social welfare system that buys jobs for millions. The government can't get rid of it, because cutting the spending would be a political suicide.

Feb 09, 2018
Renewable's do not work 24/7 yet.
Where in the world do Renewable's work 24/7. Moscow, East coast of the USA?
During record snow and cold what would be the energy output of Renewable's


Iceland

https://en.wikipe..._Iceland


that link says;
"Plans are underway to turn Iceland into a 100% fossil-fuel-free nation in the near future"
Good for them!
-and they have almost achieved that already!

Feb 09, 2018
https://www.inves...llar.asp
After the collapse of the Bretton Woods gold standard in the early 1970s, the U.S. struck a deal with Saudi Arabia to standardize oil prices in dollar terms. Through this deal, the petrodollar system was born, along with a paradigm shift away from pegged exchanged rates and gold-backed currencies to non-backed, floating rate regimes.

The petrodollar system elevated the U.S. dollar to the world's reserve currency and through this status, the U.S. is able to enjoy persistent trade deficits, and become a global economic hegemony.


Of course it's a convenient fairytale to say that the US military romping around the world is just about getting cheap oil

When Nixon disconnected the dollar from gold, the inflation started running rampant, so they made trade deals in the middle east and effectively pegged the dollar to the value of oil, or vice versa, to ensure demand for the dollar.

Feb 09, 2018
Good for them!
-and they have almost achieved that already!


However, not everyone has the privilege of living on top of an intercontinental fault line with geothermal energy and hydroelectric power from melting glaciers so abundant it's just coming out of their ears.

Plus a population of just 300,000 people, so not all that much energy is needed in the first place.

That's what's wrong with these "almost 100% renewable" lists that some commentators keep flaunting. Some African nation with a single hydroelectric power station is technically almost 100% renewable, if you ignore the fact that 80% of their population are without electricity at all.

It's all about what you count, and how you count it.

Feb 10, 2018
"Plans are underway to turn Iceland into a 100% fossil-fuel-free nation in the near future"
So it's ok to import plastic, Import steel cars all made in China and made from coal.
Hypocritical ?

Feb 10, 2018
"Plans are underway to turn Iceland into a 100% fossil-fuel-free nation in the near future"
So it's ok to import plastic, Import steel cars all made in China and made from coal.
Hypocritical ?

No it isn't. Because is it us, not them, that make them thus it is up to us, not them, to stop making them from coal. They are doing all they can up their end and the rest is up to the rest of the world.

With your logic, we should never do anything about the environment because we import things from other countries that don't. What you seem to not understand is that one of us has to start somewhere doing something good before we all do.

Feb 10, 2018
Good for them!
-and they have almost achieved that already!


However, not everyone has the privilege of living on top of an intercontinental fault line with geothermal energy and hydroelectric power from melting glaciers


But everyone has the 'privilege' of living somewhere where there is sometimes wind and sun and in a country that could be connected to an international supergrid and/or use off-the-grid flow battery storage or MgS batteries; you make no relevant point.

It would be stupid for Iceland not to exploit their geothermal energy.

Feb 10, 2018
Even without any supergrid, there isn't a single country in the world without at least one natural resource that, with off-the-grid energy storage, could potentially provide all the electricity for its citizens without CO2 emissions.
Thus, with a supergrid, globally going carbon-neutral is certainly possible!

Feb 10, 2018
The alarmists, i.e. the supporters of "renewables" cannot imagine, that their technologies increase fossil fuel consumption on background.

mackita

How would going all-renewable and/or nuclear "increase" fossil fuel consumption?
You make absolutely no sense whatsoever.
Obviously, providing we can just get past the moronic political barriers that you are a part of, it must be physically possible to decrease fossil fuel burning while maintaining adequate energy production for our own needs. Some countries have already stated doing this thus proving it is possible.

Feb 10, 2018
...Some countries have already stated doing this....

misspelling; "stated" should be "started".

Mar 09, 2018
you make no relevant point.

It would be stupid for Iceland not to exploit their geothermal energy.


I'm not criticizing Icelanders for using what they have.

I'm criticizing people who go "Look at Iceland!" for missing the obvious: not everybody is Iceland and trying to claim that everybody has it just as easy in terms of coming up with renewable energy is grossly ignoring reality.

a country that could be connected to an international supergrid and/or use off-the-grid flow battery storage or MgS batteries


None of those technologies exist at the necessary scale because of economic scalability issues, and other obvious geopolitical problems. Before you connect countries up to international supergrids, you need to build some first.

Mar 09, 2018
How would going all-renewable and/or nuclear "increase" fossil fuel consumption?


It wouldn't, but that's not what he's pointing at. "Going all-renewable" is begging the question that it's possible with available means - you're already assuming the conclusion.

The point is that the renewable technologies are -currently- propped up by fossil fuels, without technical means or even consideration for closing the loop from renewable energy back to renewable energy. That's still so far off into the future that the planners haven't even began to consider how it would be done.

As it happens to be, fossil fuels generate all the means to collect renewable energy, so increasing renewable energy consumes more fossil fuels. 80% of solar panels on the market are made by Chinese coal. The other 20% are made by coal and petroleum from somewhere else.

Mar 09, 2018
And there's this irony with countries which build and subsidize renewable energy heavily.

http://www.spiege...419.html

Sudden fluctuations in Germany's power grid are causing major damage to a number of industrial companies. While many of them have responded by getting their own power generators and regulators to help minimize the risks, they warn that companies might be forced to leave if the government doesn't deal with the issues fast.

the number of short interruptions to the German electricity grid has grown by 29 percent in the past three years. Over the same time period, the number of service failures has grown 31 percent, and almost half of those failures have led to production stoppages.


Basically, companies are responding to increasingly unreliable power by going off-grid and building their own fossil-fueled generators.

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more