Stop subsidy boon for energy.

• Author: Tagwerker, Philipp
• Position: EYE ON ECOLOGY

EFFORTS BY a VARIETY of organizations to quantify global support for fossil fuels have generated estimates that range from $523,000,000,000 to more than 1.9 trillion dollars, depending on the calculation and what measures are included. What is clear is that the level of support has rebounded to 2008 levels following a dip in 2009-10 during the global financial crisis.

Traditional calculations account for two types of energy subsidies. Production subsidies lower the cost of energy generation through preferential tax treatments and direct financial transfers (grants to producers and preferential loans). Consumption subsidies lower the price for energy users, usually through tax breaks or underpriced government energy services. While production subsidies predominate in Organisation for Economic Co-operation and Development (OECD) countries, consumption subsidies are favored in developing nations to reduce the burden on poor households' income, as these people have to use a greater share of their income to buy fossil fuel products.

The International Energy Agency (IEA) estimates that coal, electricity, oil, and natural gas consumption subsidies in 38 developing economies are around $523,000,000,000 per year. Using a price-gap approach, the IEA figure includes subsidies that bring the price of fossil fuels below the international benchmark. Subsidies that lower the price just to the international level or slightly above it are not captured. In a parallel study by OECD, support measures for the production and consumption of fossil fuels in its 24 member countries were inventoried. Using a broader definition than the price-gap method (including direct budgetary transfers and tax expenditures), support for fossil fuels in OECD countries alone averaged $55,000,000,000 to $90,000,000,000 annually over the last decade.

In developing countries, roughly $285,000,000,000--more than 50% of all fossil fuel consumption subsidies--goes to oil. Natural gas consumption there receives $104,000,000,000 in support. Coal receives $3,000,000,000 in direct consumption subsidies in these countries, but another $131,000,000,000 goes to public underpricing of electricity, much of which is generated from burning coal. In industrial countries, using the broader definition of consumption subsidies, the support for oil is valued at roughly $38,000,000,000. Natural gas support in these nations...