Monday, December 26, 2016

Global and U.S. Fossil Fuel Subsidies

Here's a quick and not nearly comprehensive survey that seeks merely to show, for anybody in denial, that fossil fuels are and have been heavily subsidized. I link here from my main blog.

The IMF estimates global fossil fuel subsidies at $5.3 trillion per year, about 6.5% of global GDP. Biggest subsidizers are: China $1.8T, U.S. $0.6T, Russia, E.U., and India $0.3T each.

As explained here, the IMF's is an expansive economic assessment that includes the costs of economic externalities, something other treatments don't typically cover: "Just over half the figure is the money governments are forced to spend treating the victims of air pollution and the income lost because of ill health and premature deaths."

Around 6% of the global subsidy is the direct subsidizing of fuel costs for consumers, primarily in oil-producing countries. (see previous "explained here" link)

Ending all subsidies would decrease global carbon emissions by 20% and would prevent 1.6 million premature deaths per year. (see previous "explained here" link)

The International Energy Agency estimated global subsidies at "only" $493 billion per year, but it didn't include externalities.

The OECD has compiled an inventory of 800 policies in member countries that subsidize fossil fuels, amounting to $160-200B annually. Scroll down to the executive summary in this extensive report.

In 2009 the G20 countries agreed to a phase out of fossil fuel subsidies. Here's a joint report by the IEA, OPEC, OECD and World Bank.

Here's a report on production subsidies in the U.S. in 2013 and 2014; it's a companion to a larger report on G20 subsidies.

From the "G20 countries agreed" link above:
Energy producers were not enthused by the subsidy phase-out plan. The American Petroleum Institute, which represents the U.S. petroleum and natural gas industry, said Washington must clarify how the policy would affect the United States. "The Obama administration and Congress now face many difficult choices if they choose to comply with the G20 commitment to phase-out fossil fuel subsidies," the API said.
This year (2016) the G7 countries pledged to end fossil fuel subsidies by 2025.

The U.S. Treasury has identified 11 federal fossil fuel production tax provisions amounting to $4.7 billion annually.

But the U.S. subsidies are not just tax-based. The U.S. government has subsidized, promoted, assisted, and partially funded fossil fuel related projects and research for much of the industry's existence. Consider the U.S. government's crucial role in the development of hydraulic fracturing (a.k.a. "fracking") of shale gas, as described here:
The history of shale gas fracking in the United States was punctuated by the successive developments of massive hydraulic fracturing (MHF), microseismic imaging, horizontal drilling, and other key innovations that when combined made the once unreachable energy resource technically recoverable. Along each stage of the innovation pipeline – from basic research to applied R&D to cost-sharing on demonstration projects to tax policy support for deployment – public-private partnerships and federal investments helped push hydraulic fracturing in shale into full commercial competitiveness. Through a combination of federally funded geologic research beginning in the 1970s, public-private collaboration on demonstration project and R&D priorities, and tax policy support for unconventional technologies, the federal government played a key role in the development of shale gas in the United States.
This 2015 study found coal subsidies of $2.9 billion per year in the U.S. and $1.3 billion per year in Australia.

The "Energy Policy Act of 2005" signed by George W. Bush, and which I called back then a "massive corporate welfare program," provided for, among other things (bullet-point items quoted from Wikipedia):

  • increase coal as an energy source while also reducing air pollution, through authorizing $200 million annually for clean coal initiatives, repealing the current 160-acre (0.65 km2) cap on coal leases, allowing the advanced payment of royalties from coal mines and requiring an assessment of coal resources on federal lands that are not national parks
  • exempts oil and gas producers from certain requirements of the Safe Drinking Water Act
  • exempted fluids used in the natural gas extraction process of hydraulic fracturing (fracking) from protections under the Clean Air Act, Clean Water Act, Safe Drinking Water Act, and CERCLA
  •  provides incentives to companies to drill for oil in the Gulf of Mexico

Tom Delay inserted $500 million in subsidies into the 2005 bill for research into deep-water oil and gas drilling. Also in the bill was "royalty relief for deep-water drilling projects." The industry contended government subsidies were necessary: "If you don't provide the relief, nothing will happen," said John Felmy, the American Petroleum Institute's chief economist. "The start-up costs are just too massive."

Speaking of "clean coal initiatives," the U.S. government is heavily involved in "Carbon Capture and Storage" research and development. One wonders why we need expensive "clean coal" (whose production will remain highly destructive) when we have abundant, cleaner, and far cheaper natural gas.

A Bloomberg editorial says "fuel subsidies are the world's dumbest policy."

An extensive report shows that U.S. fossil fuel subsidies increased under Barack Obama.

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