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Fossil Fuel Companies Received $5.9T in Subsidies Worldwide
Fossil fuel subsidies shield us from the real price at the pump
2020 was a banner year for fossil fuel subsidies worldwide propping up the world’s oil companies with $5.9T in subsidies according to the International Monetary Fund. Conservative estimates put US subsidies to oil companies at around $20.5B annually.
Subsidies make fossil fuels cheaper for the consumer making it a tough sell to go green
Energy subsidies keep customers’ prices below actual market levels while rewarding oil companies with above-market prices so they remain profitable. Subsidies also offset the costs of continued oil exploration and help shield the oil companies from the costs incurred by pollution and global warming.
Fossil-fuel subsidies are one of the biggest financial barriers hampering the world’s shift to renewable energy sources. Each year, governments around the world pour around half a trillion dollars into artificially lowering the price of fossil fuels — more than triple what renewables receive — nature.
There are many articles written about what we as individuals can do to help in the fight against climate change, however, most Americans are not willing to make any sacrifices that hit them in the wallet — higher gas prices or higher home energy costs. But there will be costs involved as we move away from energy sources with a high Energy Return of Investment (EROI) like oil to renewable sources with much lower EROI. The higher the EROI the more bang for the buck.
Keeping fossil fuel energy prices artificially low makes them more attractive to consumers. Cost-conscious consumers are more likely to conserve and cut back on energy use when energy costs are expensive. We are recently experiencing a surge in natural gas prices so much that winter energy bills are coming in at three times normal…
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Denouncing ‘Handouts to Big Oil,’ Biden Calls on Congress to End $40 Billion in Taxpayer Subsidies for Fossil Fuels
Denouncing ‘Handouts to Big Oil,’ Biden Calls on Congress to End $40 Billion in Taxpayer Subsidies for Fossil Fuels
“Biden campaigned on eliminating fossil fuel giveaways, and voters agree by a huge margin,” said one climate activist.
Special Presidential Envoy for Climate John Kerry listens as President Joe Biden speaks on tackling climate change in the State Dining Room of the White House in Washington, D.C. on January 27, 2021. (Photo: Mandel Ngan/AFP via Getty Images)
In a speech Wednesday outlining his new executive actions aimed at confronting the “existential threat” of the climate crisis, President Joe Biden said he plans to ask the Democrat-controlled Congress to pass legislation eliminating the tens of billions in taxpayer subsidies the federal government continues to hand Big Oil even as the planetary emergency wreaks havoc in the U.S. and across the globe.
“Unlike previous administrations, I don’t think the federal government should give handouts to Big Oil to the tune of $40 billion in fossil fuel subsidies,” said Biden. “I’m gonna be going to the Congress and asking them to eliminate those subsidies.”
While the president did not offer specifics on what he would want a potential bill to look like, Rep. Ilhan Omar (D-Minn.), Sen. Bernie Sanders (I-Vt.), and other progressive lawmakers introduced legislation last year that proposed ending direct federal subsidies to the fossil fuel industry and “abolishing dozens of tax loopholes, subsidies, and other special interest giveaways littered throughout the federal tax code.”
The lawmakers estimated the End Polluter Welfare Act would save taxpayers up to $150 billion over the next decade.
Watch Biden’s remarks:
Biden’s call for legislative action on fossil fuel subsidies came just before he signed an executive order that, according to a White House summary, “directs federal agencies to eliminate fossil fuel subsidies as consistent with applicable law”—a move that would not touch handouts mandated by Congress.
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Report: Just Ten Percent of Global Fossil Fuel Subsidies Would Completely Pay For a Global “Green Transition”
Report: Just Ten Percent of Global Fossil Fuel Subsidies Would Completely Pay For a Global “Green Transition”
Stephanie Kelton explaining what Ben Bernanke meant in 2009 when he said the Fed doesn’t “spend tax money” when it transfers money to banks, but simply changes numbers in a computer. “To lend to a bank, we simply use a computer to mark up the size of the account they have with the Fed.” Kelton: “It’s exactly like putting points on the screen at a baseball game,” and a scorekeeper can “never run out of points.”
I’m not a fan of the “how are you going to pay for it?” scam, since it’s obvious the government never pays for anything it really wants in the sense of raising new revenue. It just spends the money. For proof, just look at the Iraq War, or any recent war, or any Republican tax cut plan. (See the video above for a slightly longer explanation of why governments that control their own currency never have to tax to spend.)
The fact is, a government that issues its own currency and whose economy is not ravaged by inflation can always write checks to buy anything it wants — and the idea that it “pays for” what it wants by selling bonds is a fiction, since every bond sale is a trade of an asset for an asset, not a loan. The Treasury market also gives rich people something safe to invest in. Neither of these goals is related to financing government spending.
But for those who do fetishize “paying for it,” here’s one for the books.
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New study questions impact of ending fossil fuel subsidies
Ending the world’s fossil fuel subsidies would reduce global CO2 emissions by 0.5 to 2.2 gigatonnes (Gt) per year by 2030, a new study says.
The research, published by Nature, concludes that the removal of subsidies would lead to bigger emissions reductions in oil and gas exporting regions, such as Russia, Latin America and the Middle East, than promised by their Paris Agreement pledges.
In all other regions, removing fossil fuel subsidies would not have as large an impact as the Paris pledges, the lead author tells Carbon Brief.
However, a researcher not linked to the report tells Carbon Brief that comparing the effects of subsidy removal to the Paris pledges is “unnecessary and inappropriate”, since these economy-wide pledges are generally composed of many other policies and actions than just subsidy removal.
Global removal
Ending financial support for fossil fuels has long been cited as an important way to reduce the world’s greenhouse gas emissions. Both the G7 and the G20 have pledged to end “inefficient” fossil fuel subsidies – the G7 by 2025, and the G20 with no fixed end-date.
The new research analyses the implications for mitigation efforts in different regions of the world of removing all fossil fuel subsidies.
The researchers built a global dataset of subsidies under both high and low oil prices, and worked with five different modelling teams to look at the impact of removing these subsidies on emissions.
The study found the removal of subsidies would reduce the globe’s CO2 emissions by 0.5-2.2Gt per year compared to a business-as-usual scenario by 2030, equivalent to a 1-5% reduction.(Note though, that under a business-as-usual case overall emissions would increase substantially even with this reduction).
The graph below shows the impact of subsidy removal on emissions in each of the five models used in the study, compared to each model’s baseline, for low (left) and high (right) oil prices.
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Psst, Trudeau: IMF Now Pegs Our Fossil Fuel Subsidies at $46 Billion
Psst, Trudeau: IMF Now Pegs Our Fossil Fuel Subsidies at $46 Billion
Fastest way to transition Canada to a green economy? Quit the giveaways.
According to IMF economists, Canadian carbon-based fuels should be taxed an additional $17.2 billion annually to compensate for climate change. Oil photo via Shutterstock.
Globally, this figure balloons to US$5.3 trillion or 6.5 per cent of the world’s GDP. To put that enormous sum in perspective, the global giveaway to the energy sector amounts to 40 timesmore money than is contributed in aid to the world’s poorest people.
To be clear, the IMF is including all untaxed externalized costs of energy use under their definition of subsidies. The figures flagged for Canada still include $1.4 billion in direct “pre-tax” subsidies — the kind of direct public giveaways that Trudeau campaigned to eliminate. The remaining $44.6 billion is in the form of externalized costs to society from dirty and dangerous fossil fuels — things like air pollution, traffic congestion and climate change.
I realize that the folks at the Fraser Institute might get rankled by such a broad definition of subsidies by those pinkos at the IMF, and in fact they already have. But as they say in business, there’s no free lunch, so why should all taxpayers have to pick up the tab for very real costs resulting from our ongoing addiction to fossil fuels?
Let’s get down to brass tacks. How much money is being left on the table in favour of the fossil fuel sector?
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There Are 800 Fossil Fuel Subsidies Around The World
There Are 800 Fossil Fuel Subsidies Around The World
There are 800 different programs around the world that subsidize fossil fuels, according to a new report from the OECD. The OECD released the report ahead of the international climate change negotiations set to take place in Paris in December, where the world has a “moral imperative to reach an ambitious and actionable agreement.”
Tackling climate change will be a monumental task, but key to the effort will be scrapping “lose-lose” fossil fuel subsidies, as the OECD calls them. Subsidizing oil, natural gas, and coal leads to distortions in prices, contributes to overconsumption of energy, and saps developing countries of revenues that could be used for much better investments in education and infrastructure.
They also lead to environmental fallout, with capital flowing to pollution-heavy industry and energy extraction. These investments, once made, can last for decades, essentially “locking-in” pollution for a long time to come. That is one of the glaring downsides to subsidizing fossil fuels. “Because they change the stream of income investors expect to receive for holding a particular asset, those subsidies influence investment choices and change the allocation of capital across sectors. In the case of certain fossil-fuel subsidies, there is therefore the risk that investors end up favouring sectors that produce fossil fuels or use them intensively, at the expense of cleaner forms of energy and other economic activities more generally,” the OECD wrote.
Related: Peak Oil Has More To Do With Oil Prices Than You May Think
The report only surveyed the OECD member countries (consisting of Western Europe, Japan, Korea, North America, and a few other rich countries), plus Brazil, China, India, Indonesia, Russia, and South Africa. All told, the OECD concludedthat the world subsidized fossil fuels to the tune of $160 to $200 billion per year between 2010 and 2014, across 800 subsidy programs. That is much more than the $121 billion that renewable energy receives each year.
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