Subsidies for renewables: $57 billion; subsidies for fossil fuels: $312 billion

NEW NOTE: Read comment below by Keith Stewart from Greenpeace who says the subsidies identified in the IEA report are based on consumption subsidies, not production subsidies, which are somewhere around $100 billion on top of consumption subsidies and are estimated at nearly $3 billion in Canada annually just for oil alone.

NOTE: To get some perspective on the breakdown of fossil-fuel subsidies, it would be worth it to visit this site. The IEA says that coal only represents $6 billion of global fossil-fuel subsidies, and about half of the total $312 billion in subsidies are in half a dozen developing countries, not in the U.S., not in Canada. Yes, we need to be eliminating subsidies for fossil fuels, but we need to avoid exaggerating the situation in North America for the sake of making a case for renewables. That said, the case for renewables can and should still be made. Fact is, the fossil-fuel industry is benefitting from decades of subsidies that allowed it to get an infrastructure foothold in our economies. There’s no reason to deny renewables the same boost.

The International Energy Agency put out its annual World Energy Outlook today and urges strong and sustained government support for the deployment of renewable energy. The agency pegs 2009 subsidies for renewables at $57 billion and calls for that to increase to $205 billion by 2035. “The share of modern renewable energy sources, including sustainable hydro, wind, solar, geothermal, modern biomass and marine energy, in global primary energy use triples between 2008 and 2035 and their combined share of total primary energy demand increases from 7 per cent to 14 per cent,” according to the agency. Fossil fuel subsidies stood at $312 billion in 2009 and the agency urged that they be eliminated to accelerate the transition to renewables.

But even this won’t hold global temperature increases to below 2 degrees C, it concedes. It expects that CO2 emissions will grow to about 650 parts per million before stabilizing, resulting in a temperature increase of more than 3.5 degrees C. Not good, as we need to keep emissions to 450 PPM or below to keep temperature increases manageable. That means a far more rapid phase-out of fossil-fuel subsidies and more aggressive support of renewables. Ideally, oil demand would peak just before 2020 and decline by 10 per cent by 2035. Coal and, yes, natural gas demand would also peak before 2020 under this scenario. Unlikely, sure, but it’s what it will take. Meanwhile, we need to see renewables and nuclear climb to a combined share of 38 per cent of primary energy supply by 2035.

“The message here is clear,” said Nobuo Tanaka, executive director of the IEA during a London press conference. “We must act now to ensure that climate commitments are interpreted in the strongest way possible and that much stronger commitments are adopted and taken up after 2020, if not before. Otherwise, the 2 degrees C goal could be out of reach for good.”

You can read an overview of the report here, and get a lengthier executive summary here. Bloomberg News has a report here.

Environmental groups such as Greenpeace generally applauded the IEA for recognizing the rising importance of renewables, but they were still critical of the IEA for, among other things, putting too much hope in carbon capture and nuclear technologies. “The IEA´s assumption, that after 2020 98 per cent of new coal power plants will be built with CCS capability, is light years away from reality. Increasing amounts of CCS projects have been cancelled due to run-away costs and the lack of public support,” according to Sven Teske, renewable energy director of Greenpeace International.

I would agree that CCS is a dog, and subsidizing such technologies is akin to subsidizing fossil fuels. I’m in less agreement with Greenpeace on the role that nuclear can and should play. I don’t like nuclear, but at the same time I recognize that in high-growth developing countries such as China it may be crucial to keeping global emissions under control. In other words, if building a nuke plant means eliminating the need to build a few coal plants, then that’s a good thing. It’s a bitter pill we may have to swallow, at least until we get mature and competitive energy storage technologies that can give renewables a baseload profile. That said, I don’t believe we can achieve the kind of nuclear buildout envisioned by the IEA, which is akin to building a new reactor every month until 2035, according to Greenpeace. Fat chance of that happening. Renewables, on the other hand, can be deployed much more rapidly and strategically than nuclear.

4 thoughts on “Subsidies for renewables: $57 billion; subsidies for fossil fuels: $312 billion”

  1. It is obvious that concentration of CO2 is connected with using fossil fuels. Obsolete technologies that are still used would take a very long time to replace. To prefer nuclear power instead of another energy sources it is just temporary solution. New option how to solve energy problem is thorium. Well, it needs a lot of investments but it may bring more effect then anything else we have used till now.

  2. I’d challenge your comment on subsidies. The IEA’s WEO only looked at consumption subsidies, i.e. “Subsidies to energy production are not quantified in our analysis. Estimating subsidies to energy production is a complicated endeavour, due to the different sources, recipients and categories of producer support, and as the data are in many cases of poor quality or nonexistent.” (2010 WEO, p. 575).

    The Global Subsidies Initiative of the International Institute for Sustainable Development has been trying to improve the data on production subsidies. They estimate that global production subsidies are roughly $100 billion/year (so less than the $312 billion for consumption subsidies, but not chump change). In Canada alone they are at least $2.8 billion for oil production alone (including $1.5 billion for the tar sands – and eliminating those subsidies would reduce ghgs from the tar sands by 12% over the next decade). See the GSI report at:
    http://www.greenpeace.org/international/en/publications/reports/G20-Summit-Seoul-2010-/

    That’s a lot of money for oil, especially when you compare it with the virtually non-existent support for renewables at the federal level.

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