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W/Climate Talks underway, reality: developed world’s fossil foolish subsidies >5x climate finance

December 3rd, 2012 · 1 Comment

As the world’s attention is absolutely not riveted on the international climate change talks underway in Doha, take a look to the right (full size table after the fold) for a simple reality:  the developed world has more than five times the resources going to financially-related dirty energy subsidies than it is spending in climate finance.  As Oil Change International suggests, look at these figures with this question in mind:

How serious is your country, really, about fighting climate change?

This comparison between fossil-foolish subsidies ($58 billion per year) and climate-finance pledges ($11 billion/year) is rather stark.

OECD analysis shows that fossil fuel subsidies in 2011 in Annex 2 countries were more than $58 billion. Climate finance pledges over the last three years averaged $11 billion annually.

While a 5.5 to 1 ratio might seem bad enough, we should recognize that this actually seriously understates the equation since ‘externalities’ are external to the OECD analysis.

For example, if we take a reasonable “Social Cost of Carbon” (SCC) of $80 per ton (even though some analysis puts this figure up to $1000 ton), each and every ton of coal burned for electricity production has an additional $228.80 additional subsidy as burning that ton of coal puts 2.86 tons of Co2 into the atmospheric mix (the 2.86 is one example, see this EIA report for discussion of the Co2 per ton based on type of coal). Even with the Obama Administration’s grossly understated $21 per ton SCC, this means $60.06 of externality subsidies for every ton of coal — without even considering the energy required to get the coal to electricity generation station and all the other ‘externality’ costs such as mountain-top removal damage on fragile eco-systems, increased asthma rates from particulates, and mercury’s impact on average IQ rates.

With that externality cost in mind, taking the SCC as a partial surrogate for those externalities, consider this:

CO2 emissions from coal were down 18% to 387 million metric tons in the January-March 2012 period.

Great news, emissions down 18%.  A true success story in the United States due to very low natural gas prices (and the prospects for continued low gas prices), limited government action to begin to bring ‘grandfathered’ (and grandfather) 50 year-old coal plants into the Clean Air Act, and public pressure from efforts like the Sierra Club’s Beyond Coal campaign.  

However, consider the figure: 387 million tons.  At the anemic Obama Administration $21 SCC, this represents a ‘hidden’ subsidy of nearly $8 billion just for the first three months of the year or, in quick estimate, a fossil foolish externality subsidy of over $35 billion.  With that somewhat more reasonable $80 figure, the absence of a social cost of carbon from burning coal represents an additional $140 billion annual subsidy for fossil fuel usage in the developed countries — counting only carbon pollution only from burning coal only in the United States of America.

Apply a reasonable estimate as to the full figure by placing fossil fuels’ true subsidies outside the financial equation means that the figure to the right represents only the smallest tip of the iceberg in terms of the imbalance between developed countries’ fossil foolish subsidies and their commitment to finance climate mitigation and climate adaptation efforts in the developing world.

While we are not at the stage where the world community (outside some areas, such as the EU and California) is going to put into place a global warming impact fee (e.g., a carbon tax), openly discussing the true subsidies for fossil fuels should help the drive to eliminate the (much smaller) direct financial subsidies for fossil foolish energy usage.

Tags: Energy

1 response so far ↓

  • 1 sailrick // Dec 4, 2012 at 2:18 am

    There is no such thing as cheap fossil fuels. It’s time we grow up and realize that.

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