November 29, 2013
Fossil Fuel Subsidies Average $112 per Adult
by Robert Kropp
A new report on subsidies by the Overseas Development Institute recommends that they be phased out
globally by 2025 in order to encourage investment in renewable energy.
The Overseas Development
Institute (ODI), a UK-based think tank, has analyzed fossil fuel subsidies—which include
measures to reduce prices for consumers as well as tax breaks for fossil fuel companies—and found
that they cost over half a trillion dollars globally every year. The amount averages out to $112
for every adult person in the world.
“We estimate that the top 11 rich-country
emitters (E11) spent $74 billion on subsidies in 2011, with the highest level of subsidies in
Russia, the United States, Australia, Germany and the United Kingdom,” the report states. “In
effect, each of the 11.6 billion tonnes of carbon emitted from the E11 countries in 2010 came with
an average subsidy of $7 a tonne – around $112 for every adult in the E11.”
current price of carbon in the European Union (EU) carbon trading system has fallen to below a
price of $7 per ton, “the carbon price may as well not exist,” ODI stated.
“these subsidies outweigh the support provided to fast-start climate finance by a ratio of 7:1,”
the report continued. “These subsidies have significant implications for private investors and
clean-energy project developers, who must compete with artificially low energy prices based on
fossil fuels...It is clear, therefore, that eliminating rich-country fossil fuel subsidies would
enable a low-carbon transition while unlocking new opportunities for energy cooperation.”
“The rules of the game are currently biased in favor of fossil fuels,” report author Shelagh
Whitley said. “The status quo encourages energy companies to continue burning high-carbon fossil
fuels and offers no incentive to change. We’re throwing money at policies that are only going to
make the problem worse in the long run by locking us into dangerous climate change.”
early as 2009, the G-20 nations called for an end to such subsidies, stating, "Inefficient fossil
fuel subsidies encourage wasteful consumption, reduce our energy security, impede investment in
clean energy sources and undermine efforts to deal with the threat of climate change." Research by
the Organization for Economic Co-operation and Development (OECD) concluded that ending subsidies
could help promote increased investment in renewable energy technologies.
The new ODI
report recommends that G-20 nations agree to end fossil fuel subsidies by 2020, and that a global
phase-out occur no later than 2025.
Also, “It is critical that national-level diagnostics
that seek to ‘assess the investment climate for climate investments’ include a review of the
general environment for private investment,” the report concludes. “Such a diagnostic should
incorporate a review of local barriers, making it critical to include information on the current
status of fossil fuel and other climate-incompatible subsidies.”