Fossil Fuel and Renewable Energy Subsidies on the Rise

Fossil Fuel and Renewable Energy Subsidies on the Rise

Worldwatch Institute report discusses the rise in subsidies for renewable and fossil fuel-based energy production

Total subsidies for renewable energy stood at $66 billion in 2010, and total value of global fossil fuel subsidies estimated at $775 billion or more in 2012, according to new research conducted by the Worldwatch Institute.

Although the total subsidies for renewable energy are lower than those for fossil fuels, they are higher per kilowatt-hour if externalities are not included in the calculations, write report authors from Worldwatch's Climate and Energy team. Estimates based on 2009 energy production numbers placed renewable energy subsidies between 1.7¢ and 15¢ per kilowatt-hour, while subsidies for fossil fuels were estimated at around 0.1-0.7¢ per kWh.

Worldwatch Institute report discusses the rise in subsidies for renewable and fossil fuel-based energy production

The report says the U.S. National Academy of Sciences estimates that fossil fuel subsidies cost the United States $120 billion in pollution and related health care costs every year. But Worldwatch says these costs are not reflected in fossil fuel prices.

"These so-called hidden costs, or externalities, are in fact very real costs to our societies that are not picked up by the polluter and beneficiary of production but by all taxpayers," said Alexander Ochs, Director of Worldwatch's Climate and Energy program and report co-author.

Worldwatch said shifting support from fossil fuels to renewables could decarbonize the global energy system and reduce global greenhouse gas emissions, generate economic growth, and reduce dependence on energy imports.

According to projections by the International Energy Agency, if fossil fuel subsidies were phased out by 2020, global energy consumption would be reduced by 3.9% that year compared with having subsidy rates unchanged. Overall, carbon dioxide emissions would be reduced by 4.7% in 2020 and 5.8% in 2035, Worldwatch reports.

The IEA's chief economist estimated that eliminating all subsidies in 2012 for coal, gas, and oil could save as much as Germany's annual greenhouse gas emissions each year by 2015.

"At the same time, a phase-out of fossil fuel subsidies would level the playing field for renewables and allow us to reduce support for clean energy sources as well," said Ochs.

Worldwatch says progress toward a phaseout has been minimal. The 2009 pledge by the Group of 20 major economies to reduce "inefficient fossil fuel subsidies" has been left unfulfilled. As of August 2012, G20 six members opted out of reporting, and no country has yet initiated a subsidy reform in response to the pledge.

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