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Fossil-Fuel Subsidies Still Dominate

Quick, which gets subsidized more heavily around the world, fossil fuels or renewable energy? Bloomberg crunches the numbers and finds that it's not even close—oil, gas, and coal get a whopping twelve times as much total government support:

Governments last year gave $43 billion to $46 billion of support to renewable energy through tax credits, guaranteed electricity prices known as feed-in tariffs and alternative energy credits, the London-based research group said today in a statement. That compares with the $557 billion that the International Energy Agency last month said was spent to subsidize fossil fuels in 2008.

Granted, these raw totals obscure a few things (if you looked at dollars per unit of energy delivered, oil and coal subsidies would be smaller than wind and solar). But the overall disparity is stunning, given everything we know about the harm fossil fuels are doing. And those subsidies add up, pollution-wise. A report from Harvard's Kennedy Center last year found that the world could cut global CO2 emissions nearly 6 percent simply by scrapping price supports for fossil energy. And yes, removing subsidies might, in the short term, have a regressive impact in the form of higher energy prices, but countries could easily take the money saved and use it to cushion the blow, via efficiency upgrades or even lump-sum payments.

The worst offenders are China, India, and Russia, but note that the United States does plenty of fossil-fuel subsidizing, too. We may not bankroll gas-pump purchases the way Egypt or Venezuela do, but an analysis last year from the Environmental Law Institute found that the U.S. government offered $72 billion in incentives for oil, gas, and coal producers between 2002 and 2008. Most of that was in the form of 23 different tax credits, especially the credit for overseas production ($15.3 billion) and a credit for production of non-conventional fuel ($14.1 billion). The rest was in the form of grants, R&D money, and the Strategic Petroleum Reserve.

And how did clean energy fare? Over that same time period, the United States plowed just $29 billion into renewable energy. Worse still, the bulk of those renewable subsidies—about $16.8 billion worth—went toward corn ethanol, which likely makes global warming worse through indirect deforestation effects. It's baffling when people talk about climate policy as some sort of market-interference mechanism. Like many governments around the world, the United States is already meddling in the free market, shelling out taxpayer money to help heat the planet. (The G-20 has pledged to phase these subsidies out "over the medium term," but it's still a nebulous goal at this point.)

Also, as an interesting aside, according to Bloomberg, nearly one-quarter of the world's clean-energy subsidies come from Germany. The country's feed-in tariffs, which basically provide above-market rates to anyone who wants to sell solar or wind to the grid, cost the country $9.6 billion last year. Not cheap. But they also seem to work pretty well. Germany now gets nearly 20 percent of its electricity from renewables—and this in a nation that gets less sun than the state of Minnesota.

(Flickr photo credit: Don Hankins)