Environmental Engineering Reference
In-Depth Information
failures by mitigating environmental problems in specific contexts, for example,
by encouraging alternatives to biomass in areas where deforestation is an issue.
However, energy subsidies can put societies onto inefficient consumption and
production paths. Fossil-fuel subsidies to consumers can create dependencies and
discourage users from shifting to cleaner sources of energy. Similarly, subsidies to
specific energy technologies undermine the development and commercialization of
other technologies that might ultimately become more economically (as well as en-
vironmentally) attractive. As such, subsidies can “lock-in” technologies to the ex-
clusion of other, more promising ones.
The IEA estimates that fossil-fuel-related consumption subsidies amounted to
US$557 billion in 2008. Analysis shows that, if these subsidies were phased out by
2020, it would result in a reduction in primary energy demand at the global level
of 5.8% and a fall in energy-related carbon-dioxide emissions of 6.9%, compared
with a baseline in which subsidy rates remain unchanged.
The total order of magnitude of subsidies to fossil fuels, both to consumers and
producers—almost US$700 billion a year—is roughly equivalent to 1% of world
GDP.
To put these estimates into perspective, estimated agriculture subsidies in
OECD countries were close to US$400 billion in 2008.
On the other hand, the Global Subsidies Initiative (GSI) estimates that around
US$100 billion per year is spent to subsidize alternatives to fossil fuels, mainly in
Germany, Spain, Japan, and the United States.
