Geoscience Reference
In-Depth Information
Subsidies
One of the major political problems with reducing carbon emissions concerns energy sub-
sidies. First, there are huge fossil fuel subsidies, which continue to make oil, gas, and coal
relatively cheap. Second, there is resistance to providing subsidies and tax incentives to the
energy companies to build and supply renewable energy at competitive rates. This is
mainly due to the current neoliberal view that states should not interfere with markets.
However, this view concerning renewable energy subsidies usually comes from ignorance
of the huge amounts of fossil fuel subsidies. In 2011, fossil fuel subsidies reached $90 billi-
on in OECD countries and over $500 billion globally. This is compared to renewable en-
ergy subsidies, which reached only $88 billion globally. If we just focus on the USA, a
study by the consulting firm Management Information Services estimated that between
1950 and 2010 the US government had given $369 billion to oil companies, $121 billion to
natural gas companies, and $104 billion to coal companies. Oil also benefitted heavily from
regulatory subsidies such as exemptions from price controls. Over the same period non-hy-
dro renewable energy (primarily wind and solar) benefited from $74 billion in subsidies,
largely in the form of tax policy and direct government expenditures on research and devel-
opment (R&D). Nuclear power benefitted from $73 billion in subsidies, largely in the form
of R&D, and hydro power received $90 billion in subsidies. According to the International
Energy Agency, energy subsidies artificially lower the price of energy paid by consumers,
raise the price received by producers, or lower the cost of production. 'Fossil fuels sub-
sidies costs generally outweigh the benefits. Subsidies to renewables and low-carbon en-
ergy technologies can bring long-term economic and environmental benefits', according to
Fatih Birol, Chief Economist at the International Energy Agency, without a phasing out of
fossil fuel subsidies, we will have no chance of reaching any climate targets.
There is, however, another reason for the continuation of fossil fuel subsidies, and this is
down to the ownership of the major oil and gas companies. Out of the top 26 oil and gas
companies only 7 are private companies, the other 19 are fully or partly owned by coun-
tries. Hence the state-owned companies are making huge amounts of money for the country
and will continue to be given state aid in the form of subsidies and tax breaks to ensure that
they are competitive with other oil and gas producing nations. This is only set to get worse
with fracking and the shale gas revolution, with many countries such as the USA and UK
having found new reserves of natural gas underground.
The top 26 oil and gas companies in 2014 in order of size are as follows (stars note a fully
privately owned company): Saudi Aramco, Gazprom, National Iranian Oil, ExxonMobil*,
