COP21: Time to end fossil fuel subsidiesPublished by Tony Juniper on Mon, 30/11/2015 - 12:00am
COP21 opened today in Paris with a focus on one of the international community's most serious oversights: the annual allocation of public subsidies worth hundreds of billions of dollars to artificially lower the price of oil, coal and gas.
While there is much talk in Paris about 'putting a price on carbon', many here believe that undoing the opposite signals that cut the price of carbon is the obvious place to begin.
The first figure to raise this subject in Paris was His Royal Highness The Prince of Wales. He pointed out in his speech to the opening ceremony how "Governments collectively spend more than a trillion dollars every year on subsidies to energy, agriculture and fisheries."
He went on to ask "what could be done if those vast sums supported sustainable energy, farming and fishing, rather than fossil fuels, deforestation and over-exploitation of the seas?" A good question, for when it comes to fossil fuels alone, direct subsidies for the extraction and consumption of these resources total about $500 billion per year.
That's almost four times the level of development assistance provided in 2013, four times the total global financial support for renewable energy, more than four times the sum invested in energy efficiency and five times the $100 billion that has been pledged to be spent every year by 2020 in support low carbon and climate resilient development in developing countries.
The pattern was confirmed in a new report by the Overseas Development Institute and Oil Change International on G20 government subsidies for oil, gas and coal production, which identified the UK as the only G7 nation significantly ramping up its support for the fossil fuel industry - with even more tax breaks and industry support to be handed out to companies operating in the North Sea in 2015.
These fossil fuel subsidies also cause regressive outcomes, including in the developed countries, where they mainly benefit middle class consumers, and encourage energy wastage.
UK's fossil fuel subsidies - £26 billion a year - dwarf renewables support.
The UK's Department for Energy and Climate Change might wish to reflect upon these figures, not least because British energy policy since the General Election has been largely geared to protecting 'hard working families' from the cost of energy subsidies.
Unfortunately, however, action to protect consumers has only been in relation to incentives for the expansion of renewable energy. When it comes to fossil fuels, a very different analysis prevails. Just how different was recently revealed in a survey published by the International Monetary Fund entitled 'How Large Are Global Energy Subsidies?'
The IMF's numbers included all forms of official support and the wider costs of fossil fuels, including air pollution (that kills about 29,000 UK citizens each year) to conclude that the fossil fuel sector is in the UK benefiting from subsidies worth more than £26 billion per year - about 1.4% of GDP.
According to the Department for Energy and Climate Change the cost of supporting all renewable energy technologies in 2014 to 2015 will total £3.5 billion.
As if this disparity were not damaging enough to the economic viability of clean energy, the Chancellor added insult to injury in July when he extended the scope of the Climate Change Levy (that was introduced to charge companies for the carbon pollution they cause) to include the renewable energy sector.
This bizarre decision will, it has been estimated, cost green energy producers around £450 million in the current financial year, and up to £1 billion by 2020-2021. In the same announcement further tax breaks were offered to the producers of North Sea oil and gas.
Incoherent and inconsistent policies send a bleak signal
These incoherent economic signals are helping delay the transition to a low carbon future. The International Energy Agency estimates that ending the $500 billion in direct support for fossil energy would on its own reduce emissions by 10% by 2050. If these vast sums were redirected to incentivize renewables and energy efficiency instead, then the impact would be greater still.
It is welcome that the UK has made such firm public statements backing a strong deal from Paris, has recently signalled the end of British coal-fired power generation, has put substantial financial commitments on the table and is mobilizing its diplomatic resources to smooth a pathway to success in Paris. But how much stronger would these acts of leadership be were it not for it's inchoate national energy policy?
Having undermined renewables, the British Government's forward plan now rests in large part on a substantial increase in gas. While cleaner than coal, gas is not clean enough to meet the contracting carbon budgets that must be achieved to implement the low carbon plans needed during the decades ahead.
And in prioritizing gas another double standard has been exposed. For while the Prime Minister himself championed policies to enable local veto over on-shore wind projects, Ministers have recently signaled their intention to overrule decisions taken locally that block the exploration and production of shale gas.
Wrecking our future 'green growth'
These breathtaking economic and political slants against renewable energy are irrational and will ultimately be self-defeating.
Propping up fossil fuels with tax breaks, planning policies and exemption from the environmental damage they cause at a time when the world is heading toward modern renewable generation and storage technologies will only leave Britain behind in the global race that our current government has repeatedly said we need to compete in.
Leader after leader in their opening speech in Paris highlighted the economic and development opportunities that come with a clean and renewable future. Against this backdrop of change in the political wind a Communique from The Prince of Wales's Corporate Leaders Group and the Friends of Fossil Fuel Subsidy Reform, backed by more than 30 countries and hundreds of businesses and other organisations, called for the phase out of fossil fuel subsidies.
If Paris is to be successful in sending the signal the world so desperately needs, then this subject will surely need to be part of the package. Either way, the contradictions in British energy policy will only become more apparent as the clean tech revolution gathers momentum in the wake of these talks.
That will leave the UK not only in danger of blowing its carbon budgets, but also driving out investment and wrecking the 'green growth' industries of the future.
First published by The Ecologist 30th November 2015.