The Energy Game is Rigged: Fossil Fuel Subsidies Topped $620 Billion in 2011

protest against fossil fuels subsidies

By Emily E. Adams

The energy game is rigged in favor of fossil fuels because we omit the environmental and health costs of burning coal, oil, and natural gas from their prices. Subsidies manipulate the game even further. According to conservative estimates from the Global Subsidies Initiative and the International Energy Agency (IEA), governments around the world spent more than $620 billion to subsidize fossil fuel energy in 2011: some $100 billion for production and $523 billion for consumption. This was 20 percent higher than in 2010, largely because of higher world oil prices. Of the $523 billion that supported consumption, $285 billion went to oil, $104 billion to natural gas, and $3 billion to coal; an additional $131 billion was divided among the three energy sources specifically for electricity use. Through these subsidies, governments cut the prices people paid for fossil energy by nearly a quarter—encouraging waste and hindering efforts to stabilize climate.

World Fossil Fuel Consumption Subsidies, 2011

Iran spent the most of any country to subsidize the use of fossil fuels: $82 billion, equal to 17 percent of the country’s gross domestic product. Half of that money went to oil. With domestic automotive fuel prices held far below world market prices, Tehran is snarled in seemingly endless traffic congestion and choked with air pollution.  The world’s two leading energy exporters had the second and third highest subsidies: Saudi Arabia spent $61 billion, mostly for oil use, and Russia spent $40 billion, split almost evenly between natural gas and electricity use. India spent just under $40 billion, nearly 80 percent more than in 2010. China’s $31 billion, mostly for oil, rounded out the top five.

Fossil Fuel Consumption Subsidies in Top 25 Countries, 2011

On a per person basis, Middle Eastern countries top the list. The United Arab Emirates spent a whopping $4,200 per person on fossil fuels consumption in 2011. Kuwait and Qatar each doled out more than $3,600 per person.  Each of these countries ranks high on another disreputable list: the world’s top carbon emitters per capita.

Fossil Fuel Consumption Subsidies Per Person in Top 25 Countries, 2011

In 2009, the G-20 countries committed to gradually eliminating “inefficient fossil fuel subsidies that encourage wasteful consumption,” but they have made little measurable progress.  Rising world oil prices have strained the budgets of governments that heavily subsidize gasoline and diesel use, leading a number of countries, including Morocco and Mexico, to reduce their support. In December 2010, Iran instituted a five-year program to reduce subsidies, which began by nearly quadrupling gasoline prices overnight. Without such reforms, Iran would have had even higher subsidies in 2011.

The estimated $623 billion spent to subsidize fossil fuels does not capture the full extent of support, such as certain tax breaks and years of government-funded research and infrastructure dedicated to the older, dirtier sources. In contrast, just $88 billion went to subsidies for renewable energy, most often paid to the producer. This support was almost equally divided among solar photovoltaics, wind, biomass electricity, and biofuels (ethanol and biodiesel).  Clearly, the deck is stacked against renewables.

Fossil Fuel and Renewable Energy Subsidies, 2011

The IEA estimates that phasing out all fossil fuel consumption subsidies by 2020 would cut carbon dioxide emissions in that year by nearly 2 gigatons, the equivalent of taking 350 million cars off the roads. The fossil fuel industry does not need billions of dollars in government support; in 2012, the Big Five oil companies—Royal Dutch Shell , ExxonMobil, BP, Chevron, and ConocoPhillips—together raked in $137 billion in profits. Shifting subsidies from the dirty fuels of the last century to clean renewable sources, such as wind, solar, and geothermal, will help speed the transition to a new and lasting energy economy.

Copyright © 2013 Earth Policy Institute

Image credit: tolkien1914 via photopin cc

One comment
  1. Simon Hamblett

    By definition “Sustainability” is ultimately characterised by way of a system which requires no subsidy in the long term. However,Solar PV together with other forms of Alternative energy sources will still call for a heavily subsidised system set up for a length of time to allow it to progress in a protected environment and take roots so as to ultimately have a chance of competing against non-renewable fuels and the nuclear power which we currently rely so heavily upon. But for just how long will this support be needed?

    I don’t reckon that anyone who actively entered into or enters the industry either being an investor, customer, business owner or installer thought that the original subsidies were sustainable or indeed healthy for the industry over time but without them the industry would not be where it is today!

    However, lots of individuals built their UK business models around subsidy guidelines through the feed in tariff system which has been changed radically by the government and caused many companies to go bankrupt making unemployed most workers who were drawn into the industry. This is all fact! After reviewing the electricity industry all together, the Economy and how best to integrate Renewable forms of generation into the domain for the greater good of all i put together the design for a system which will result in “Grid Cost Parity” for renewables which will not require a subsidy system to function.

    In a nutshell, the conceptual background to this patent application draws on the benefits associated with the practice of sharecropping by communities on a collective basis embedded within a competitive marketplace by directly attaching the rights and distribution to the output of the crop (In this instance Green energy Electricity, farmed on a large scale basis) directly back to the owning individuals within defined limits for his / her own personal useage and therefore outside of the monetary and taxation system. This financial approach being in line with all the Governments current policy pertaining to the advantages obtainable through the current feed in tarrif system for domestic installations.

    For anyone who is truly an enthusiast of finding and supporting an effective way to make the world a more rewarding place then please visit my website http://www.solar-panel-installs.com and follow the tab to the Patent Application containing all the info of the design which is now at the publication stage with the Intellectual Property Office in the UK.Please be aware that the application is just for the UK and the design can be used as the basis for any project away from the UK on an open source basis.

    Full details on this application along with other articles which i have written on the subject, including “Why and How the Government and the Energy Companies Sacrificed thousands of Jobs in the Solar PV Industry” are also open for discussion on my Solar blog page.

    I really believe the best way forward is to keep installing although the Green deal is actually just another load of Green Spin Policy.

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