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  • Julie Wornan

Why are we still subsidising fossil fuels?



To avoid climate catastrophe, we need to reduce greenhouse gas emissions by close to 6% every year until 2050. This means seriously cutting down on fossil fuel use. So, are we still encouraging those carbon emitting energies by subsidising them?

The IMF has estimated that the world spends about $5 trillion a year subsidizing energy, mainly fossil fuels. Removing this enormous subsidy would discourage fossil fuel use to the point where CO2 emissions would fall by 20%! The International Energy Agency gives a lower but still substantial estimate, in the range of $300 to $600 billion per year between 2008 and 2015.


Just what is a subsidy? It might be a cash payment to producers or consumers, or possibly a tax exemption or rebate. In fact, the development of today's major modern energy industries have all relied on subsidy support. Governments often justify energy subsidies on the grounds that cheap energy promotes economic development and particularly benefits the poorer members of society. The IMF’s concept of subsidy includes, somewhat controversially, a cost estimate of all the environmental damage that fossil fuels cause, more often referred to as “externalities.”


In the U.S., direct subsidies to the fossil fuel industry have been estimated at roughly $20 billion per year, with 20% of this allocated to the coal industry and 80% to gas and oil. The boom in shale gas development in the U.S. was enabled through government support. European Union subsidies are estimated to total 55 billion euros annually.

Ironically, existing fossil fuel reserves already exceed the global carbon budget. More than 90% of ExxonMobil’s potential spending on new projects through 2030 would be stranded in a low-carbon world.


Lobbying


According to a report by InfluenceMap, the top oil companies - Chevron, BP, ExxonMobil, Royal Dutch Shell, Total and ConocoPhillips - together spend nearly $200M a year lobbying to defeat policies to tackle climate change. Social media is increasingly used. ExxonMobil has spent $9.6M on political Facebook advertising in the US since May 2018. The major oil companies plan to invest only 3% of their 2019 capital expenditure in low carbon technologies, but $110.4 billion in more oil & gas.


ExxonMobil has launched a petition to Support American Offshore Drilling. The American Petroleum Institute has launched a campaign to counter criticism of offshore drilling in US coastal southeast states, focusing on minority communities, who have shown more than average opposition to offshore drilling.


The fossil fuel industry’s stranglehold on politics is a fundamental bottleneck to serious climate action.

References:

How Large Are Global Fossil Fuel Subsidies?

On Tether to Fossil Fuels, Nations Speak With Money

G7 nations pledge to end fossil fuel subsidies by 2025

Subsidies for fossil fuels and climate change: A comparative perspective

The F-Word Finally Enters Climate Politics

For the first time, [USA] presidential candidates are no longer scared to say “fossil fuels”

How the oil majors have spent $1Bn since Paris on narrative capture and lobbying on climate

Bridging the racial divide to boost offshore support

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