Fossil fuel subsidies, renewables and Republican lies

fossil fuel subsidies

With the White House now firmly under fossil-fuel industry control, leading Republicans are deploying their full array of arguments to justify US non-action on climate change.

But Donald Trump’s love for the coal industry and dislike for renewables not only deprives under-employed US workers hundreds of thousands of new jobs in a booming industry of the future.

It’s also justified by a mendacious narrative on public subsidies, made frequently by politicians on the Right in the US – and also the UK – but too rarely challenged.

And that is: that renewables can only survive thanks to taxpayers’ generosity, while the trusted and established fossil fuels industries are somehow subsidy free.

However, this line of argument is – to use a charming English colloquialism – complete and utter bollocks.

The fossil fuel industries are among the most heavily subsidised industries on the face of Planet Earth – much more so than renewables, and especially when indirect costs are added to the equation.

Jobs and fossil fuels

The facts are stark, but that doesn’t stop politicians from siding with the fossil fuel industries.

Let’s take Republican Senator Rick Santorum’s defence of Donald Trump’s obsession with coal mining on Friday night’s Real Time with Bill Maher as an example.

Santorum’s rationale went something like this: government should not support renewable energy because it relies on subsidies, which distort the free market and, therefore, limit freedom.

What’s more, although renewables is a booming industry, it cannot create the blue-collar jobs the US is crying out for.

And, in any case, the environmental benefits of doing so would be more than offset by the fast-rising carbon emissions of countries such as China and India.

Thus, according to Santorum, indulging the renewables fad is a pointless distraction from the serious business of burning oil, coal and gas.

He said: “Wind is supported by government subsidies. Solar is supported by government subsidies. And coal is taxed to the hilt by the government.

“The problem we’re facing, that Donald Trump identified, is that millions of Americans who have been working hard and trying to make a living – the 74% of Americans who don’t have a college degree – need jobs.

“You can criticise and demean those people, but those are the folks who built America.”

Size matters

Taken at face value, it’s easy to see why this particular line of argument has its supporters across the Rust Belt.

In response, both Maher, the host, and Center for American Progress president Neera Tanden vociferously refuted Santorum’s claims. Except, unfortunately, when it came to Santorum’s point on state subsidies.

Maher argued that state support is often good and necessary – a point on which even the Republicans can be flexible when it suits them. Think here of the squillions of US dollars spent on defence each year.

Any debate on priorities is, of course, always entirely legitimate. But despite energetic climate change denial in the US, the economic case for subsidising solar and wind energy can easily be justified on the Republican’s own pseudo-economic terms.

However, in this debate, claims that the renewables sector is dependant on subsidies insinuates a lack of ideological worth vis a vis fossil fuels.

It’s only when one looks at the figures, however, that the argument completely falls apart. Until then, insinuations remain that renewables are the work of an international communist conspiracy.

Direct and indirect subsidies

Subsidies are payments or concessions that reduce costs for consumers, producers or both. All of today’s major energy industries receive substantial state support.

Subsidies come in direct and indirect forms.

Direct subsidies tend to result from formal arrangements that are comparatively easy to identify. Examples include cash transfers to producers, consumers or trade bodies.

However, indirect subsidies can be much less straightforward to the point where they are virtually hidden from view. They include tax exemptions and rebates, price controls, trade restrictions and barriers to entering the market, as well as things like conservation subsidies.

But indirect subsidies can also arise where governments and industries effectively ignore the wider costs associated with energy production and consumption.

Economists label these wider costs as ‘externalities’ and are hidden from view because neither the producers nor governments want to pay them.

They usually achieve this by refusing to acknowledge, quantify or regulate these costs, which are also not reflected in energy supply prices.

Even more importantly, their apparent invisibility reduces the risk of public campaigns for change. This is essentially why the fossil fuel industries support climate change denial.

The real cost of fossil fuels

The lack of comparable data makes it difficult to directly compare the total costs associated with fossil fuels and renewable energy.

But despite this, the blatant truth is that there are heavy costs associated with fossil fuel extraction, production and consumption.

According to the International Energy Agency’s 2014 World Energy Outlook, annual global fossil fuels subsidies stood at $550bn compared with $120bn for renewables.

In the same report, the IEA claimed that fossil fuel subsidies were obstructing the global move to renewables, estimating that the latter would account for less than half the increased electricity generation by 2040.

IEA chief economist Fatih Birol told a press conference in London: “The huge subsidies fossil fuels enjoy worldwide gives incentives to their consumption, which means that I’m paying you to pollute the world and use energy inefficiently.”

However, an authoritative 2016 study report, entitled How Large Are Global Fossil Fuel Subsidies?, arrived at a much less positive conclusion:

“Global energy subsidies – as measured by the difference between what consumers should be paying for fossil fuel energy to cover supply costs, environmental costs and general consumption taxes, and what they actually pay – are very large at an estimated $5.3trn for 2015, or 6.5% of global GDP.

“These subsidies are pervasive across advanced and developing, and oil-producing and non-oil-producing, economies alike.”

This report, which was supported by the IMF, detailed how state subsidies push the price of oil, coal and gas well below their actual cost.

“Undercharging for global warming accounts for 22% of the subsidy in 2013, air pollution 46%, broader vehicle externalities 13%, supply costs 11%, and general consumer taxes 8%.

“China was the biggest subsidiser in 2013 ($1.8trn), followed by the United States ($0.6trn) and Russia, the European Union and India (each with about $0.3trn).

“Eliminating subsidies would have reduced global carbon emissions in 2013 by 21% and fossil fuel air pollution deaths 55%, while raising revenue of 4% and social welfare by 2.2% of global GDP.”

Donald Trump’s coal obsession

Santorum’s comments on Real Time With Bill Maher suggest that the US coal industry is hard done by.

But burning coal for energy is not only extremely wasteful – the average US coal plant is estimated at only 33% efficient – but the US coal industry also receives generous, often understated levels of government subsidy.

Unfortunately, the US’s tendency to protect entrenched interests and their ageing, inefficient operations is not restricted to coal.

The US has been producing oil at near-record levels – 3.5bn barrels annually – over the last two to three years, according to the Stockholm Environment Institute in 2015.

And the SEI was keen to stress that state subsidies play a major role in ensuring this happens: “The oil production boom has been aided by tax provisions and other subsidies that support private investment in infrastructure for oil exploration and development.

“Federal tax preferences, for example, enable oil and gas producers to deduct capital expenditures faster, or at greater levels, than standard tax accounting rules typically allow, boosting investment returns.

“At recent oil prices of US$50 per barrel, subsidies push nearly half of yet-to-be-developed oil into profitability, potentially increasing US oil production by almost 20bn barrels over the next few decades.

“Once burned, this oil would emit 8bn tonnes of CO2, about 1% of the world’s remaining carbon budget to keep warming under 2°C, as envisioned in the Paris Agreement. This would represent a much greater share – perhaps a quarter – of a carbon budget for US oil production alone.”

Santorum’s bleating

In other words, not only are fossil fuel subsidies damaging to health and the environment, but even attempting to use state subsidies as a defence for fossil fuel dependancy is an act of gross dishonesty.

Of course, it’s no surprise that politicians are economic with the truth, but Santorum was repeating a blatant lie for which there are ample reams of facts to dispel.

I have great respect for Bill Maher, who at least uses his weekly hour-long programme (plus Overtime) to challenge those in power.

But the fossil fuel industry in the US and elsewhere is extremely powerful and relies on misinformation to maintain our dependency on it – and, therefore, its profits.

For this reason, we need journalists to stop acting as glorified press officers and do their job by exposing the lie at source.




Peter a journalist with 30 years experience of freelance writing, UK national newspaper and magazine production roles, and business development. In 2007, he developed and launched a mainstream-style green consumer magazine in the UK, called GreenerLiving, as a means of promoting sustainable change ‘within the system’. GreenerLiving closed during the post-crash recession, but Peter went on to become managing editor of the international ethical business title, Ethical Performance. However, Peter felt that the CSR sector has not succeeded in changing corporate priorities anywhere near fast enough, and so I decided to leave the treadmill of corporate employment and debt accumulation to focus on my own projects. Now poorer but a billion million times happier, he writes on political, economic and social issues – usually seriously, but sometimes as satire. He's currently writing Psychopath Economics, a book about the logic of social and economic power, belief systems, and the rise and fall of societies. Peter is convinced that ordinary people must educate themselves and exercise their economic leverage if we are to avoid social and environmental destruction.

peterbatt has 165 posts and counting.See all posts by peterbatt

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