Energy for the 99 Percent

The Center For American Progress has a look at the subsidies directed to the fossil fuel industry in the US and possible alternative futures - Energy for the 99 Percent.

The Occupy Wall Street protests are focusing Americans’ attention on the fact that power is increasingly consolidated into the hands of very few individuals and corporations. This is especially true in the energy sector. Two weeks ago the country’s five largest oil companies—BP, Chevron, ConocoPhillips, ExxonMobil, and Royal Dutch Shell—released their third-quarter profits and once again revealed that high gas prices are bad for consumers but great for Big Oil, which pulled in a staggering $101 billion in profits during the first nine months of 2011.

Today Washington politicians publicly bicker over renewable energy credit programs that will only cost taxpayers $2.5 billion while the oil-and-gas industry quietly pulls in $7 billion in annual subsidies. But even that is not enough for Big Oil. These companies are now lobbying hard for even more federal government support, for even more of the public’s waters and lands to be opened up for drilling rigs or pipelines, and for even fewer health and safety standards to govern those projects.

At the same time, those of us who pay the taxes that subsidize Big Oil—call us the 99 percent, though in reality we’re more like the 99.99 percent—must continue paying out precious dollars at the pump and must suffer from the ill-health effects of fossil-fuel pollution because we have very little choice in how we power, or fuel, our lives.

But it doesn’t have to be this way. We have the power to choose a brighter, more equitable, more sustainable future.

What could that future look like? Fast forward to America in 2030. Picture rolling up to the gas pump and having a choice of a petroleum product or a bio-based one, maybe from algae or switchgrass—or instead just plugging your electric or hybrid vehicle into the fast-charging electrical outlet located nearby. In 2030 conventional cars and light trucks will average at least 54.5 miles per gallon, saving our nation the expense of importing 2.2 million barrels of oil per day.

Picture an America where you don’t have to drive at all because buses, trains, and light rail systems are convenient and accessible. Bike lanes are no longer a luxury of certain coastal cities but are the norm along heavily trafficked commuter corridors. And cities are designed to allow workers to live much closer to their jobs, avoiding long commutes altogether.

Picture an America where at least half of our electricity comes from renewable sources such as wind, solar, wave, and geothermal. Sound impossible? It’s not. Other countries, especially in Europe, are already on track to get there. Germany has set a goal of 45 percent renewable energy by 2030 and Denmark is hoping to be completely fossil-fuel free by then.

In 2030 Americans could have the choice of whether to buy power from big utility producers or instead to install household or community-scale energy systems themselves—systems that allow excess power to be sold back into the grid, making the consumers the owners of America’s energy system. We could have a smarter grid, where home appliances and even plug-in electric cars could “talk back” to power distribution centers, which would distribute power more efficiently and effectively across the entire system and avoid costly blackouts. We could see homes built and renovated to efficiency standards that allow consumers to use far less electricity, for far less money, than they do today.

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Digging up old fossils

The Climate Spectator has a look at the immense subsidies directed to fossil fuels - Digging up old fossils.

Of all the riveting topics that will be brought up at this week's tax summit in Canberra, one that is likely to feature little, if at all, are subsidies for fossil fuels. And that’s a pity.

The International Energy Agency and the OECD last night delivered another broadside against the extent of fossil fuel subsidies around the globe, estimating that they amounted to $409 billion in 2010 – a rise of $110 billion over 2009 – and will likely exceed $600 billion by 2010.
Moreover, the agencies argue, they do nothing to alleviate fuel poverty, because they are poorly directed. While many of them reduce the price of oil and fuel below their cost, they favour only the rich and middle class that can afford them in the first place. Only eight per cent of the subsidies reach the poorest population.

“Making energy cheap means we use fuel in a wasteful manner, says Fatih Birol, the chief economist at the IEA. Without these subsidies, he says, global energy use would decline 4 per cent by 2020 – a significant reduction in the current context – around 1.7 gigatonnes of greenhouse emissions would be avoided, and more money could be directed towards renewable energy and energy efficiency schemes.

The IEA has been raging against fossil fuels for several years, arguing that artificially lowering prices below their costs distorts the market for energy products, and impedes the task of reducing emissions and ensuring energy security, which it sees as its remit. It also has other unwanted impacts, such as encouraging energy smuggling.

The OECD notes that removing fossil fuel subsidies – which outrank renewable energy subsidies by a factor of around eight to one – are one of the few structural reforms and policy levers available to address one of the worst economic crises of our lifetime and to stimulate growth and employment. The World Bank has recently argued that ending fossil fuel subsidies in developed countries could allow funds to be directed towards climate change financing in emerging economies, one of the key sticking points at international climate negotiations.

Most of the subsidies accounted for in the IEA/OECD survey come from nations such as Iran, Saudi Arabia and Russia, and half of the subsidies are directed towards petroleum products. China, India and Russia have been credited with taking measures to reduce their subsidies.
However, for the first time, the IEA and the OECD countries have combined to produce an inventory of fossil fuel subsidies in these nations, most of them among the G20, who in 2009 promised to eliminate these subsidies by 2020.

This is potentially embarrassing for Australia, which has used definition arguments and accounting gymnastics to try and argue that it doesn’t have any. The OECD is not having a bar of it. Its inventory estimates that 24 OECD nations together hand out around $45-$75 billion a year in fossil fuel subsidies, and Australia has more than its fair share, with annual subsidies – even within the narrow construct of the OECD definition – of more than $7 billion.

According to the OECD, the big ticket items are fuel tax credits, which have amounted to around $5 billion a year in each of the last three years. There was a further $1 billion in fuel tax credits for aviation, and another $563 million in exemptions for “alternative fuels.”

While Australia has moved to end some of its most notorious subsidies, such as the fringe benefits tax, which encouraged people to drive their cars more than was needed, the OECD says its assessment also does not include subsidies to the making of motor vehicles designed to run on petroleum fuels, or to electricity producers.

That means that some of the subsidies that exist in NSW, for instance, where the cost of coal-fired electricity is subsidised by contracts that are dramatically below market prices, are not included. Nor does it take into account the carbon pricing mechanism currently before parliament.

Australia would argue that its carbon pricing regime finally addresses part of what many would describe as the biggest subsidy in the world today – the lack of accountability on the external costs of fossil fuel production, as outlined in this article on Monday.

However, it seems likely that the OECD would take a dim view of some of the compensation measures included in the Clean Energy Future package, as others already have. In particular, the $5.5 billion in compensation that will be handed out to coal-fired generators, apparently to ensure that they don’t close suddenly, and the further billion or two billion dollars that will be spent on the brown coal buyout scheme to ensure that some of the worst polluting generators do in fact close.
The IEA/OECD, and most independent think tanks would argue that these handouts are not needed, and the money would be better directed at support for R&D and the commercial rollout of clean technologies.

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