Monday, August 16, 2004

$235 billion subsidy for fossil fuels

The British Government has sent a letter to the World Bank saying it has not done enough to cut subsidies for extracting oil, coal and gas. It also said the Bank has not done enough to promote renewable energy generation.

A conservative estimate of worldwide subsidies for oil, gas and coal is $235 BILLION dollars.

It is often argued that renewable energy is not cost competitive with fossil based fuels. The reality is fossil fuels are heavily subsidised which makes developing renewable alternatives more difficult. A recent National Geographic article estimated that an unsubsidised gallon of gasoline would cost between $6 and $8.

Imagine how much more use of renewable energy we would be using if the subsidies were removed from fossil fuels. If they were then applied to renewable energy sources soon several would be cheaper than the current non-renewable choices.

Small scale renewables would also allow the first world to bring the health and economic benefits of electricity to the developing world in a sustainable way. Deaths from the effects of burning biomass indoors with inadequate ventilation have now surpassed AIDS in Africa.

We need to stop subsidising our addiction to fossil fuels, and invest in the alternatives.

BBC Article


Anonymous Anonymous said...

Uh if 100% of the subsidy went to oil and assuming world consumption at 30e6 bbl/day the subsidy amounts to about $20 a bbl. With oil at $40/bbl the subsidy at worst lowers the cost of a bbl by 1/3. Or multiply today's price by 1.5 to find out the unsusidized cost. Of course if coal is getting most of the subsidy difference in cost would be less. Gasoline in America would rise in price to no more than $3 per gallon. Probably much less.

I hate it when people who claim to be interested in energy can't even do the math.

2:08 pm, August 18, 2004  
Anonymous Anonymous said...

BTW my name is M. Simon

2:09 pm, August 18, 2004  
Blogger James said...

The figure of $235 billion dollars comes from the New Economics Foundation and is quoted in the BBC article.

The other figure is from a National Geographic article (admittedly quoted from memory) which calculates the true price of oil using different figures.

The explanation of the difference in these figures?

One is for direct subsidy, the other includes indirect subsidies and externalities (although I'm not sure it includes the security premium of guaranteeing oil supplies).

2:29 pm, August 18, 2004  
Anonymous Anonymous said...

With a different set of assumptions I calculate that oil is subsidizing the rest of the world's economy to the tune of $23 trillion a year. If you count the cost of horses for the same amount of transportation that you get from oil. You see making horses run at 65 mph for several hours at a time kills them off real fast. This does not count the gain of forrested land that will not need to be turned into cropland for horses.

Now what were the assumptions your sources used?

M. Simon

4:22 am, August 19, 2004  
Blogger James said...


My point is that fossil fuel use is subsidised. Of course the exact figures are open to debate and any figure for global subsidies is unlikely to be exact. If you want to question whether fossil fuels are subsidised please provide your own figures and sources.

I've quoted the sources. If you want to question the assumptions, stop being lazy and go do the legwork yourself.

8:41 am, August 19, 2004  

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