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New research shows real government subsidies for clean and dirty power

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August 1, 2010

New research shows real government subsidies for clean and dirty power

New research shows real government subsidies for clean and dirty power

How can you tell when a politician is lying? First check to see if his/her lips are moving. New research has revealed that despite what they would have you believe, the world’s governments subsidize the fossil fuel sector far more than they do renewables and biofuels. Indeed, the assistance delivered to the oil, coal, and other fossil fuel sectors makes a mockery of claims that government is serious about reducing carbon emissions. Hey folks, that’s YOUR MONEY!

New Energy Finance Limited was acquired by Bloomberg in December 2009, and its services and products are now distributed by Bloomberg Finance as Bloomberg New Energy Finance (BNEF).

BNEF provides news, data, research and analysis to decision-makers in renewable energy, energy smart technologies, carbon markets, carbon capture and storage, and nuclear power. Bloomberg New Energy Finance Insight Services provide deep market analysis to investors in wind, solar, bioenergy, geothermal, carbon capture and storage, energy efficiency, and nuclear power.

The following BNEF press release was issued July 30, 2010.

New research from Bloomberg New Energy Finance reveals that despite many platitudes and pledges, governments of the world are spending substantially more on subsidizing dirty forms of energy than on renewables and biofuels. In fact, support for cleaner sources is dwarfed by the help the oil, coal, and other fossil fuel sectors receive.

In all, governments of the world provided approximately $43-46bn to renewable energy and biofuels technologies, projects, and companies in 2009, BNEF concludes in preliminary analysis. This total includes the cost of feed-in-tariffs (FiTs), renewable energy credits or certificates (RECs), tax credits, cash grants, and other direct subsidies. (It does not include more upstream support, such as subsidies to corn farmers to grow feedstock for use in US ethanol plants, nor does not include any value transfer due to carbon cap-and-trade schemes.)

The $43-46bn figure stands in stark contrast to the $557bn spent on subsidizing fossil fuels in 2008, as estimated by the International Energy Agency last month.

"One of the reasons the clean energy sector is starved of funding is because mainstream investors worry that renewable energy only works with direct government support," said Michael Liebreich, chief executive of Bloomberg New Energy Finance. "Setting aside the fact that in many cases clean energy competes on its own merits - for instance in the case of well-situated wind farms and Brazilian sugar-cane ethanol - this analysis shows that the global direct subsidy for fossil fuels is around ten times the subsidy for renewables. And that is without taking into account the enormous security and public health costs of fossil fuels, as well as the appalling pollution catastrophes on the Gulf Coast, the Niger Delta and elsewhere." The BNEF preliminary analysis suggests the US is the top country, as measured in dollars deployed, in providing direct subsidies for clean energy with an estimated $18.2bn spent in total in 2009. Approximately 40% of this went toward supporting the US biofuels sector with the rest going towards renewables. The federal stimulus program played a key role; its Treasury Department grant program alone provided $3.8bn in support for clean energy projects.

China, the world leader in new wind installations in 2009 with 14GW, provided approximately $2bn in direct subsidies, according to the preliminary analysis. This figure is deceptive, however, as much crucial support for clean energy in the country comes in form of low-interest loans from state-owned banks. State-run power generators and grid companies have also been strongly encouraged by the government to tap their balance sheets in support of renewables.

Feed-in-tariffs (FiT) subsidizing the purchase of clean electricity in Europe accounted for roughly $19.5bn of the total 2009 spend, or just under half the global total. Germany is home to what was the world’s single most expensive clean energy subsidy program in 2009, BNEF's preliminary research found. Its FiT cost Germany’s ratepayers an estimated $9.6bn in 2009 and is a reflection of the extraordinary number of PV systems installed in the country in recent years.

The gap between what governments spend on subsidizing fossil fuels and clean energy should narrow considerably in 2010 for two reasons. First, support for renewables and biofuels will grow as disbursement of $188bn in global stimulus funds for clean energy accelerates, based on BNEF research. Second, the amount governments such as China spend to keep fossil fuel prices artificially low for consumers has dropped as oil prices retreated from their mid-2008 peaks. Simply put, less government support is needed to make these dirty sources of energy more affordable to populations around the globe.

8 Comments

This research is great. But in order for this to be truly effective to the average taxpayer, they need to see what the real cost of gas is at the pump. That's the current cost plus what we're all already paying in taxes to support the oil industry. And who pays when there's a massive spill like in the gulf? If BP paid the full cost of that, they'd be out of business. The taxpayers are going to pick up the cost, and the locals are going to pay for it with loss of work. How does it make any sense at all to subsidize this nonsense?

It just goes to show how fundamentally broken the US government is. We need to get the corporate influence out of government, but the Supreme Court seems to think there's not enough (see Citizens United case). And people need to get active.

Stradric
2nd August, 2010 @ 05:47 am PDT

Interesting points, however,

1. We do not know from this article how the study defines "subsidies for fossil fuels." In other contexts, I have seen expansive definitions used to sweep in all manner of government expenditures as "subsidies" in making such comparisons. I just want to see the real basis for comparison.

2. The ratio (roughly 12:1 may not seem so outrageous if you take into account the equivalent BTUs or KWH produced. The relevant figure would be the $/KWH for renewables vs fossil. I would not be surprised to find the ration reversed with that calculation.

3. And let's not forget that fossil fuels are taxed more heavily than renewables, if only in the form of the gasoline taxes that supposedly fund our national highway system. And when electric cars become more numerous, shouldn't they pay on some basis? They presumably cause just as much depreciation to roads and other infrastructure. For example - Shouldn't there be a KWH or BTU tax on the amount of energy used to charge the vehicles, based not on the cost of the "fuel" but more on the miles driven - which is really the basis of the gas tax, gallons merely being a proxy for miles. If e-cars get 10x the miles per BTU or KWH, then the tax on those measures should be 10x the tax on the equivalent gallons of fossil fuel.

Without more information on these two points, this article tells me very little.

I would like to see fossil fuels and renewables (of all kinds, possibly including nuclear) compete on an equal basis. Unfortunately, government expenditures through tax policy, pork barrel politics, regulatory requirements (and exemptions) makes it very hard to know the real cost of anything sometimes. Policy decisions, sometimes made decades ago, are permanently embodied in almost everything we consume. And let's not forget that fossil fuels are taxed more heavily than renewables, if only in the form of the gasoline taxes that supposedly fund our national highway system.

Sadly, the web of subsidies, tax breaks, penalties, taxes etc. make it very difficult to make a real assessment here. The article should admit as much.

Thomas L. Bowden Sr.
2nd August, 2010 @ 10:35 am PDT

This glosses over the real subsidies like coal in 3,000deaths, 150,000 hospital stays from it's pollution and huge damages to air, water, land just in the US.

Now oil pollution from burning, drilling, producing and far more from Persian Gulf military, 2 oil wars, terrorism directly caused by oil including $400B/yr trade deficits comes to about $1T/yr.

If these costs too were in coal, oil we would be off both 90% in 10 yrs. It's both national security and economic reasons we really need to get off them.

So really Fossil fuels get 50x's or more subsidies than RE does. Of course our congress is bought and paid for by big coal, oil. Vote for those who want to stop this terrible corporate welfare next election.

jerryd
2nd August, 2010 @ 11:17 am PDT

I don't see hydro referenced in the article and I doubt it's included. So what percentage of world total energy consumption is satisfied by the remaining renewables? 5% if you're lucky. So 5% hydro, 5% other renewable, 90% fossil fuel and nukes. 18:1 in energy production and 13:1 in spending. Or, fossil fuels and nukes get 70% of the subsidy that renewables get. Still more expensive, and if they can't make a go of being competitive with "free" fuel after $50bil in subsidies, well that's more than just a scale problem, isn't it?

Plasma Junkie
2nd August, 2010 @ 12:49 pm PDT

Great and important piece. However, thoughtless impugning of the character of all politicians is more counterproductive than it is unfair. When we do that, we give license for bad behaviour. Is that the outcome we intend?

MikesMatters
2nd August, 2010 @ 01:52 pm PDT

It'd be interesting to see the dirty energy subsidies broken out by country, both in absolute $ terms and per capita. India, Iran, and many Middle Eastern countries have been subsidizing gasoline prices for years (thus stimulating their economies but removing an incentive to conserve), though India announced recently it would cut back on that.

Suman M Subramanian
2nd August, 2010 @ 02:00 pm PDT

Actually one of the better quotes that I like is, "When are we going to Stop being held as, 'Energy Prisoners' "? The world for far too long, ie governments, have become so corrupt that the needs of it's citizens almost always are ignored for the sake of 'progress'. Again anyone who would make derisive comments about government most often are told that the system where they live is the best system in the world and people would be foolish to live anywhere else. Basically. Love It or Leave It! Unfortunately, they must be ignorant to the fact, there is another option, Change It!

Mark Hedtke
2nd August, 2010 @ 04:39 pm PDT

Not to mention the cost of oil wars, oil diplomacy, patrolling oil supply lines, oil subsidies to oil dictators, cost of treating the wounded of oil wars (38% of Iraq vets now put in claims for disability!), not to mention military aid to grisly oil dictators, shooting Nigerian and Myanmar "peasants", and so on. Oh yes, pollution from oil-fired cars that causes permanent lung damage to kids, the more serious the closer they live to freeways.

Doug Korthof
2nd August, 2010 @ 11:03 pm PDT
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