Yes, fossil fuel subsidies are real, destructive and protected by lobbying. Fuel subsidies worth $700 billion are also stalling the power transition to cleaner energy. For now the people’s tax dollars give oil, gas and coal an unfair edge over clean energy.
The 1,801 largest publicly traded oil, gas and coal companies worldwide earned net profits worth $500 billion in 2013 yet received direct subsidies worth $700 billion?
According to the latest estimate from the International Energy Agency (IEA), the annual worldwide fossil fuel subsides had somewhat declined but were still northward of $400 billion in 2018.
The highest estimates come from a recent paper from the International Monetary Fund (IMF) asserting that subsidies reached $4.7 trillion in 2015 and $5.2 trillion in 2017—truly staggering numbers.
The “external costs” of fossil fuels should include medical care for air pollution and the defense of hydrocarbon supply chains, not to mention $69 trillion in climate-related damages expected to accrue between now and 2100.
If neither consumers nor fossil fuel companies pay for these externalizations, they are simply being subsidized indirectly.
Many “direct” fossil fuel subsidies (minus the externalities) are hidden in tax codes. The International Institute for Sustainable Development (IISD), a think tank, estimates that the Canadian subsidy is worth $265 million CAD annually.
It allows Canadian fossil fuel companies to pass 100% of their “exploration” expenses (the cost of searching for new hydrocarbon deposits) on to their investors, who may deduct these from their income tax.
The IISD documents another seven Canadian tax provisions that, including flow-through shares, add up to nearly $2.15 billion CAD in annual subsidies for the fossil fuel industry. And that is just Canada.
Some subsidies look rosy but stink. Shell’s Quest carbon capture and storage (CCS) project in Edmonton, Alberta is a good example.
Of the $1.35 billion CAD in capital costs, the Alberta government subsidized $745 million and the Canadian federal government shelled out $150 million. That doesn’t include the tax credits given for each ton of C02 captured.
The cost of capturing carbon with Quest’s old amine technology doesn’t even come close to a price the market could justify. So, Canadian taxpayers spent significantly more than Shell to reduce the environmental impact of the company’s for-profit operations.
Because Quest uses outdated technology, this project will not be replicated elsewhere. Therefore, the subsidies are not helping to create a CCS market. They merely spare Shell the cost of taking responsibility for its carbon emissions.
It seems obvious that governments should end subsidies for fossil fuel companies. However, a lot of money works to ensure that they stay in place.
BP, Shell, ExxonMobil, Chevron and Total spend a combined $200 million per year on lobbying (bribery & extortion) “designed to control, delay, or block binding climate-motivated policy.
These five companies also spend $195 million annually on branding campaigns meant to portray them as energy transition champions, even as they drastically increase spending on fossil fuel extraction.
$200 million in lobbying plus $195 million in green washing is more than enough to keep the system rigged. Most people are unaware that their tax dollars subsidize fossil fuels.
As a gentleman from Indonesia once told me, “You guys in the West complain about bribery in our system, but you have perfected bribery and made it acceptable just by giving it a new name: lobbying.”
Fossil fuel subsidies are a form of corruption that enriches fossil fuel shareholders at the expense of Earth’s 7.5 billion people. Let’s stop funding our own destruction. Instead, let’s invest our hard-earned tax dollars in clean technologies for a prosperous future.
Wal van Lierop @ Forbes/ ABC Flash Point News 2019.