Friday, 21 March 2014

Subsidising coal, oil, and gas

This report is worth a read.  It’s not exactly recent (November 2013) but it’s one of those things that I’ve only just got around to reading.
One of the frequent refrains of the opponents of wind farms is that they wouldn’t be built if it weren’t for the subsidies.  Take away the subsidies and no one would ever build a wind farm again.  Like all good propaganda, it has the advantage of being true, as far as it goes.  It isn’t the whole truth though, and they get away with it only because the subsidies for renewable energy are more obvious than the subsidies for other forms of energy.
What this report highlights is that when the subject is looked at more comprehensively, it becomes clear that for every £1 spent to support renewable energy, £6 is spent on fossil fuel subsidies.  The total subsidy, just to the producers of fossil fuels (i.e. without counting consumer subsidies) amounted to some $523 billion worldwide in 2011.  The subsidies aren’t always obvious, and take many forms, some of which are set out in the report.  But the basic message is clear – we are paying more to subsidise fossil fuel then we are to subsidise renewable energy – it’s the complete reverse of the claims made by those opposing renewable energy schemes.
Now, of course, statistics can be selected and it’s important to compare like with like.  We also need to consider the state of development of different technologies.
So, for instance, the world uses much more fossil fuel than renewable energy; even if the subsidy per kilowatt hour were to be the same, one would therefore expect a higher total to go on fossil fuels than on renewables.  In fact, given that renewables is a newer and still developing technology, the subsidy per kilowatt hour is generally likely to be higher than in the case of fossil fuels.
That is not, however, enough to “prove” the point which the antis make.  Subsidies – any sort of subsidies – for fossil fuel encourage their continued use, and mean that renewable energy is competing with subsidised fossil fuel and that people are still being incentivised to continue using fossil fuel.  Take away those subsidies completely, and the requirement for any subsidy for developing new technologies reduces dramatically.
So why does it happen?  At its simplest, the governments paying subsidies are afraid of exposing us to reality when it comes to the cost of energy.  Energy represents such a large proportion of household and industrial costs that governments believe that paying the true cost would be an enormous price shock.  So they take all sorts of actions to reduce and/or hide the costs.  We still pay in the end of course through taxation.  We just delude ourselves.
It can’t continue indefinitely though.  Sooner or later we need to face up to the real cost of our demand for energy.  Perhaps then we’ll do what we really need to do, which is to reduce our demand rather than play games with the price.


Anonymous said...

Phew. At last you seem to have got it. Finding ways to make do on less can often be more satisfying and more rewarding than always wanting to have more and more.

Now apply this new found thinking of yours to other areas such as welfare.

You see, less is actually more!

G Horton-Jones said...

Another excellent blog

Not a lot of people possibly in the hundreds are aware of this so you can ask the question why?

Is it that the Press and Television and Radio are sanitising public information to the point of irrelevance and if so why

I was amazed to listen to David Cameron going on about the need for Europe to take a common stance against Russia viz a viz events in The Ukraine and Crimea.

Has he simply forgotten that his own party is anti Europe and there are many parallels here with Scotland. Northern Ireland and Wales Shades of August 1914 37 days to War

Nice one anon.

A blog on Welfare reform would be excellent John

It is looking more and more that the majority will be on minimum wage or something close to it.

Lets say 10K per annum and no more

We are after all all in it together

John Dixon said...


The logic which gets you from energy subsidies to welfare somewhat escapes me, I fear. But it would be way off-topic to start debating welfare on this post.

G Horton-Jones said...

Now you have got me worried
My contract with the Coop to supply only electricity -- as there is no gas- here has come up for renewal.
On offer are two options ??
Variable at 14.39 pp kilowatt plus £73.00 for 12 mths
Fixed at 14.52pp kilowatt plus £73.00
also for 12 mths

Which one should I go for??

Does this figure include a sum to help the financial recovery Coop Bank.

Or and also.

Does the tax revenue from all this add to or reduce the state of UK financial indebtedness going forward Since it appears we are funding the subsidies out of State borrowing

Any guesses as to what the real cost of a kilowatt of electricity is at this moment in time