Fossil-fuel consumption subsidies totaled $557 billion in 2008, up from $342 billion in 2007, according to the summary of the International Energy Agency’s (IEA) analysis of 37 countries. The analysis estimated that those countries represent over 95 percent of global subsidized fossil-fuel (oil, natural gas and coal) consumption. The analysis is part of a report that will be discussed at the G20 Leaders’ Summit in Ontario, Canada on June 25 to 27, 2010.
The IEA analysis says that phasing out fossil fuel subsidies would create an incentive to be more energy efficient and switch to fuels that emit less greenhouse gas (GHG) emissions. The IEA modeling of a phase out between 2011 and 2020 would:
- Reduce primary global energy demand by 5.8 percent by 2020, equivalent to the present energy consumption of Japan, Korea, Australia and New Zealand
- Reduce global oil demand 6.5 mb/d in 2020, mainly in the transportation sector, about one-third of present U.S. oil demand
- Reduce carbon emissions by 6.9 percent by 2020, equivalent to the present emissions of France, Germany, Italy, Spain and the UK combined
Fatih Birol, chief economist at the IEA in Paris, said, “I see fossil fuel subsidies as the appendicitis of the global energy system which needs to be removed for a healthy, sustainable development future.” He added, “Phasing out oil, natural gas and coal subsidies would increase energy efficiency and push investments in clean energy sources.”
“Governments and energy consumers are paying to encourage investment in renewable energy, but the fossil-fuel alternative is not cheap either,” said Angus McCrone, a senior analyst at Bloomberg New Energy Finance in London.
President Obama called for an end to billion of dollars in tax breaks for oil last week. “The votes may not be there right now, but I intend to find them in the coming months,” Obama said. “I will continue to make the case for a clean energy future wherever and whenever I can, and I will work with anyone to get this done. And we will get it done.”
Continuing to depend on fossil fuels “will jeopardize our national security, it will smother our planet and will continue to put our economy and our environment at risk,” Obama said. “The time has come, once and for all, for this nation to fully embrace a clean energy future.”