Our governments have given hundreds of billions to the fossil fuel industry in subsidies. If we used that money to fight climate change, instead of using it to make things worse, we would have a substantial down payment on the funds required.
Subsidies include a myriad of payments, indirect and direct, made by governments to oil, gas, and coal companies. They include tax credits, and government underwriting of corporate risk. The OECD has identified a surprising 250 mechanisms currently in place to support and subsidize the oil, gas, and coal industries.
At the same time, renewable energies get much less. They are not allowed to compete on a level playing field. So we have to get serious about tackling these issues. We can’t wait for better times. As Damian an Carrington from the Guardian said,
“If you thought that tackling the red-hot issue of cleaning up energy now was tantamount to burning money, you ain’t seen nothing yet. Without urgent and transformative action, today’s conflagrations will seem like stray sparks compared to the wildfires to come.”
As Fatih Birol has pointed out,
“One of the most surprising and alarming issues in the climate change arena is the fact that fossil fuels causing global warming continue to receive substantial government support, making them artificially cheap and encouraging more of them to be consumed. It’s a form of madness. What’s particularly baffling is that while government support given to environmentally beneficial renewable power is subject to seemingly endless media and political scrutiny, the 500% larger subsidies given to oil, gas, and (to a much larger extent) coal rarely get much attention…So what would happen if all these subsidies were phased out? According to the IEA’s models, we’d see a massive reduction in global fossil fuel.”
This in turn would lead to a huge reduction in greenhouse gas emissions. Isn’t that exactly what we are trying to accomplish? Yet isn’t that exactly what our government keeps telling us we can’t afford? Perhaps we could afford to do what so desperately needs to be done if we stopped giving away so much cash to so many enormously profitable multi-national oil and gas corporations. The IEA has estimated that with cuts to oil and gas subsidies we would have sufficient funds to provide about half the funds required to hold global warming to 2°C.
Think how powerful the oil and gas companies are to secure such lavish subsidies when the governments cut “fat” (as they called it) everywhere. So when energy prices at the time hit a record high, in 2008 government subsidies of more than half a trillion dollars were paid to some of the richest companies in the history of the planet! That money was equivalent to the combined gross domestic product of Sweden and Saudi Arabia!
I admit that it would be very expensive to pay for the various solutions to climate change. Yet half the necessary funds could be obtained by doing what we should be doing anyway!
Yet it will be difficult to persuade our political leaders that they should do what needs to be done to eliminate these harmful subsidies. After all the richest companies in the world won’t go down without a fight. They will spend lavishly to protect their interests and obtain the influence to get what they want and resist actions they find unpalatable. It is a fact that environmental groups are pipsqueak opponents of the energy sector. As Birol said,
“I don’t know of any global data about the relative size of fossil and renewable lobbies, but where figures are available, the hydrocarbon brigade massively outspends those pushing for clean energy—by a factor of 12 in the U.S. according to one estimate.”
Even Greg Mankiw, a professor at Harvard and energy advisor to Mitt Romney who was one of the Republican Presidential candidates all of whom refused to even consider any tax hikes under any circumstances, has admitted that the current pricing of fossil fuels does not make economic sense. According to him, the price of gas should be higher, as “Economists who have added up all the externalities associated with driving conclude that tax exceeding $2 a gallon makes sense.” So the rest of us are paying for expenses that the oil companies should be paying, to the tune of $2 for every gallon they sell. If that is not insane, what is?
Instead of subsidizing fossil fuels, we should be taxing them more so that their price more accurately reflects the “real cost” to all of us. That is why more and more of us are advocating a carbon tax.
When Stephen Harper was running against Stephane Dion he unfairly, but successfully, characterized the carbon tax as “a tax grab.” In fact, in Dion’s case it was clearly revenue neutral. He wanted to “shift” tax to bad things from good things. The total tax would not have changed. Yet that was considered too radical for Canada. Now some—not many granted—Americans are advocating the same thing.
Elizabeth Kolbert, one of my favourite writers for the New Yorker, got it right when she said,
“What the country needs—and has always needed—is an energy policy that, instead of pandering to American’s sense of entitlement, would compel us to finally change our ways. In addition to a phased-in increase in the gas tax, it would include a comprehensive, economy wide tax on carbon, or alternatively a cap-and-trade- system.”
No matter how much we want to find a different solution, we just have to raise the price of carbon so high that we will find alternatives and fund research for new alternatives. Until we do that, we will find no solutions to our declining fossil fuels nor to the ever rising global warming. We can pay now, or we can pay later. And paying later will be much more painful than paying now.