The Appalling Truth About Energy Subsidies

[Locutus]

There’s nothing makes my blood boil more than to read reports about the international level of subsidies of the fossil fuel industries like this one in Bloomberg.

Fossil fuels are reaping $550 billion a year in subsidies and holding back investment in cleaner forms of energy, the International Energy Agency said.
Oil, coal and gas received more than four times the $120 billion paid out in incentives for renewables including wind, solar and biofuels, the Paris-based institution said today in its annual World Energy Outlook.
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It makes you think that BP, ExxonMobil and Shell are receiving vast state handouts, doesn’t it? I’ve done a bit of sleuthing and it seems that nothing could be further from the truth. The map below from the IEA shows countries where the state pays energy subsides to its citizens, many who will be poor!

The dark red on the map are the countries paying the highest FF consumption subsidies and is of course more or less a map of OPEC. The grey are countries paying no energy consumption subsidies and covers the OECD + darkest Africa. I have not been able to get my hands on a copy of the IEA World Energy Outlook (yet) but this 2011 presentation on the IEA energy subsidies web page makes clear what the IEA are talking about when it comes to FF subsidies. They are subsidies paid to consumers to help them afford to pay for gasoline, diesel, electricity and natural gas that amounted to about $409 billion in 2010, $550 billion today. This has proven to be a problem for Egypt that is not nearly as energy rich as its north African neighbours. It is one thing providing indigenous energy at discounted rates (relative to international market prices) to the indigenous populations. It is a totally different matter subsidising energy (and food) imports.

So, when it comes to fossil fuels, the Bloomberg article and the IEA are talking about consumer subsidies, paid by the State. In the case of OPEC, the main source of income that the State has is oil. So this is State oil companies subsidising consumers.

There is another flavour of alleged fossil fuel subsidies out there linked to oil companies charging exploration costs against tax. The oil companies pay a lot of tax, in the UK at a much higher rate than other companies, and rightly so. It is basic accounting practice in the OECD that companies deduct costs from income to define a profit and it is the profit that is taxed. Greens seem to want a different set of rules for the FF companies, presumably to try and drive them out of business.

This via email from Nate Hagens:

The report by Oil Change International is a complete distortion of facts. The authors have described as “subsidies” normal deductions of expenses and capital costs from revenues for calculation of taxable income. These are procedures which are followed in all fiscal systems in all countries for all forms of business and investment endeavors. Under normal definitions of “subsidy” the United States has no subsidies for the oil and gas industry which is why Obama has taken no steps to reduce them.

US subsidies for the oil and gas industry ranks with alligators in the sewers as a popular urban myth. To believe this reveals no knowledge of accounting and government tax rules or the authors are intentionally distorting reality for purposes of deceptive propaganda. Such persons or organizations and their opinions cannot be taken seriously.
Dr. Charles A. Kohlhaas
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I could not find a definition for renewable energy subsidies on the IEA web site but assume that these are mainly the consumer paid subsidies that go into the pockets of wealthy land owners in the UK or into community energy projects in Denmark. In the USA, these subsidies end up in the pocket of Warren Buffet:

“I will do anything that is basically covered by the law to reduce Berkshire’s tax rate,” Buffet told an audience in Omaha, Nebraska recently. “For example, on wind energy, we get a tax credit if we build a lot of wind farms. That’s the only reason to build them. They don’t make sense without the tax credit.”
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The renewables subsidies are paid to producers by the consumers and are the exact opposite of the consumer subsidies described above. These are apples and oranges and it is appalling that Bloomberg and the IEA (?) do not understand the deception of conflating the two.

I want to conclude by reflecting on the levels of these alleged subsidies compared with the energy that is produced. The consumption figures below (million tonnes oil equivalent – Mtoe) are for 2013 taken from the 2014 BP Statistical Review:

Oil 4185
Gas 3020
Coal 3827
FF total 11032
New renewables 279
FF consumption subsidy = $550 billion
Renewables production subsidy = $120 billion
Doing the sums:
FF $51 consumption subsidy per toe
New renewables $430 production subsidy per toe
@ $80 / barrel 1 toe is priced at $586
We are comparing apples with oranges but normalising for energy production, the renewables subsidies are 8.4 times larger and amount to 94% of the value of the energy produced. This latter statistic is hard to believe, but if it is close to true, it suggests that new renewables are contributing virtually nothing to society.


The Appalling Truth About Energy Subsidies | Energy Matters


a good bookmark: Energy Matters | Energy, Environment and Policy

 

[taxslave]

On the contrary, renewable subsidies contribute greatly to society. They give greens that warm and fuzzy feeling and....... well they give greens that warm and fussy feeling.

 

[Locutus]

heh

"fussy"

 

[whitedog]

heh

"fussy"

When the PM brags about opening a northern road at public expense for the benefit of corporate entities such as oil and mining, and does this supposedly for the benefit of Canadians, aka jobs, I think, what a bimbo. What about these companies equipment costs, theymust enormous, why should these companies have to pay for that, I mean, this is for Canadians, the govt shld pay. And the companys' labour costs, that have to pay too? Like do we want these companies to operate in the north and hire Canadians or Not? Harper, what a cheapskate!

 

[taxslave]

When the PM brags about opening a northern road at public expense for the benefit of corporate entities such as oil and mining, and does this supposedly for the benefit of Canadians, aka jobs, I think, what a bimbo. What about these companies equipment costs, theymust enormous, why should these companies have to pay for that, I mean, this is for Canadians, the govt shld pay. And the companys' labour costs, that have to pay too? Like do we want these companies to operate in the north and hire Canadians or Not? Harper, what a cheapskate!

You mean as opposed to squandering vast amounts of tax dollars, both federal and provincial on public transit that only benefits a small number of city dwellers. Which aside from a few short term construction jobs does nothing for the economy.

 

[gopher]

On the contrary, renewable subsidies contribute greatly to society. They give greens that warm and fuzzy feeling and....... well they give greens that warm and fussy feeling.

Actually, the wealthy elites who get these taxpayer financed multibillion dollar handouts are the ones who like the feel of fresh green dollar bills against their faces, much like Thurston Howell III did on Gilligan's Island.

 

[whitedog]

When the PM brags about opening a northern road at public expense for the benefit of corporate entities such as oil and mining, and does this supposedly for the benefit of Canadians, aka jobs, I think, what a bimbo. What about these companies equipment costs, theymust enormous, why should these companies have to pay for that, I mean, this is for Canadians, the govt shld pay. And the companys' labour costs, that have to pay too? Like do we want these companies to operate in the north and hire Canadians or Not? Harper, what a cheapskate!

Thats the trouble with you lib/ndp types, can't help but give our hard paid tax dollars away to greedy shareholders while pretending to give a ratsas. about taxpayers.

 

[grainfedpraiboy]

Subsidies are a shell game governments play with money in order to manipulate a sector for ulterior reasons. These reasons range anywhere from the benign attempt to create employment to the more nefarious such as harming a neighbouring economy. By and large most subsidies are about promoting political stability.

A few examples; In Canada we subsidise municipal water at the tap and it's proper disposal to the tune of 75% and higher and thus encourage high consumption through cheap prices. There would be genuine hardship for many if their water bill went from $50.00 to $200.00.

Food is heavily subsidised in many bizarre ways and once was the single largest expense for a Canadian household. Governments everywhere know that we are 9 meals away from total anarchy and it is a well established fact that the Arab Spring has it's roots in high food prices rather than a desire for democracy.

A great example in our market of food subsidies is the American taxpayer subsidising the production of US corn whose subsequent oversupply and dumping on the Canadian market has negatively impacted the Canadian feed industry on the one hand but on the other has reduced pork prices for the Canadian shopper.

Even better example is the production of Sorghum. The USA as I recall is the largest producer of this crop and it is almost entirely taxpayer funded. Almost no Sorghum is consumed in the USA but instead is sent to Africa as food aid where sorghum is a staple like potatoes in Canada or rice in China. African farmers trying to sell their locally produced sorghum cannot effectively compete with the American taxpayer giving it away so the local sorghum industry remains stunted.

So it is easy for us to shake our heads at .11 cent a litre subsidised gas in some of these countries when Canadians would likely take to the streets if food prices tripled or we paid unmanipulated market rates for water, energy and other commodities by the removal of their subsidies.

 

[petros]

There are other forms of subsidized food like the use of migrant and illegal alien labour. If fair wages were paid to labor we'd be paying $6lb for green peppers.

 

[skookumchuck]

Thats the trouble with you lib/ndp types, can't help but give our hard paid tax dollars away to greedy shareholders while pretending to give a ratsas. about taxpayers.

Quoting yourself and then replying in a different context? Best you listen to the peeps in white coats.