Taxpayers in richest countries pay $112 to subsidize oil, gas, and coal companies.
JESSICA DESVARIEUX, TRNN PRODUCER: Welcome to The Real News Network. I’m Jessica Desvarieux in Baltimore.
A new U.K. study published by the independent think tank the Overseas Development Institute outlined how world governments subsidize the fossil fuel industry to the tune of $500 billion. They also looked at the impact of these subsidies on the environment.
With us to discuss this groundbreaking study, Time to Change the Game: Fossil Fuel Subsidies and Climate, is the author, Shelagh Whitley, who is a research fellow at ODI.
Thanks for being with us, Shelagh.
SHELAGH WHITLEY, RESEARCH FELLOW, ODI: Thanks for having me.
DESVARIEUX: So, Sheila, we have this 12-day UN convention on climate change happening in Warsaw right now, and right now there’s nothing on the agenda really discussing governmental subsidies to the fossil fuel industry worldwide. Can you give us a brief breakdown of who the biggest players are and which companies get the biggest subsidies, and from which governments?
WHITLEY: Sure. I mean, the data that we have available is at a global level. So we have very good information in terms of subsidies, as you said, aAnd that they add up to almost half a trillion dollars–or they did in 2011.
The easiest way to think about these fossil fuel subsidies in terms of how they’re broken down is that they are subsidies both to consumers of fossil fuels, so users of fossil fuels, including companies and industry, and also producers of fossil fuels. And they’re broken down across those two categories in another two ways, which is in terms of the fact that they either are government expenditures, so public government money being spent on subsidies directly, or in the form of tax breaks, either to users or producers of fossil fuels.
DESVARIEUX: Okay. And can you name some of these governments and companies?
WHITLEY: Well, the challenge with fossil fuel subsidies is that we don’t have good information that’s comparable on a country-by-country basis. But we have sort of two big sets of information that I can talk about, so information about developed or rich countries, and then information about developing countries.
When we look at the rich countries, what we find is that the biggest subsidizes are countries like Russia, the United States, Germany, and the United Kingdom. And in terms of developing countries, most of the subsidies are in countries in the Middle East and include countries such as Saudi Arabia and Iran, but also China and India are big providers of fossil fuel subsidies.
DESVARIEUX: Alright. And also in your study you outline that, quote, for every USD 6 spent on fossil fuel subsidies in 2011, only $1 of U.S. support went to renewable energy. Some would say that subsidizing the fossil fuel industry is a more effective way to stimulate the economy and that renewable energy industry just can’t compete in terms of job creation, for example. What would be your response to that?
WHITLEY: Well, I think what’s important to note is the scale of these fossil fuel subsidies. So fossil fuel subsidies have been, you know, on the order of half a trillion dollars. This is a huge amount of money that’s going to support the production and use of fossil fuel energy. At the moment, that doesn’t create a level playing field in any way for renewable energy or energy efficiency. What it leads is to increased consumption of energy and also creates disincentives for the production of clean energy. So I don’t think we can even answer that question about what would be better to create jobs, because there’s just not a level playing field for the production of renewable energy, and also not a level playing field for investors. There are so many more incentives going towards, as you say, investors putting money into fossil fuels, and even risky fossil fuels like we see in sort of new technologies in terms of offshore oil and gas, that renewables just can’t compete right now.
DESVARIEUX: And there are also some surprising facts that you raise your study. And one of the more surprizing ones, at least for me, is that Venezuela subsidizes their oil industry, and since oil production is nationalized, there doesn’t–doesn’t that mean that in effect that the state and the general population, the benefits that they go to, they’re actually subsidizing those things?
WHITLEY: Well, I think what you find is that, yes, oftentimes what subsidies mean, especially those subsidies, as I said, that are in the kind of category that go to consumers, some of those go to businesses and to companies, but some of them go to individuals. And even in the U.K. we have tax breaks which mean that our energy is cheaper. So those subsidies do provide incentives for increased use of energy.
I think it’s really interesting that you raise Venezuela as an example, because one of the things we highlight in the report is that Venezuela spends almost double on fossil fuel subsidies than it does on health.
So I think the real question is what types of subsidies should be in place and what types of incentives should be in place. Should governments be spending money on supporting the use of high-carbon energy, especially in the context of dangerous climate change? Or should they be spending that money on health care and education for the public? And I think the main obstacle that we see right now is that most people don’t even know where this money is going. And I think it’s, you know, for the people of each country and for the government of each country to make decisions about what activities they want to be supporting and what activities they don’t want to be supporting.
DESVARIEUX: Sheila, you raise some really interesting points. Can you outline more of your recommendations from your study? For example, do you recommend that we do a carbon tax? How would this all work out?
WHITLEY: Sure. Our study has really specific recommendations. I think another fact that’s sort of less well known is that the G20 countries have already committed to phase out inefficient fossil fuel subsidies. So that group of governments, which are amongst the wealthiest and most powerful countries in the world, have already committed to phase out fossil fuel subsidies. What they haven’t done is set a timeline for phase out, and they haven’t even agreed on a definition of what an inefficient fossil fuel subsidy is.
So what we’re calling for is fairly simple, is that they set a timeline for phasing out fossil fuel subsidies. And we’ve proposed a timeline of 2020, so that the G20 would have a phaseout by 2020. And what we also propose is that there’s support for less developed countries through this group, so to help them to phase out their fossil fuel subsidies.
One of the most important issues when fossil fuel subsidies are phased out is that energy prices could go out up and that that could have a significant impact on the poor. But countries have already demonstrated that they can retain some of the income from phasing out fossil fuel subsidies and redirect that to the poor to protect them in the event of energy price increases. And what’s been found is that if these governments phase out fossil fuel subsidies, that that can have a very significant impact on reducing emissions of greenhouse gas emissions, and that’s really important in the near-term, because we’re not likely to get an international agreement on climate change until 2020.
DESVARIEUX: Alright. Sheila Whitley, thank you so much for joining us.
WHITLEY: Thank you very much for having me.
DESVARIEUX: And thank you for joining us on The Real News Network.
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