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Are Fossil-Fuel Subsidies On The Way Out?

In other big U.N. news, Barack Obama gave a lofty climate speech today that was... well, mostly barren of specifics. Let's see: Global warming's a real crisis, it's a generational challenge, our security and prosperity's in jeopardy, the House passed a climate bill, it'd be swell if the Senate did too (he didn't exactly tighten the vise on the dawdling Senate)... All the usual fare. Except for one little newsy bit.

Obama also said he'd "work with my colleagues at the G20 to phase out fossil-fuel subsidies." Now there's a concept! This is one of the most basic steps toward curtailing global carbon-dioxide emissions there is. As a report from Harvard's Kennedy School outlined last November, non-OECD countries spend between $220 billion and $280 billion subsidizing fossil fuels each year, with China, Russia, and India the most blatant offenders. Just scrapping these subsidies could cut global CO2 emissions by about 6 percent. (And yes, removing subsidies might, in the short term, have a regressive impact in the form of higher energy prices, but countries could easily take the erstwhile subsidy money and repurpose it in other ways to cushion the blow—efficiency upgrades or just lump-sum payments.)

Meanwhile, it's worth recalling that the United States does some fossil-fuel subsidizing of its own. We may not bankroll gasoline purchases the way Russia does, but a new analysis from the Environmental Law Institute found that the U.S. government offered $72 billion in incentives for oil, gas, and coal producers between 2002 and 2008. Most of that was in the form of 23 different tax credits, especially the credit for overseas production ($15.3 billion) and a credit for production of nonconventional fuel ($14.1 billion). The rest was in the form of grants, R&D money, and the Strategic Petroleum Reserve. (There's also $2.3 billion in research for coal carbon-capture, which strikes me as less objectionable, since it's aiming to curb carbon-dioxide emissions.)

And what about other forms of energy? Well, over that same time period, renewable power received just $29 billion in subsidies—most of it unstable tax credits that tend to expire after set durations. Solar, wind, and geothermal get relatively meager love and affection. Infuriatingly, the biggest slice of renewable subsidies—$16.8 billion worth—went toward corn-ethanol production, which very likely makes global warming worse through indirect deforestation effects. (The EU's biofuels mandates have ravaged Indonesia's rain forests, for instance.) If Obama wants to talk about scrapping fossil-fuel subsidies, fine, but junking all this ethanol support deserves prime emphasis, too.

(Flickr photo credit: Don Hankins)