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Climate Hustle

Fossil fuel subsidies are a staggering $5 tn per year

Posted on 7 August 2017 by John Abraham

Fossil fuels have two major problems that paint a dim picture for their future energy dominance. These problems are inter-related but still should be discussed separately. First, they cause climate change. We know that, we’ve known it for decades, and we know that continued use of fossil fuels will cause enormous worldwide economic and social consequences.

Second, fossil fuels are expensive. Much of their costs are hidden, however, as subsidies. If people knew how large their subsidies were, there would be a backlash against them from so-called financial conservatives.

A study was just published in the journal World Development that quantifies the amount of subsidies directed toward fossil fuels globally, and the results are shocking. The authors work at the IMF and are well-skilled to quantify the subsidies discussed in the paper.

Let’s give the final numbers and then back up to dig into the details. The subsidies were $4.9 tn in 2013 and they rose to $5.3 tn just two years later. According to the authors, these subsidies are important because first, they promote fossil fuel use which damages the environment. Second, these are fiscally costly. Third, the subsidies discourage investments in energy efficiency and renewable energy that compete with the subsidized fossil fuels. Finally, subsidies are very inefficient means to support low-income households.

With these truths made plain, why haven’t subsidies been eliminated? The answer to that is a bit complicated. Part of the answer to this question is that people do not fully appreciate the costs of fossil fuels to the rest of us. Often we think of them as all gain with no pain.

So what is a subsidy anyway? Well, that too isn’t black and white. Typically, people on the street think of a subsidy as a direct financial cost that result in consumers paying a price that is below the opportunity cost of the product (fossil fuel in this case). However, as pointed out by the authors, a more correct view of the costs would encompass:

not only supply costs but also (most importantly) environmental costs like global warming and deaths from air pollution and taxes applied to consumer goods in general. 

The authors argue, persuasively, that this broader view of subsidies is the correct view because they “reflect the gap between consumer prices and economically efficient prices.”

Without getting too deep into the weeds, the authors discuss both consumer subsidies (when the price paid by a consumer is below a benchmark price) and producer subsidies (when producers receive direct or indirect support which increases their profitability). The authors then quantify what benefits would be achieved if the fossil fuel subsidies were reformed.

Interested readers are directed to the paper for further details, but the results are what surprised me. Pre-tax (the narrow view of subsidies) subsidies amount to 0.7% of global GDP in 2011 and 2013. But the more appropriate definition of subsidies is much larger (8 times larger than the pre-tax subsidies). We are talking enormous values of 5.8% of global GDP in 2011, rising to 6.5% in 2013. 

The authors also broke the results down by fossil fuel type and usage (coal, petroleum, natural gas, electricity). It is not clear to me how the authors separated the various fuel sources out of electrical generation; however, the results show that petroleum and coal receive much larger subsidies compared to their counterpart fuels. The authors organized results by geographical region and found that the top three subsidizers of fossil fuels are China, USA, and Russia, respectively. The European Union is a bit less than half of the entire US subsidy. Other notable countries and regions are discussed.

There are two key takeaway messages. First, fossil fuel subsidies are enormous and they are costs that we all pay, in one form or another. Second, the subsidies persist in part because we don’t fully appreciate their size. These two facts, taken together, further strengthen the case to be made for clean and renewable energy. Clean energy sources do not suffer from the environmental costs that plague fossil fuels.

I asked one of the authors, Dr. Coady, why their work is important. He told me: 

Click here to read the rest

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Comments

Comments 1 to 31:

  1. Well said. Government (tax payer) subsising of producers doesnt make economic sense. The fossil fuel industry is not some new industry needing help to get started, its generally an established and generally strong industry so hardly needs subsidies.

    This is obviously pandering to powerful lobby groups with political influence, and a gullible public scared to say enough is enough. It's certainlly not free market capitalism and self reliance, more a form of back door socialism for corporates and the well connected.

    Keeping prices artifically low distorts the market and is just a complex money go round, and over encourages consumption. It would be better to just to give direct government income support to poor people for them to spend on essential basics. This is more transparent, and doesn't create awful problems like in Venezuela where cheap petrol leads to people sneaking across the border to buy the petrol in bulk.

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  2. Jevons Paradox is written generally: that means the voting consumer has the resources available to win this fight!

    Where there's a will there's a way: it was Arnold Schwarzenegger (Though he probably wasn't the first) that said, "The people lead, governments follow!"

    We all have the power to demand.... (..supply is just the other side of the coin.)

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  3. Australian taxpayers get slugged $1.8bn/year, every year, all of which goes to subsidise production of coal, rather than pay-off the burgeoning national debt. The Federal government does not hesitate to spend lavishly and grant tax concessions to ensure that Australia remains the worlds largest coal exporter.

    Prime Minister Turnbull and his Energy Minister, Josh Friedenberg call for greater domestic use of coal to meet the nations demand for energy, despite the fact that it impairs the health and kills miners, seriously pollutes the atmosphere accelerating global warming and is the major cause of climate change, destined to kill the Great Barrier Reef - and Queensland’s tourist industry.

    Money paid to subsidise coal production could be put to better use: reducing national debt, spending more on health and education, or horror of horrors, reducing greenhouse gas emissions. But neither government or coal industry show any interest in measures not aimed at sustaining the growth and durability of coal production. They will rue the day!

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  4. From the 10th paragraph of this article - 

    Interested readers are directed to the paper for further details, but the results are what surprised me. Pre-tax (the narrow view of subsidies) subsidies amount to 0.7% of global GDP in 2011 and 2013. But the more appropriate definition of subsidies is much larger (8 times larger than the pre-tax subsidies). We are talking enormous values of 5.8% of global GDP in 2011, rising to 6.5% in 2013.

     

    The actual study is paywalled, which makes it difficult to ascertain the validity of conclusions of the study, including the mathematical computations, underlying assumptions, reasonableness, etc.  

    The article makes note that .7% of GNP are direct subsidies, while the remaining indirect subsidies are approx 5.8% / 6.5% of global GNP.  

    Assuming those numers are correct - how do you solve for that - By taxing the fossil fuel companies on profits they dont earn?

    Secondly, neither this article or the guardian article explain what direct subsidies the fossil fuel companies actually receive. The actual study may discuss that issue, but it is behind a paywall.  

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  5. Tom13,

    The paper says:

    "Producer subsidies arise when producers receive direct or indirect support (e.g., receiving prices above supply costs, pref- erential tax treatment, direct government budget transfers, paying input prices below supply costs) which increases prof- itability when this support is not passed forward into lower consumer prices (e.g., because prices are determined on world markets). For presentational purposes, we include producer subsidies in pre-tax subsidies, though they are very small in relative terms."

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  6. "..Producer subsidies are lumped into pre-tax subsidies but are relatively small ($17-$18 billion during 2011–15)."

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  7. For Tom13, I found a copy (draft?) of the paper on the IMF website (https://www.imf.org/external/pubs/ft/wp/2015/wp15105.pdf).

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    Moderator Response:

    [PS] Fixed link. Please learn to do this yourself with the link tool in the comments editor.

  8. To me the exact amount of subsidies misses the point. In my opinion there is simply no justification for subsides on fossil fuels, regardless of what type of subsidies or how much they are in total. Nobody can come up with a sensible justification. Even India is planning to remove oil subsidies.

    But if you are hung up on numbers, 5 trillion dollars would subsidise a lot of electric cars. If it was a $10,000 subsidy per car thats about half a billion electric cars. 

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  9.  I'm not sure where John Abraham came up with this headline: "Fossil fuel subsidies are a staggering $5 tn per year"

    Table ES4. Fiscal year 2010 electricity production subsidies and support (million 2010 dollars) Share of Total Subsidies and Support Coal, 10%; Renewables, 55.3%
    "Direct expenditures accounted for 39 percent of total electricity-related subsidies in FY 2010 (Table ES4). These expenditures were mostly the result of the ARRA Section 1603 grant program, 84-percent of which went to wind generation." <http://www.eia.gov/analysis/requests/subsidy/>
    This is why renewables are built at all: "The billionaire was even more explicit about his goal of reducing his company's tax payments. "I will do anything that is basically covered by the law to reduce Berkshire's tax rate," he said. "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." Warren Buffett <http://www.wsj.com/articles/SB10001424052702304831304579541782064848174>

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    Moderator Response:

    [JH] Always best to read the article before commenting. The third paragraph clearly states the source of the information contained in the article. The link embedded in the word "study" will take you to it.

    Sloganeering snipped. 

    Please note that posting comments here at SkS is a privilege, not a right.  This privilege can be rescinded if the posting individual treats adherence to the Comments Policy as optional, rather than the mandatory condition of participating in this online forum.

    Please take the time to review the policy and ensure future comments are in full compliance with it.  Thanks for your understanding and compliance in this matter.

  10. To those above who doubt that fossil fuels are subsidied as much as the OP claims:

    This Forbes article claims that 15,000 people in the USA and 500,000 are killed every year from coal pollution alone.  What is the vlaue of their lives?  That is a subsidy of the coal industry.  It costs $300-800 billion to treat the health issues caused coal (the hosptalizations of the people who eventually and the medical care of the people who survive).  These include lung issues from particulate pollution, lung issues from sulfate  aerosols, mercury poisoning, miners killed and many others. (I have seen lower estimates of health costs of only $100 billion per year elsewhere).  Metal roofs that last 40-50 years in Florida only last 15 years near coal burning power plants. 

    Virtually all of the freshwater lakes in the USA are polluted with mercury from coal plants.  This lowers the value of fishing tourist visits.  Coal pays nothing to the businesses it bankrupts from their pollution.  That is a subsidy to fossil fuels.  The list goes on and on if you read the reports.

    If you want to challenge the OP you need to cite a reference that supports your wild claims.  I note that the doubters have not cited a source of data to support their argument, they just argue from incredulity because they do not know the facts.  It appears to me that the people who are making those claims have not bothered to do thier homework and are only counting direct monetart subsidies when the OP clearly states that the majrity of subsidies are issues like pollution damage and health affects.  Any analysis that does not include the health cost of fossil fuel pollution is not a serious evaluation of the subsidy given to fossil fuels.

    How much is your life worth if you are one of the people who dies 10 years early from exposure to fossil fuel pollution?  I count my life as worth a lot more than the current value which is zero dollars.  Renewable energy does not have this issue, they are essentially non-polluting.

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  11. J Doug Swallow @9

    The five trillion is for global subsidies, not just America. America spends about one trillion anually on energy in total, so it could not possibly be for america.

    Fossil fuels in America  get various subsidies including direct subsidies not apparent in your chart. Renewable energy is subsidised in America with some sort of tax rebate scheme. Yes Warren Buffet will invest in whatevers profitable. Thats what investors do, so theres nothing negative in him doing this, its supply and demand at work.

    Just imagine if oil and coal subsidies were spent to subsidise renewable energy. How much sensible that would be.

    In fact things have changed in America the last couple of years and wind power is almost the same cost as gas and coal even without subsidies as below.

    www.treehugger.com/renewable-energy/us-energy-secretary-solar-and-wind-energy-cost-competitive-without-subsidies.html

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  12. Ignoring for the moment externalities, I wonder what the direct subsidies are.  That is to say tax relief direct grants and allowances and so forth.  Attacking these would be a good way to start as they are more blatant and easier to identify.  Externalities such as health costs would come next.  A shame to spread the effort too thinly.  Find one direct subsidy and go for that one.

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  13. William,

    I've already given this number, back in comment 6. It's from the paper. Globally $18bn, or 0.4% of the headline number.

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  14. First - thanks to Ian above for providing an actual link to the paper.  (vs guardian article). With access to the actual paper, we can review the assumptions/computations etc in the study.

    From #13 Stevecarson

    William,

    I've already given this number, back in comment 6. It's from the paper. Globally $18bn, or 0.4% of the headline number.

    I have to go with William on this one - doing a word search for subsidy, subsidies, direct, direct subsidies, etc,  The paper never identifies a direct subsidy, nor does it quantify any direct subsidy nor does provide any data to support the computation of the direct subsidy[ies] the study claims the fossil fuel industry receives.

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  15. Tom @13,

    "The paper never identifies a direct subsidy, nor does it quantify any direct subsidy nor does provide any data to support the computation of the direct subsidy[ies] the study claims the fossil fuel industry receives."

    Perhaps the paper didnt "identify" any direct fossil fuel subsidies because this information is easy enough to find, and they are not in the business of providing a long list of data. For example look up "energy subsidies" on wikipedia, under the entry for America, and you will see a highly detailed breakdown from Terry M Dinnan, senior advisor to the congressional budget office, for 2013. Yes I know its wikipedia, but original references are provided for this information.

    The article covers some other countries including Russia and Europe. One suspects in some other cases it would have to be estimates as governments can be secretive at times.

    However the point is it took me literally seconds to find this information, and quickly scan through it, just the first google hit that came up, and there were plenty of reputable looking articles on fossil fuel subsidies. On that basis I have no real reason to doubt the methods and numbers in the original article. Clearly some is likely to be estimates for some countries, but the information for the USA appears easilly accessible.

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  16. Splitting hairs on what is or is not a subsidy distracts from the important stuff. The only reason fossil fuels are as profitable as they are is their externalized costs. If even only the current total costs of climate change and fossil fuel exploitation were to be attached to their cause, fossil fuel extraction, transformation and burning would all have to make serious adjustments, the kind that can prompt investors to take their bucket and shovel and go play in another sandbox.

    The invasion of the New York subway by salt water, the toppled levees in New Orleans, the defenses now necessary in Miami, the increased frequency of extreme dry and wet events, all these are externalized costs of fossil fuel burning. Then of course, there is the complete destruction of the landscape in Athabasca, filling valleys with toxic sludge in West Virginia, spills, respiratory illnesses, etc. Even when courts attribute responsibility in catastrophic events, the consequences for the responsible corporations are very small, delayed, diluted; the consequences for the individuals who were instrumental in the decisions leading to catastrophic events are non existent. All these costs, however, do not go away; in fact they tend to pile up; they will become more and more apparent, more expensive, and more varied as time goes by.

    The fact that any subsidy of any kind would be granted to an industry that is beyond mature, and generates such enormous profits, has no rational explanation.

    Meanwhile, the mass extinction marches on. The reality is quite simple: there is no long term future for humans on this planet that does not include the eradication of global, industrial scale fossil fuel burning, one way or another. Even if we were to take all the coal, gas and oil out of the ground, it would run out after a few hundred years, a thousand at most, a blink of an eye in the grand scheme of things. How painful the transition away from fossil fuels is depends to a large extent on how long we wait to start.

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  17. I just read today (11 August) that the governor of West Virginia has proposed that the federal government subsidize the purchase of Wet Virginia coal. According to theWall Street Journal via the Washington Post:

    Jim Justice, the born-again Republican governor of West Virginia, is floating a federal proposal to bail out the struggling Appalachian coal industry at a cost to taxpayers of up to $4.5 billion a year.

    As Justice described it to the Wall Street Journal, under the proposal, the federal government would pay out $15 to eastern power companies for each ton of Appalachian coal they purchase.

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  18. A few other points regarding these subsidies 

    First - virtually every human activity has externalities.  To assign high externalities to fossil fuels but not to other activities is illogical.

    Secondly, it ignores the benefits that fossil fuels provide, lower transpotation costs which translate into lower costs for virtually all goods and services.  Renewable energy, while promising remains, much more expensive at this time.

    Third - Life expectancy increase dramatically from the early 1900's until today for 3 primary reasons, improvements in sanitation, massive leaps in crop yields due primarily from the shift to mechanized farming due in part from the availability of fossil fuels, and a distant third reason is the improvements in health care.

    The study assigns a large subsidized cost to increase in premature mortality to the increase in fossil fuel pollution.  While this is very difficult to quantify, most studies estimate the range is somewhere between 23 days to 6 months shorter life due to fossil fuel pollution.  However, it should be noted the shorter life expectancy due to pollution pales in comparison the benefits that inexpensive energy has provided to increase life expactancy.

    The main point is that if a study is attempting to quantify "subsidies" from externalities, it needs to include benefits received.  

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  19. Tom @13

    "A few other points regarding these subsidies First - virtually every human activity has externalities. To assign high externalities to fossil fuels but not to other activities is illogical."

    Virtually every other human activity does not have externalities. Just google a dictionary definition of "externality" and you get "a consequence of an industrial or commercial activity which affects other parties without this being reflected in market prices, such as the pollination of surrounding crops by bees kept for honey"

    Clearly pollution is a classic externality or tragedy of the commons scenario. Air pollution from motor vehicles is an example of a negative externality. The costs of the air pollution for the rest of society is not compensated for by either the producers or users of motorized transport. You therefore need some form of legislation, or resorting to the courts etc but this is not really practical. Legislation requiring appropriate emissions controls is preferable. Sometimes taxes are a solution as well, to pay for costs and encourage desired outcomes.

    High externalities are not just assigned to greenhouse gas problems. For example coal power stations have to limit sulphur emissions, automobiles have catalytic converters to filter out various toxic substances. Limits should be put on greenhouse gases, and polluters should also pay with carbon taxes.

    "Secondly, it ignores the benefits that fossil fuels provide, lower transpotation costs which translate into lower costs for virtually all goods and services. Renewable energy, while promising remains, much more expensive at this time."

    Transportation costs between petrol cars and electric cars are now not that much different. The petrol driven toyota corolla is about $25,000 in America, while an all electric nissan leaf is about $35,000 (without subsidies) but it is much cheaper to run and would pay for itself after about 5 years.

    Renewable energy is not "much more expensive". Wheres your eviidence of that?

    Wind and solar electricity is now approximately the same cost as coal and gas, and cheaper in some countries. Refer "Cost of electricity by source" on wikipedia. The article documents all source material. Alternatively if you dont like wikipedia, Forbes Magazine, a business publication, has articles finding the same results.

    "Third - Life expectancy increase dramatically from the early 1900's until today for 3 primary reasons, improvements in sanitation, massive leaps in crop yields due primarily from the shift to mechanized farming due in part from the availability of fossil fuels, and a distant third reason is the improvements in health care."

    Where is your proof of those claims? I dont think improvements in health care would be a 'distant' third reason. Think antibiotics for a start.

    But you are just giving a history lessen, and history does not become a permanent template for how society goes into the future. We have substitutes for fossil fuels.

    "The study assigns a large subsidized cost to increase in premature mortality to the increase in fossil fuel pollution. While this is very difficult to quantify, most studies estimate the range is somewhere between 23 days to 6 months shorter life due to fossil fuel pollution. However, it should be noted the shorter life expectancy due to pollution pales in comparison the benefits that inexpensive energy has provided to increase life expactancy."
    "The main point is that if a study is attempting to quantify "subsidies" from externalities, it needs to include benefits received."

    Maybe it should. But the science and economics community is basically finding that the risks of fossil fuels to the planet outweigh the benefits. There is an economic literature on this.

    In any event your discussion seems beside the point to me. The question is what justification would there be to subsidise fossil fuels? As already explained the arguments are weak. The industry is strong, mature and profitable without subsidies, so has no need of producer subsidies.

    Remember subsidies are tax payer money, yours and mine. Every business would love subsidies but it would bankrupt the tax payer. Free markets are supposed to stand on their own feet, and get finance from shareholders and banks etc, this is how capitalism is supposed to work! This is economics 101.

    Subsidies should therefore be limited in number and for special cases where theres a genuine "market failure"  and this is the general view of the economics profession. In other words things where private enterprise is inherently weak or insufficient. This might include research and development in some cases, war time emergency situations, helping new small businessess get started, or high risk businesses that are essential to the economy. Its hard to see how any of that would apply to wealthy fossil fuel producers.

    However subsidies are justifiedd for renewable energy on numerous counts. Clearly it is helping new business get started, and in some cases there is risk, so the subsidies fit the definition of where subsidies should be applied. However wind power is now profitable in many cases even without subsidies so they may not need to be permanent. As a general rule I think subsidies should be time limited, as is common in the countries of south east asia. 

    Subsidies have their place, if applied to the right things and with some sort of time limits.

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  20. Tom13,

    The fossil fuel industry tries to defend their pollution by claiming positive benefits.  They get supporters to write white papers that make that claim, but they do not submit them to peer review.  Presumably they know that their claims will not withstand critical review.  I have not seen a peer reviewed study making that claim.  All the studies I have seen show very large negative externalities for fossil fuels.  Each one seems to add more negatives to previous studies.  Please link to peer reviewed studies to support your wild claim that positive benefits of fossil fuels offset a significant fraction of thier negative externalities.  I note that you have not linked to any studies that support your claims.  Unsupported claims are not convincing.  The OP links to substantial peer reviewed data.  

    Nuclear proponents claim that nuclear kills less people than fossil fuels so it is possible to make a claim of benefits.  I have seen several studies by nuclear proponents that claimed externalities for wind and solar so it is possible to do (those studies did not gain much traction).

    Your estimate of life lost to fossil fuel pollution is much smaller than those I have seen.  Please provide references for your claim.

    Wind and solar have very low externalities.  It has been shown that wind and solar can power the entire USA at a lower overall cost than fossil fuels when externalities are considered (Jacobson et al and the Solutions Project).  Fossil fuels need to show that their benefits exceed the benefits of power from renewable sources.

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  21. The consumers are the ones receiving the benefit of the subsidies related to the externalities. If the Fossil fuel companies were assessed the costs of the externalities, then those costs would be passed on to the consumer in the form of higher prices.

    This is no different than food. If the food producers were assessed the cost of disposal, then the food producers would simply add those costs to the price of food.

    In essence, it is the consumer that receives the benefit of the subsidies.

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  22. Tom13@21m

    You are correct. Not having all externalities fully included in the price of things leads to the development of popularity and profitability for damaging unsustainable activity 'because the less acceptably something can be gotten away with the cheaper or more profitable it is for as long as consumers want to get away with it'.

    However, there is actually no way to properly price an activity that has to be completely curtailed before a marketplace developed extinction of the opportunity occurs, other than continuing to increase the price until the activity is ended. The marketplace does not really 'manage resources', it exploits opportunities until the virtual extinction of the opportunity to benefit from the activity (until something cheaper is developed, which is likely to be just another damaging unsustainable way of personally benefiting).

    That is a fatal flaw of the economic games. It is why the economic games need rules, restrictions and effective enforcement by people who base acceptability on rational consideration of how to keep people from pusuing personal benefit in ways that can harm other people.

    Similar to sports competitions, it is important to 'restrict the freedom of participants who may wish to do as they please and believe what they want regarding acceptable behaviour'. Rules/Restrictions are required to ensure a reasonably decent result, making it more likely that the more deserving competitors/participants are the Winners. And as in sports there is a constant need for new rules and restrictions as the cheaters come up with mew ways of behaving that the existing laws/rules do not address or when, as in the case of climate science, improved understanding is developed regarding what is unacceptable, unsustainable or harmful.

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  23. Tom13 @21

    "The consumers are the ones receiving the benefit of the subsidies related to the externalities."

    You dont know that. You provide no objective study or where subsidies go The benefits of subsidies could equally flow to executive salaries and shareholders pockets, or go into new plant and equipment. In reality its most probably going to be some combination.

    For all we know most of them could flow into building the ceo's new swimming pool. Its certainly very unlikely to all benefit consumers in the wider sense of the word. 

    Either way  we should not be encouraging fossil fuels so subsidies make precisely no sense at all.

    You would at the very least have to show some cost benefit to the general public from subsidies and that would be very unlikely given the companies have no trouble getting finance in conventional ways, and it would be very hard to ever prove a cost benefit.  You have certainly not provided an independent authoritative assessment. This is why sensible countries only subsidise things where theres a commonsense, definable reason as I outlined above, such as helping new businesses that might struggle to get finance.

    "If the Fossil fuel companies were assessed the costs of the externalities, then those costs would be passed on to the consumer in the form of higher prices."

    What an incredible assumption. You provide no evidence.  Just remember theres a lot of competition in the fossil fuel industry, so passing on costs is not so easy. At the very least its far more probable that a large proportion of the prices would be absorbed internally, and some may be passed on.

    However I would agree dumping the problem entirely on fossil fuel companies as a simple tax  is not ideal, as at least some will be passed on to consumers. However this is not entirely a problem, as it sends a clear price signal to consumers anyway.

    There are many ways of dealing with negative externalities. It may be appropriate for a simple carbon tax on consumers to modify behaviour. The revenue can either go into renewable energy or be revenue neutral. 

    Cap and trade is another option where it would be harder to pass on costs, but not impossible of course. Simple rule based schemes are better still, as its very hard to pass on costs directly, although scarcity will ultimately push up prices, but again this will modify consumption which is a desired goal.

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  24. If the consumers are also "paying" for the subsidies in various way (directly or in poorer health incomes) then that sounds like zero-sum. Except that fossil fuel companies get to compete unfairly against other energy sources. NZ is a place where subsidies are a dirty word for governments of either right or left. Renewable compete easily against FF in such a market.

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  25. #24 - Scaddenp - At least you are acknowledging that it is the consumer that is receiving the subsidy, not the fossil fuel companies.

    Whether the fossil fuel should be assessed an additional tax to compensate for the externalities, which would be passed on to the consumers is a different subject.  Just pointing out who is actually the beneficiary of these subsidies.

    #23 - Nigel - Not sure where to how to respond to your response.  I simply commented on why the consumer is the beneficiary of these subsidies, not the FF companies.  There is no additional payment to the FF in excess of the revenue from the sale of the product.  There may or may not be merit to assessing costs to the FF companies for the externalities.  If such a cost is assessed, then those costs will be passed through to the consumers in the form of higher prices.  In either case. the consumer pays those costs on the front end or the back end.  Its just not a subsidy to the FF.  

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  26. At least you are acknowledging that it is the consumer that is receiving the subsidy, not the fossil fuel companies.

    No, even if you established (which you have not), that subsidy is transferred, I was pointing out that no net benefit is established for consumer. You so far seem to be employing convoluted logic in defense of subsidies for reasons I cannot fathom.

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  27. I take exception to the "distant 3rd reason" for improved life expectancy being "health care." I have lived on 3 continents and an island, and been in this world for over 50 years. That gave me the opportunity to be vaccinated against small pox, as well as a host of other diseases more commonly immunized against in the Western World. 

    I would consider public health to include "health care" as it may be understood by Tom 13. I certainly would argue that, in Africa, immunizations and antibiotics are among the very top reasons for increased health expectancy, more so than diet and sanitation. I had a discussion on this very site with a vaccine skeptic, in which I showed that countries that had experienced virtually no improvement in sanitation still benefited from disease eradication with appropriate vaccination campaigns.

    Worldwide, life expectancy has increased more from 1950 to the present than it has between 1900 and 1950. I think it suggests also that public health, and its newer tools has played a large role. The major factor in increased health expectancy is the tremendous decrease in infant mortality that has happened across the World. Even in the middle ages in Europe, those who managed to live to age 20 had a life expectancy of up to 60 depending on the period considered (the plague took it down a few notches).

    I happen to work in critical care, and the immense majority of the patients I see would die in short order without antibiotics. I argue that the enormous increase in world population we saw since 1950 owes more to vaccines and antibiotics than possibly any other factor, including diet. The industrialization of agriculture has, among other things, made possible an epidemic of type2 diabetes, that is now on its way to become global.

    Nonetheless, Tom13's argument almost sounds as suggesting that, because some improvements to our condition were accomplished because of fossil fuels, we should be thankful to them by not phasing them out. This would of course be a completely ridiculous argument. Improvements were made because of fossil fuels. There are now alternative that are not perfect but better and fossil fuels are not a sustainable option by any means. They remain economically attractive only because their full cost is not attached to their consumer price. They must be phased out as quickly as possible to prevent increased cumulative negative effects, some of which have already materialized and are bound to get worse even if we were to phase them out now. There is no rational argument to prevent or delay fossil fuel phase out.

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  28. Tom13 @125

    "Not sure where to how to respond to your response. I simply commented on why the consumer is the beneficiary of these subsidies, not the FF companies. There is no additional payment to the FF in excess of the revenue from the sale of the product."

    Can you please provide some proof of this? A quick look at "energy subsidies" on wikipedia indicates energy companies appear to be in direct recept of payments from the tax payer over and above revenue. In 2013 fossil fuel companies received 3.2 billion in direct subsidies and 0.5 billion for research and development.

    I understand some form of tax rebate system also operates. Has this replaced direct subsidies? However while this is not a payment as such, it deprives the tax payer of money that could be spent elsewhere. It is "effectively" still a cost on the public purse and a payment to the fossil fuel company by offsetting their tax bill. So fossil fuel companies benefit and the consumer doesn't benefit.

    If you are talking about fossil fuel prices being kept "artificially low", then that is a separate additional form of subsidy.  Yes the consumer benefits and producers don't benefit. However such schemes are silly schemes as I discussed above.

    Its very hard deciphering what your posts mean.

    "There may or may not be merit to assessing costs to the FF companies for the externalities. If such a cost is assessed, then those costs will be passed through to the consumers in the form of higher prices. In either case. the consumer pays those costs on the front end or the back end. Its just not a subsidy to the FF. "

    There is plenty of merit. We have already established that, and you have given me no information to make me change my mind. 

    And only some of the costs would be passed on to consumers as I have already explained. Any carbon tax, or cap and trade scheme, or rule imposed on fossil fuels companies (and any other company) will force them to consider innovating, reducing their emissions, or branching into renewable energy etc. Passing on costs is not easy and could loose them business, so they will consider other options first.  If they still decide to try to pass some costs on, the price signal will make consumers reduce reliance on fossil fuels and this is a good outcome.

    However a carbon tax on petrol at the pump might required as well. This wont directly hurt producers as much, and the revenue could be returned to the motorist or put into subsidising electric cars etc. It seems a bit more practical to me. Of course its worth considering having both schemes.

    I never claimed an externality it was a subsidy to the fossil fuel producer. We are clearly talking different things. Thank.s for the civil discussion.

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  29. "Life expectancy increase dramatically from the early 1900's until today for 3 primary reasons, improvements in sanitation, massive leaps in crop yields due primarily from the shift to mechanized farming due in part from the availability of fossil fuels, and a distant third reason is the improvements in health care."

    Nonsense. No sources given. I agree with comments at 27. The principal reasons are medical advances, antibiotics, sanitation, hygene, education and housing as below. Crop yields would be a secondary reason,  and fossil fuels in last place.

    www.nature.com/scitable/content/life-expectancy-around-the-world-has-increased-19786

    Who wants to live forever? - Why are people living longer?

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    Moderator Response:

    [BW] Edited the 2nd link as it was breaking the page format. Please use the "Insert" tab of the comments box to properly embed links. Thanks!

  30. While the life expectancy argument is suspect, it is undoubtedly true that fossil fuels have benefited the western world in particular over the last two hundred years.

    It does not follow however that they should be subsidized or even used rather than alternatives. Should horse-breeding and lively stables been subsidized and protected when petroleum arrived because horses had undoubtly benefited those that used them for thousands of years?

    One major problem with climate change is that benefits are largely to the more developed nations whereas vunerability to climate change is highest for those that have used them least.

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  31. Tom13 - you need to provide some references to support many of your assertions. It is very unclear what is informing your argument.

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