Disproportionate subsidies for fossil fuel aid an industry that is the primary driver of climate change and hinder the growth of clean energy solutions.
Now is the time for a reduction in fossil fuels subsidies. The markets have adjusted to oil at a much higher price than they are right now, this means that removing fossil fuel subsidies could be done with less shock. Removing such subsidies would save the government money and drive up the price which would encourage efficiency and diminish demand.
Subsidies are useful to help new industries get off the ground. However, fossil
fuels are a mature industry while renewable energy is still very young.
As much as two trillion dollars each year is being poured into fossil fuel subsidies. The International Energy Association (IEA) says Fossil fuels get $550 billion a year in subsidies while the World Energy Outlook says that oil, coal and gas received more than four times the $120 billion paid out in subsidies for renewables. Others say fossil-fuel subsidies outpace renewable-energy subsidies by a factor of 6 to 1.
Whatever the exact number, with the world spiraling towards runaway climate change a policy shift needed to limit global warming. Reducing the subsidy gap is one of the cheapest ways to manage climate change as this would increase fuel efficiency and speed up the switch to cleaner energy.
The IEA singled out the Middle East as a region where fossil fuel subsidies are hampering renewables. It said 2 million barrels per day of oil are burned to generate power that could otherwise come from renewables, which would be competitive with unsubsidized oil.
“In Saudi Arabia, the additional upfront cost of a car twice as fuel efficient as the current average would at present take 16 years to recover through lower spending on fuel,” the IEA said. “This payback period would shrink to three years if gasoline were not subsidized.”
Even without a reduction in the Subsidy gap, renewables are growing and the transition away from fossil fuels is already underway. According to the IEA the share of renewables in power generation will rise to 37 percent in countries that are members of the Organization for Economic Cooperation and Development.
Increasing support for renewable and decreasing support for fossil fuels is essential if we are to succeed in staving off the worst impacts of climate change.