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Jun. 27 2010 - 5:52 pm | 269 views | 0 recommendations | 5 comments

Unpublished G-20 Report: Fossil fuel subsidies cost the world $557 billion

Old Gas Pump

G-20 tries to hurry fossil fuels to antique status. Image via Wikipedia

World governments undermine themselves and their nations’ infrastructure and cost the global economy half a trillion dollars each year by subsizing the oil and coal industries, according to a scathing report–still unpublished–that ministers from the G-20 nations received in Toronto this weekend.

The White House released a brief but colorful summary of the report this afternoon:

Their report has found that fossil fuel subsidies displace important public investments and drain government finances, worsen balance of payments, lead to underinvestment in infrastructure, and can contribute to energy shortages.

The report estimates that fossil fuel consumption subsidies cost the global economy $557 billion in 2008, and unless eliminated can be expected to impose similar costs in the future. Additionally, the report found that subsidies do not provide meaningful, widespread benefits to low-income households, and that other types of targeted support for low-income families serve as a more effective social safety net.

The report was prepared at the request of ministers of the 20 largest economies by the International Energy Agency (IEA), the Organization of Petroleum Exporting Countries (OPEC), the Organization for Economic Cooperation and Development (OECD), and the World Bank.

Barack Obama may not have been able to plug BP’s oil geyser in the Gulf or pass a climate bill through the sphincter of the Senate, but he’s continued an effort to pull the plush rug out from under the oil industry that the world’s government’s have obligingly provided for decades.

On Sunday the G-20 nations meeting in Toronto reaffirmed a 2009 pledge to phase out fossil-fuel studies, using toughened language that describes those oil and coal company perks as “inefficient fossil fuel subsidies that encourage wasteful consumption.”

On Friday, India announced it would deregulate the price of gasoline and raise the price of diesel, kerosene, and liquid petroleum gas. Mexico has also begun phasing out motor-vehicle subsidies.

Obama began an effort to roll back U.S. subsidies for fossil fuels almost immediately after taking office. His 2009 federal budget eliminated subsidies worth $12.7 billion during Obama’s first term and an estimated $31.5 billion over the decade. The budget implemented an excise tax that restored royalty revenues that had been omitted from leases on off-shore drilling sites in the Gulf of Mexico.

Congress restored those subsidies, and Obama rolled them back again in his budget proposal for 2011.

Exxon-Mobile Corp. earned $1,300 per second in 2007, setting a record for American companies with its $40.6 billion profit that year. In 2008, it broke the record, reaching $45.2 billion. (BP, for contrast, earned a profit of $13 billion last year.) Those numbers followed a series of record years for the industry, 2001-2006, during which oil companies accumulated $120 billion in what the Consumer Federation of America called “excess profits.”

At the same time, the oil industry enjoyed tax cuts, deductions, and exemptions from royalties owed the American public that were worth $2-3 billion per year.


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  1. collapse expand

    The G20 crooks want to steal the $557 billion themselves and stuff it in their private offshore accounts….

  2. collapse expand

    The subsidy is not as crazy as it looks, given that “cheap energy” is one of the best economic boosters you can have.

    You can also call it a subsidy of car travel (as opposed to bike, mass transit, etc) to have good, wide, smooth roads and interchanges that can handle 50,000 vehicles per day on major city streets.

    But who can come out against “good roads”?

    Still, the sheer size of the direct subsidy is shocking. With a bit of wikipedia help, I just added up that the value of the oil consumed every year is about $2500B/year, coal about $700B/year, natural gas around $650B. All told, just under $4 trillion, so the subsidy is reducing overall consumer spending on fossil by around 14%.

    • collapse expand

      I can come out against good roads, Roy. The easier it is to drive, the less likely people are to take buses and trains. We never put each American in her own car because it made sense. We put each American in her own car because it sold cars and it sold gasoline and fueled economic growth in the mid- and early 20th Century. And now we’re in a hell of a fix. Not only is the planet overheating from all that carbon we’re emitting, but massive cities have been designed with automobile dependency built in, and obviously it has become increasingly risky to go into deeper and deeper water in search of oil. Bad roads would be a good thing. Fewer roads even better. Thank you for your comment, which I’m sure most people will find more sensible than mine.

      In response to another comment. See in context »
  3. collapse expand

    One need only visit Paris, where seemingly half the world’s cultural treasures are less than 30 minutes apart–walk, Metro/RER/bus, walk–to know that we have a choice between subsidizing automobile dependency and subsidizing far better means of transportation. However, it isn’t easy in the US, since we’ve been building sprawl instead of compact urban form since the end of WWII.

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    Environmental reporting recruited me 25 years ago—on my first day as a reporter for my college newspaper, when I discovered my college was discarding radioactive waste in the regular city trash. Since then I've written hard news for dailies, including the Arizona Republic, and slanty news for alternative weeklies, including Newcity. I've written a column for New Times, stories on the Web for Forecast Earth, essays for PEN International and other magazines. I lived in an idyllic California village nestled among volcanoes and vineyards until my batteries were full of sunshine, and then I returned to my origins on the South Side of Chicago, where hope persists with no illusions about the struggle ahead. I cross the asphalt jungle by bicycle and el, mostly to get to the University of Chicago, where I teach journalism. But what matters more than any of this is a lifelong love for the natural world. We are all born with it, I believe, but some turn away.

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