The Worldwatch Institute has reported that the subsidies for fossil fuel and renewable energy are increasing. The value of fossil fuel subsidies in 2012 is estimated to be between $775 billion and $1 trillion, while the value of renewable energy subsidies were $66 billion in 2010. The total subsidies for renewable energy are higher per kWh though they are lower in terms of value.
Based on energy produced in 2009, the fossil fuel subsidies were estimated between 0.1-0.7¢ per kWh, while the renewable energy subsidies were estimated between 1.7¢ and 15¢ per kWh.
Hidden costs are involved in consumption and production of fossil fuels. These fuels affect human health and environment and also lead to depletion of resources. According to the U.S. National Academy of Sciences, fossil fuel subsidies are costing $120 billion in terms of pollution and associated health care costs annually in the U.S. These hidden costs are not part of the price of the fossil fuel being sold. Taxpayers bear these costs. The society seems to be lessening the cost of killing thousands of people with pollutants released from burning of fossil fuels.
Decarbonizing the global energy system can be achieved by shifting government support to renewables from fossil fuels. This will lead to economic growth, reduction in greenhouse gas emissions and reduction of energy import.
The report highlights that the estimated global production subsidies are $100 billion annually, while the subsidies in consumption are around $675 billion. The global consumption of energy will reduce by 3.9% if the subsidies for fossil fuel are phased out by 2020, according to the International Energy Agency (IEA). The demand for coal will reduce by 230 million tons, natural gas by 330 billion m3, and oil by 3.7 million barrels/day. This will lead to CO2 reduction of 4.7% by 2020.
G20 countries have not taken significant steps in their pledge to reduce "inefficient fossil fuel subsidies." While arguments say that subsidies will affect the poor, IEA’s survey revealed that only around 11% of the subsidies reach the poorest population.
The report has been prepared by the Climate and Energy team at the Worldwatch Institute.
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