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Page added on May 19, 2015
The ‘Shocking’ Cost of Letting Companies Pollute for Free
“Energy subsidy,” as the phrase is tossed around Washington, typically refers to any financial help the government gives to producers of oil, wind, or other sectors of the energy industry.
But there’s another way to consider energy subsidies that takes a bigger picture and conceives of all manner of help—financial or otherwise—as a subsidy. In that context, letting companies pollute for free, when that pollution carries a real social cost, can be thought of as a subsidy.
That’s how researchers at the International Monetary Fund describe energy subsidies in a sobering new paper that puts a comprehensive price tag on global aid to the energy industry. The price tag, which IMF officials describe as “shocking,” is a big one: This year, the report estimates, fossil fuels are being subsidized to the tune of $5.3 trillion, or 6.5 percent of global gross domestic product.
The report breaks energy subsidies into two main classes. The first kind, which the IMF has called “pre-tax subsidies,” includes the discounts that allow consumers worldwide to buy energy below what it costs to supply. These subsidies amounted to about 0.7 percent of world GDP in 2013. They’re projected to fall to 0.4 percent of GDP this year, or $333 billion, mostly because of lower energy prices.
The second category is called “post-tax subsidies.” Why “post-tax”? (Presumably not just to be opaque.) This sum is driven by a hypothetical energy tax that includes several factors—global warming potential, air pollution, traffic accidents, and the other side effects of carbon civilization. The authors translated the environmental harm of fuels into this dollar figure and folded it into energy prices. The IMF researchers see a steady rise in such subsidies, from $4.2 trillion in 2011, to $4.9 trillion in 2013, and on to a projected $5.3 trillion this year.
Far and away, the heaviest contributor to each energy source’s “post-tax subsidies” is its environmental impact, according to the study. This chart breaks down, by fuel, the components of the post-tax subsidies in 2013 data. They include the entire first category (pre-tax subsidies), and the environmental impacts such as not paying for global warming, air pollution, and smaller factors. Coal’s outsized pollution makes its combined financial and environmental subsidies the costliest of all the energy sources.
The elimination of all this direct and tacit support to the industry would free up resources that could be used productively elsewhere in the economy. Killing subsidies in 2013 would have yielded $3 trillion in global revenue in 2013, the authors found. That’s more than governments collect from corporate income tax. Killing them this year would increase governments’ revenue by $2.9 trillion and cut CO2 pollution by 20 percent.
If energy prices were to reflect their harm to the planet, the authors wrote, we’d probably use less fossil fuel. Not to mention, they note, that fewer people would die of air-pollution related causes, particularly in the coal-heavy developing world.
The biggest subsidizers are the usual suspects: China, $2.3 trillion; the U.S., $699 billion; Russia, $335 billion; and India, $277 billion.
The study isn’t a policy road map as much as an elucidation of a problem at the heart of resource economics. Energy prices aren’t particularly efficient if the air we breathe and the climate we live in mean anything.
There are attempts to rid the books of subsidies, but they’ve rarely made progress. For example, Republicans in the House of Representatives introduced a bill at the end of April that would eliminate the temporary tax break being given to wind-powered electricity generators. Beyond that measure, there’s probably little immediate threat to energy subsidies worldwide.
15 Comments on "The ‘Shocking’ Cost of Letting Companies Pollute for Free"
apneaman on Tue, 19th May 2015 1:57 pm
The air is dark and asthma is deadly along the Mexico border
https://www.revealnews.org/article/the-air-is-dark-and-asthma-is-deadly-along-the-mexico-border/
apneaman on Tue, 19th May 2015 2:00 pm
Air pollution increases at Pennsylvania’s natural gas sites
“Sulfur dioxide emissions jumped 57 percent from 2012 to 2013 at the state’s natural gas production sites, according to data released today by the Department of Environmental Protection. Sulfur dioxide contributes to acid rain, and causes respiratory problems including asthma. Other air pollutants that contribute to public health impacts also increased. These jumps in emissions coincide with the number of well sites reporting.”
http://stateimpact.npr.org/pennsylvania/2015/04/20/air-pollution-increases-at-pennsylvanias-natural-gas-sites/
rockman on Tue, 19th May 2015 2:17 pm
Yes: all industrial activity creates pollution to some degree. And there’s nothing wrong with making all those companies pay something for the pollution generation. And that because, if it’s done across the board to all the industries in a particular sector, such as oil/NG development, that cost will either be passed on to the consumer. Or it will eliminate some portion of that industry which means less production and thus greater competition for the product and thus higher prices.
So in the end the consumers pay the full cost of all industrial activity or they do without that activity they don’t pay for. No industry is going to function very long if it’s losing money in the process. If the folks in PA don’t want increased air pollution from drilling ops…no problem…ban all drilling. Problem eliminated. Along with the jobs, tax revenues and local energy supplies available. Either way the consumers in PA will pay the freight.
On a personal note the Rockman is all for taxing as much of his completion out of business as possible. He wouldn’t need a penny of subsidies given how much he would be able to sell his oil/NG for if the majority of US drilling were curtailed.
GregT on Tue, 19th May 2015 3:49 pm
We don’t let companies pollute for free. We pay them to pollute…….
apneaman on Tue, 19th May 2015 5:05 pm
In the end we will all become externalities – simply too much pollution for natural systems to handle.
Huge Spike in Neurological Diseases in Japan After Fukushima — 600% Rise in Disorders Among Evacuees
http://www.globalresearch.ca/huge-spike-in-neurological-diseases-after-fukushima-600-rise-in-disorders-among-evacuees/5450580?utm_content=buffer4a736&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer
Apneaman on Tue, 19th May 2015 8:36 pm
The beat goes on & it’s getting faster.
……………………………….
About 21,000 gallons of oil leaked off Santa Barbara County beaches
http://www.latimes.com/local/lanow/la-me-ln-pipeline-santa-barbara-coast-20150519-story.html
Speculawyer on Tue, 19th May 2015 9:03 pm
But some pollute more than others. At this point, we should really walk away from coal. We don’t need for electricity generation. It is much too dirty.
Northwest Resident on Wed, 20th May 2015 1:29 am
Speaking of “shocking costs”, how about the cost of letting wall street gamers continuously roll their money over into ever higher bets, financing their lucrative trades with zero percent no-cost debt, while the 99.9% sink ever further into the financial doldrums?
Two articles explain how this Wall Street casino is about to come to an end, and offer clues on just how bad it will be when the casino finally goes bust:
http://davidstockmanscontracorner.com/chop-chop-choppin-at-the-feds-front-door/
http://wolfstreet.com/2015/05/20/lawrence-lindsey-fed-has-no-credibility-about-ability-to-stay-on-top-of-ticking-monetary-bomb/
But what neither of these two articles mention is that lurking behind the curtain lies the base cause of all that has gone haywire with our stock markets and our entire global economy — peak oil and its merry band of dire consequences.
Lack of cheap and plentiful high-energy oil has distorted our economies, has driven the Fed and other governments to take extreme measures including financial manipulation and desperate central bank policies, while at the same time pumping out a steady stream of propaganda and lies to keep the masses pacified and ignorant of the true plight humanity now faces.
The Fed can’t raise interest rates. The churning stock market and wealth transfer will continue until the bitter end, which will be soon enough.
John Kintree on Wed, 20th May 2015 9:19 am
One of the principles of the Earth Charter is to internalize the full environmental and social costs of goods and services into the selling price.
If this is not enacted into law some other way, the last resort is to do it through a global referendum.
penury on Wed, 20th May 2015 12:13 pm
If the “costs” were money it might be possible to control,at least a small amount of the problem. However IMHO the problem is too many consumers. There is no way to mitigate the costs associated with the consumption of the planet by pretending that the thing we call money in any way compensates for the environmental or social costs incurred. The greed of man will not allow for the reduction in utilization of any and all resources in the planet. The cry is always “give us more, we want new, modern time and labor saving crap.We are humans we deserve everything and we want it free.
Apneaman on Wed, 20th May 2015 5:07 pm
Companies get plenty of help from our(?) respective governments They do own them after all. I have made the observation a number of times on how a majority of people only speak out at or near retirement – here is one more. It’s understandable since they are most often persecuted. Snowden, Manning, etc.
………………………………..
Steve Campana, Canadian biologist, ‘disgusted’ with government muzzling
Fisheries and Oceans Canada biologist speaks out only after retirement
http://www.cbc.ca/news/canada/nova-scotia/steve-campana-canadian-biologist-disgusted-with-government-muzzling-1.3078587?cmp=rss
Apneaman on Wed, 20th May 2015 5:15 pm
Also telling is the implied accusation “out only after retirement” at the end. This from the tax payer funded CBC. Isn’t truth telling supposes to be the medias job?
Canada – The True North Strong and Free?
Consumer fascist paradise. Nothing to be proud of here folks.
Davy on Wed, 20th May 2015 5:17 pm
Ape Man, what is your Native American background if I may ask. I have done extensive research on Native American history, spirituality, and customs.
Apneaman on Wed, 20th May 2015 5:54 pm
My European ancestors were Vikings and Cossacks, Davy. I’m a 6ft tall, stocky, blond haired, blue eyed Aryan poster boy. I guess it’s possible I have native in me. Only DNA testing would tell for certain.
Davy on Wed, 20th May 2015 6:14 pm
I am Prussian/German on Mom’s side and Czech/Moravian on Dad’s side. I am 6’1″, blond, blue eyed Aryan myself.
Here is one of Davy’s ancestral towns:
http://www.google.com/maps/place/Fr%C3%BDdek-M%C3%ADstek,+Czech+Republic/@49.6796939,18.3418303,12z/data=!3m1!4b1!4m2!3m1!1s0x4713f725179c0af5:0x400af0f66150440