The Appalling Truth About Energy Subsidies

There’s nothing makes my blood boil more than to read reports about the international level of subsidies of the fossil fuel industries like this one in Bloomberg.

Fossil fuels are reaping $550 billion a year in subsidies and holding back investment in cleaner forms of energy, the International Energy Agency said.

Oil, coal and gas received more than four times the $120 billion paid out in incentives for renewables including wind, solar and biofuels, the Paris-based institution said today in its annual World Energy Outlook.

It makes you think that BP, ExxonMobil and Shell are receiving vast state handouts, doesn’t it? I’ve done a bit of sleuthing and it seems that nothing could be further from the truth. The map below from the IEA shows countries where the state pays energy subsides to its citizens, many who will be poor!

The dark red on the map are the countries paying the highest FF consumption subsidies and is of course more or less a map of OPEC. The grey are countries paying no energy consumption subsidies and covers the OECD + darkest Africa. I have not been able to get my hands on a copy of the IEA World Energy Outlook (yet) but this 2011 presentation on the IEA energy subsidies web page makes clear what the IEA are talking about when it comes to FF subsidies. They are subsidies paid to consumers to help them afford to pay for gasoline, diesel, electricity and natural gas that amounted to about $409 billion in 2010, $550 billion today. This has proven to be a problem for Egypt that is not nearly as energy rich as its north African neighbours. It is one thing providing indigenous energy at discounted rates (relative to international market prices) to the indigenous populations.  It is a totally different matter subsidising energy (and food) imports.

So, when it comes to fossil fuels, the Bloomberg article and the IEA are talking about consumer subsidies, paid by the State. In the case of OPEC, the main source of income that the State has is oil. So this is State oil companies subsidising consumers.

There is another flavour of alleged fossil fuel subsidies out there linked to oil companies charging exploration costs against tax. The oil companies pay a lot of tax, in the UK at a much higher rate than other companies, and rightly so. It is basic accounting practice in the OECD that companies deduct costs from income to define a profit and it is the profit that is taxed. Greens seem to want a different set of rules for the FF companies, presumably to try and drive them out of business.

This via email from Nate Hagens:

The report by Oil Change International is a complete distortion of facts. The authors have described as “subsidies” normal deductions of expenses and capital costs from revenues for calculation of taxable income. These are procedures which are followed in all fiscal systems in all countries for all forms of business and investment endeavors. Under normal definitions of “subsidy” the United States has no subsidies for the oil and gas industry which is why Obama has taken no steps to reduce them.

US subsidies for the oil and gas industry ranks with alligators in the sewers as a popular urban myth. To believe this reveals no knowledge of accounting and government tax rules or the authors are intentionally distorting reality for purposes of deceptive propaganda. Such persons or organizations and their opinions cannot be taken seriously.

Dr. Charles A. Kohlhaas

I could not find a definition for renewable energy subsidies on the IEA web site but assume that these are mainly the consumer paid subsidies that go into the pockets of wealthy land owners in the UK or into community energy projects in Denmark. In the USA, these subsidies end up in the pocket of Warren Buffet:

“I will do anything that is basically covered by the law to reduce Berkshire’s tax rate,” Buffet told an audience in Omaha, Nebraska recently. “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.”

The renewables subsidies are paid to producers by the consumers and are the exact opposite of the consumer subsidies described above. These are apples and oranges and it is appalling that Bloomberg and the IEA (?) do not understand the deception of conflating the two.

I want to conclude by reflecting on the levels of these alleged subsidies compared with the energy that is produced. The consumption figures below (million tonnes oil equivalent – Mtoe) are for 2013 taken from the 2014 BP Statistical Review:

Oil 4185
Gas 3020
Coal 3827
FF total 11032

New renewables 279

FF consumption subsidy = $550 billion
Renewables production subsidy = $120 billion

Doing the sums:

FF $51 consumption subsidy per toe
New renewables $430 production subsidy per toe

@ $80 / barrel 1 toe is priced at $586

We are comparing apples with oranges but normalising for energy production, the renewables subsidies are 8.4 times larger and amount to 94% of the value of the energy produced. This latter statistic is hard to believe, but if it is close to true, it suggests that new renewables are contributing virtually nothing to society.

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50 Responses to The Appalling Truth About Energy Subsidies

  1. Willem Post says:


    RE contributing virtually nothing? It is much worse than that.

    Here is an excerpt from this article.


    Worldwide Energy Generation: As a result of gross world product, GWP, growth, world energy generation increased from 16,174 TWh in 2002 to 23,127 TWh in 2013, an increase of 43.0% in 12 years, about 3%/yr over 12 years. Analysis of the data shows:

    – Near CO2-free, nuclear energy decreased from 16.5% in 2002 to 10.8% in 2013
    – Fossil increased from 65.0% to 67.3%

    – Hydro decreased from 16.7% to 16.4%
    – RE increased from 1.6% to 5.3%

    Worldwide RE Investments and RE Generation: The below, recently issued report presents an overview of worldwide RE investments from 2002 to 2013.

    As a result of RE build-out investments of about $1,700 billion from 2002 to 2013 (excluding mostly “socialized” investments for grid adequacy, capacity adequacy, etc., of about $400 billion not mentioned in the report), worldwide RE generation increased from 1.6% to 5.3%, a 3.8% addition, of which:

    – Wind increased from 0.3% to 2.7%
    – Biomass from 0.9% to 1.8%

    – Solar (PV + CSP) from 0.0% to 0.5%

    – Geo from 0.3% to 0.3%

    – Marine from 0% to 0%

    Thus, the total generation (excluding nuclear) of Hydro + RE increased from 16.7 + 1.6 = 18.3% in 2002 to 16.4 + 5.3 = 21.7% in 2013. The 3.8% addition of worldwide RE generation required investments of 1.7 + 0.4 = $2.1 TRILLION from 2002 to 2013. The report data shows, the 12 – year trend of RE investments to reduce fossil energy generation and replace it with renewable energy generation would take many decades.

    According to the report, worldwide RE investments were distributed as follows:




    Asia, Oceania………..….25.3………..29.5………..…43.3 (incl. Japan, Australia, etc.)

    World Total……………279.0……….250.0………..214.0

    From the above table, we can make the following observations:

    – Worldwide RE investment has declined in the last 2 years, primarily in Europe.
    – RE investment in Europe has collapsed, largely due to budget constraints resulting from about 12% unemployment, near-zero economic growth, and higher energy prices due to expensive RE policies.
    – China became the largest RE investor, only because of RE investment backsliding by Europe and the US. China is catching up on RE investments, i.e., backsliding is not an option. Whereas China’s per capita GDP is low, its GDP is greater than of the US, on a purchasing power parity, PPP, basis.
    – Other countries account for about 14% of the worldwide RE investment, which is of minor relevance regarding GW impact.,_2002-2013_(%25).png

    Worldwide CO2 Emission Reduction Due to RE Investments: The $2.1 trillion of non-hydro RE investments over 12 years produced 1,234 TWh of electricity in 2013, about 3.8% of total energy generation. The addition of RE to the grid primarily displaces oil, gas and coal energy. If we generously assume all of the displaced energy in 2013 had CO2 emissions of about 0.7 kg/kWh, or 0.7 mmt/TWh, then, in 2013, the RE CO2 emission reduction would have been 0.7 x 1,234 mmt, or 0.7 x 100 x 1,234/36100 = 2.39%.

    The 2.39% significantly overstates, because: 1) biomass, while claimed to be CO2-neutral, is in fact not so; 2) gas energy has CO2 emissions of about 0.55 kg/kWh; 3) balancing generating plants are operated less efficiently, i.e., emit more CO2/kWh; 4) the RE build-outs had embedded CO2 emissions; 5) most of the RE build-outs have short, less than 25 year useful service lives and need to be partially replaced causing additional embedded CO2 emissions.

    NOTE: The increase of world CO2 emissions of 706 mmt in 2013 occurred despite the (overstated) reduction of 0.7 x 1,234 = 864 mmt due to RE in 2013.

    US CO2 Emission Reduction due to RE Investments and Other Factors: For comparison, according to the EIA, the US 2013 CO2 emissions due to energy generation would have been 2,817 mmt, based on the 2005 trend, but lower demand reduced it by 402 mmt, using gas instead of coal reduced it by 212 mmt, and RE reduced it by 150 mmt, for a net CO2 emissions of 2,053 mmt.

    According to the EIA, the US 2013 RE generation, in TWh, from wind 167.665, solar 9.252, geothermal 16.517, biomass 59.894, totaled 253.328 TWh.
    Thus, the US 2013 CO2 emission reduction due to RE was 150 mmt/253.328 TWh = 0.592 kg/kWh.

    The US 2013 net electrical generation was 4,058 TWh, and energy generation-related CO2 emissions were 2053 mmt, for a US grid CO2 emissions intensity of 2053/4058 = 0.506 kg/kWh.

    The EIA appears to assume the displaced energy due to RE has a greater CO2 emission intensity than the US grid. It is not clear, if the EIA took into account any factors that lead to the above-mentioned overstatement of CO2 emission reduction.

  2. Les Johnson says:

    Its worse than we thought (TM Climate Science)

    Wind and solar get the most subisdies, for the least production.

    Solar gets 1212 times the subsidies per megawatt hour, than fossil fuels.

    Wind gets 88 times fossil fuels, per megawatt hour.

    The facts come in a 2011 report from Mr. Obama’s own Department of Energy. The report—””Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2010″”—identifies $37.16 billion in federal subsidies. These include special tax breaks, loans and loan guarantees, research and development, home heating assistance, conservation programs, and so on.

    • Willem Post says:


      For your info.


      The US EIA 2011 report—”Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2010″—identifies $37.16 billion in federal subsidies. These include special tax breaks, loans and loan guarantees, research and development, home heating assistance, conservation programs, etc. In addition, there are indirect federal subsidies, plus state and local subsidies.

      Subsidizing RE is expensive, $/MWh, as shown in the table of direct subsidies for energy generation only. As RE generation increases, these subsidy amounts will increase to unsustainable levels.

      Direct Subsidy………$million…….$/MWh

      Oil and Gas……………..654…………..0.64
      Wind……………………4,986…………56.29; incl. $23/MWh PTC; 5 yr-acc. depreciation; capital grants, etc.

  3. John Weber says:

    if you consider the energy, resources and machinery necessary to make the solar and wind energy capturing devices and the fossil fuel supply system and massive industrial infrastructure underwriting these devices, they are not green, sustainable or renewable. This looks at the rebar and concrete for the base of 2.5 megawatt turbine.

  4. Euan Mearns says:

    This is a press release from Oil and Gas UK (the industry representative) in response to the subsidies claims. Note that the UK oil industry pays corporation tax at a rate between 62 and 81% – way way higher than any other industry.

    Friday 14 November 2014
    Offshore oil and gas does not receive any government subsidies – and is subject to highest corporate taxes in UK The production of offshore oil and gas is subject to the highest corporate taxes in the UK, ranging from 62 to 81 per cent. Tailored tax allowances, introduced by this and the previous Government, have helped to boost flagging investment in the UK’s oil and gas fields which, at the current headline rates of tax, would not have been developed. Oil and gas left in the ground pay no taxes, support no jobs, undermine energy security and worsen the balance of payments.

    Malcolm Webb, Oil & Gas UK’s chief executive commented:

    “First and foremost, it is disingenuous and misleading to suggest that the offshore oil and gas industry has been a recipient of subsidies. Unlike other sectors of the energy industry, offshore oil and gas does not receive any government subsidies, and it is taxed on profits at up to 81 per cent in the pound. In fact, it pays more tax into the Exchequer than any other corporate sector and has paid over £330 billion to the country in production taxes paid to date. The Exchequer has further benefitted from the Income Tax and National Insurance Contributions paid by the 450,000 people in the UK whose jobs are supported by the industry.

    “To describe tax allowances on capital investment as subsidies is to imply capital expenditure should be taxed. It is extremely worrying that this notion is being shared by media, especially at a time when this country is in such serious need of capital investment and the economic growth which it brings.

    “In the past three years, the economic activity of this industry has amounted to between 2.5 and 3 per cent of GDP, whereas the taxes paid on the profits from production have amounted to between 15 and 25 per cent of all corporation taxes received by the Exchequer, almost an order of magnitude larger.

    “With up to 24 billion barrels still to be recovered, there should be a strong future for the North Sea. To ensure the sector remains a driving force in Britain’s economy, the UK Continental Shelf must remain an attractive and competitive destination for investment. For that to happen, as a representative of over 500 companies from super majors to SMEs, Oil & Gas UK believes that the fiscal regime needs to recognise the requirements of a mature and relatively high cost hydrocarbon province, including appropriate allowances for capital expenditure in marginal investments. This is not a request for subsidy – relieving costs – but economic good sense.”

    The £330 billion paid are in the form of corporate taxes levied on profits, after all costs have been paid by the industry. This industry receives limited allowances from 62 to 81 per cent taxes on profits for marginal investments, with the rate of tax never going below 30 per cent, versus 21 per cent for the majority of British businesses. This then reverts to 62/81 per cent tax rate once the allowance has been used.

    In addition, the oil and gas provides some 70 per cent of the UK’s total primary energy, 50 per cent of which comes from indigenous sources. It is a figure which, according to the Department of Energy, will remain unchanged at least until 2030. This industry will remain hugely important for the country for many years to come, not only though it’s economic contribution and through providing a secure energy supply, but by supporting British jobs.

    • Willem Post says:


      It is best not to focus on tax RATES, but instead focus on the percent of profits actually paid in taxes.

      Also, focus on how these before tax profits can be made to look small for tax purposes.

  5. mark4asp says:

    Good morning Euan. The pro-renewables crowd have a different definition of subsidy to most people.
    1. pro-REs don’t offset taxes paid on fossil fuel against ‘subsidies’. For example in UK, we tax petroleum quite highly and have done so for a long time. First we apply fuel duty at about 55%. At the point of sale we also apply VAT at 20%. Some of the tax we pay is paid on the the cost of the tax we already paid!
    2. pro-REs regard taxes not paid (tax breaks) as subsidies. For example, a reduction in fuel duty or other tax to incentivise a marginal oil field becomes a subsidy in the eyes of the pro-renewables crowd.
    The only way these reports on fossil fuel subsidy can be understood is by looking into the fine detail.

  6. Jamie says:

    I feel you’re painting quite a simplistic view of the fossil fuel subsidies. They incur costs to society and the citizens of those countries pay for those subsidies every bit as much as the renewable subsidies.

    Let’s assume that these countries only subsidise their indigenously produced fuel (is that a valid assumption?). This means that the subsidy represents revenue foregone by the state which creates an implicit burden on the citizenry as this revenue could have been put into healthcare, social support, housing, education, income tax reduction or any number of measures that can help to alleviate poverty.

    Instead these countries have chosen to subsidise fuel, which is great for the wealthy sections of society who can afford a vehicle, but not good for the poorer sections (although of course cheaper public transport is a benefit). Mostly it benefits the more affluent in that society though.

    If any countries do in fact subsidise imported fuel purchased on the open market as well then that becomes an explicit burden on the citizens. I don’t know if that happens but e.g. isn’t Venezuela’s oil mostly suited for diesel but their cars are petrol-fuelled monsters so maybe it does? (this is another significant issue with these fossil fuel subsidies – in many cases they go hand in hand with horrendously inefficient vehicles so it’s not even conferring that much of an economic benefit).

    So I wouldn’t paint these subsidies as such wonderful tools in the fight against poverty as you make out and I also don’t believe that they are as different to the renewable subsidies as you make out: subsidies always end up being paid for by the citizenry in some way or other.

    • Euan Mearns says:

      Jamie, I traded in my gas guzzling Volvo 850 estate for a “Green” Volvo V50 estate – very fuel efficient and it attracts tax benefits in the UK. Electric cars attract even higher tax breaks in the UK – but use electricity made mainly from gas and coal. If you are unable to distinguish between this and government lining the pocket of BP and Shell then there is nothing I can do to help.

      In OPEC, it is entirely up to the governments of those countries to decide how to distribute their revenues. But again, if you cannot clearly see the difference between this and OECD governments lining the pockets of BP and Shell as portrayed in the Green press, then there is nothing I can do to help.

      Iam not portraying developing world consumer energy subsidies as wonderful but simply drawing attention to the different flavours of subsidy out there and how the Green press distorts the information. I presume from your attitude that you would like to see cold weather fuel subsidies in the UK abolished.

      • Raff says:

        It is of course up to countries to decide how to tax and spend. Jamie was pointing out that the beneficiaries of price subsidies are the affluent not the poor. If countries want to help the poor, they do better with measures aimed directly at the poor, such as the bolsa familia in Brazil. It may well be that the subsidies are more about buying legitimacy in undemocratic countries than helping the poor. The cold weather fuel subsidy in the UK is of the same sort as those in OPEC countries – it goes to thousands of people who don’t need it (my mother and her friends give it to charity). It would be better concentrated on the smaller number who actually need it.

        On subsidy to oil/gas/coal/nuclear/renewables there is clearly a subsidy when arrangements are put in place for one industry that are not available to others. For example insurance against disaster for nuclear. Or more prosaically, special financing arrangements that can be used for pipeline construction in the US. Or paying for road repairs caused by heavy vehicle use in fracking operations, or exempting fracking from certain environmental regulations, or not insisting on exploration company payments into escrow funds to pay for capping of abandoned wells when companies fold, and so on. Add in the cost of oil-related wars and the numbers explode.

        And then remember the historic and existing subsidies related to coal. I’m sure you would have been equally furious about those subsidies in the UK if you had been blogging in the 70’s 😉

        • Euan Mearns says:

          Raff, you don’t seem to have understood this post. I detect a pattern emerging.

          • Raff says:

            A pattern requires something to happen at least twice. So where’s the other time(s) I have supposedly misunderstood? And what makes you think I misunderstood?

            You said that the “state pays energy subsides to its citizens, many who will be poor!”. Jamie pointed out that energy subsidies go predominantly to the affluent. I responded to your negative comments on his thoughts. Did I misunderstand there?

            You also commented that Jamie might want “cold weather fuel subsidies in the UK abolished”. I found the question a bit petulant and commented on the nature of these payments. Did I misunderstand there?

            You said in addition that you were “simply drawing attention to the different flavours of subsidy out there”. But with such an intention it is odd that you forgot to mention the variety of subsidies that don’t involve direct payments but instead entail avoided costs. I was sure that was an oversight on your part, as they are of significant value (in the case of nuclear they are of go/no-go size). So I identified a few that you had forgotten. Did I misunderstand there?

            And I added a bit of historic context in the form of a reminder that fossil fuels have been subsidised more in the past. Ok I suggested you might have been furious about such subsidies – the furious bit is clearly wrong as you are currently furious not about subsidy per se, but about what you consider non-subsidies being classed as subsidies (and I tend to agree with you that they are not). But there was a smiley there – it was a joke.

            Your last point about the subsidy per Mtoe I didn’t comment on because I don’t have any idea whether it is correct, whether it covers lifetime energy production by the renewables or just faceplate. Like I say I have no idea, it might be correct.

            So overall, I think I added something that was missing – greater discussion of existing subsidies. Tell me what I misunderstood.

          • It is useless to feed the troll

  7. Jacob says:

    Another thing worth mentioning in this context is the gasoline tax. Gas (petrol, gasoil) is taxed at about 100% in Europe. The gasoline tax in the US is much lower, but it exists there too.This can be considered as a kind of carbon tax, already imposed on FF.

    • Euan Mearns says:

      Jacob, I never got around to the multiple layers of taxation on FF. What the population and politicians need to understand is that when they look around at their built environment that absolutely everything they see was built by FF (a little bit by nuclear and hydro) and that all the wealth and services flowing through our society comes from FF. Virtually all of it. Some of it in the way of multiple layers of taxation and the rest leveraged out of the work FFs do for us. The energy from FF is as important to our well-being as water and oxygen. The sooner society wakes up to that fact the better.

  8. Sam Taylor says:

    I suppose this all comes down to a fundamental lack of understanding of the role of energy in the economy by of a lot of people both in journalism and various pressure groups. It is the amount of human labour which we have been able to subsidise with work done by burning fossil fuels that is the real subsidy. Taxation and subsidies are just needless levels of abstraction when viewed through this prism.

    Of course, the issue we now face relates to the fact that as we move to lower quality fuel resources, externalities of various sorts are beginning to pile up and at some point the question is whether the cost of these externalities will be greater than the benefits provided by the work done by the fuels. Of course we’re currently heading down some slighly wrong-headed path wherby the solution to these externalities is, in some instances, expending even more energy (conservation programs, ccs, cleaning up after makondo) when it probably would have been cheaper overall if we simply hadn’t bothered doing anything in the first place.

  9. Dodgy Geezer says:

    …The oil companies pay a lot of tax, in the UK at a much higher rate than other companies, and rightly so…

    I wonder why the “…and rightly so..” was added? Is there some fundamental moral requirement to tax oil production more than other human activities?

    • Euan Mearns says:

      Yes – but its not a moral requirement. In most OECD countries it is the State that owns natural resources like oil and gas. And so it is natural for the State to recover an “appropriate” level of the windfall wealth on behalf of the people who have entrusted the State to take care of their well fare. This model is preferred in the OECD to state company ownership / operation of national assets. There are a wide range of other models for State participation. The main exception to this is the USA where the land owner also owns mineral rights with the exception of course of the off shore where there is federal ownership.

    • Euan Mearns says:

      Paul, I had a quick look into UK oil and gas taxation but gave up since it is extremely complex and varies from field to field and with time. The Oil and Gas UK press release that I have copied into this thread states that corporate tax rate for oil and gas cos is 62% to 81%. It really is preposterous when national institutional charities like the BBC start to claim that the highest tax sector of industry in this country is being subsidised.

  10. Olav says:

    About ff subsidies: If clima alarmists are right and urgent action is needed then apply a carbon tax equal to the cost of extracting CO2 from air and safely bury it. That is the ultimate level ff fuels should be carbon taxed to truly earn the label of beeing unsubsidized. That will crash our exonomy but in the end we will have to do it.

  11. stewgreen says:

    Saying renewables get much more subsidies than conventional fuels is still mis-representation.
    Bottom line – some energy sources PAY-IN – other energy sources TAKE-OUT in net terms of the public purse
    ..And in the West subsidies to fossil fuel corps are effectively zero, all subsidies are concentrated in non-western countries which we have no control of.
    So talking of the West
    – Fossil fuels, hydro-power,& certain biomass PAY-IN
    The various taxes they pay in, minus whatever tax breaks, are positive ..If the corps don’t sell their product for more than their costs they go bust

    – Magic energy like wind power, solar PV, wave power TAKE-OUT
    The subsidies from government and/or subsidies from obligations imposed on the consumer suppliers are always bigger than the tax they will ever pay.
    They would not exist without subsidies..There was a reason why private companies never built them in the old days.
    – There is a fallacy that parity will be achieved in the future as conventional fuel prices will rise, but that ignores the laws of supplies and demand ie that Arabs will simply reduce the price rather than leave their fossil fuels unsold

    Nuclear is a complex issue Payer-in or taker-out ?
    On the whole it could be a net PAYer-IN as it’s indecisiveness about regulations which pushes up costs. Fissile material isn’t particularly dangerous and can be stored safely ..there is plenty of natural radiation already on the planet.

    Shush are not allowed to mention commercial fusion power.. If it comes on line, possibly as early as 2030 then those wind/solar gimmicks will just end up abandoned

    • Raff says:

      As I said upthread to Euan there is a variety of subsidy that doesn’t involve direct payments but instead entails avoided costs. There’s state backing (i.e. free insurance) against disaster for nuclear without which absolutely no nuclear plant would ever be built in democratic countries. And there are plenty of ways in which fossil fuel industry is supported, including special financing arrangements, paying for road repairs caused by heavy vehicle use in fracking operations, exempting fracking from certain environmental regulations, not insisting on exploration company payments into escrow funds to pay for capping of abandoned wells when companies fold, and so on. I dare say those in the industries could name many more. And if we start counting the implied subsidy due to oil-related wars or the health costs due to emissions the numbers explode.

      Euan forgot to mention these implied subsidies in his discussion of subsidy. And the historic subsidies of coal etc, which were also large – we shouldn’t forget those, should we?

      • Jacob says:

        Raff, be honest and truthful, and state the obvious: you support renewables whatever their cost might be. You support them at any price. You believe that it is the right thing to do, we have no other choice, and need to pay whatever it takes to have them installed. This is a plausible position.

        Don’t try mental acrobatics with funny accounting of “subsidies to FF” or “social costs of carbon”. Everything has a “social cost”. Even your being alive, you consumption of food, your traveling on vacation, your health care, have “social costs” (i.e. are “subsidized”…).

        The truth is simple: renewables (wind and sun) have high costs, compared to FF energy. You can’t mask this fact or argue it away. You can argue that we have no choice but to do it despite the high costs, and need to leave FF underground, to save the planet.

        You can’t reasonably argue that the costs are not high. (You also can’t reasonably argue that they are a feasible source for most of our energy needs, but that is another debate).

        So, forgive my sermon, but whenever I hear about “the social cost of carbon” (that you mention above) that sounds fishy to me.

        • Raff says:

          Jacob, sermons are fine – at least you didn’t call me a troll (as upthread). “at any price” is an exaggeration, but you are right that I support renewables. I also support conventional fuels. I use them every day and am grateful for what they make possible. I support nuclear too in principal.

          My concern is that articles like this one try to push the idea that only renewables are subsidised and that they are awfully more expensive than “FF energy”. That is a nice formulation because FF energy is of course cheap, but it is the exploration, extraction, burning and cleanup that have extra costs attached, some of which you would call “social” and hence ignorable.

          I actually hardly mentioned “social costs”. I mentioned liability insurance – if I want a contract with the UK government, even for something trivially desk bound, I need insurance cover for several million pounds. So is insurance a social cost, or a cost of doing business? If I’m excused buying insurance because there’s no way I could ever pay for it, what is that if not a subsidy?

          If in doing my contract for the government, the rules, which apply to everyone, say I have to capture any dangerous gasses or liquids I produce, that is going to cost me money, maybe a lot. Is that a social cost, or a cost of doing business? So if I get my pals in government to waive those rules for me, what is that if not a subsidy?

          From experience talking to anti-renewables people, neither Euan not stewgreen is likely to acknowledge these sort of subsidies. I really don’t know why. People like our friend above will call me a “troll” for daring to question the mantra “fossil fuels good, renewables bad”.

          It is a favourite attack of some that renewables are expensive and have pushed up the price of energy – just look at the rise in excess winter deaths, they say. What is that if not a “social cost”. Is this one that also sounds fishy to you (it should)? Yet if I mention that there are thought to be half a million early deaths annually in China due to air pollution, at least partly from coal? They will probably say that is a fishy social cost that can’t be discussed, or even more incredibly (on BH recently), that there no such thing as dirty coal.

          I’m all for honesty about the costs and benefits of various fuels and technologies. But make it a full and open debate.

          • Jacob says:

            You mix up a lot of themes, and that doesn’t contribute to clear thinking. Maybe nuclear is subsidized by getting free insurance, but we were comparing renewable subsidies to FF and not to nuclear. You also mention pollution – again – a different topic. The cost of clearing pollution is already included in the cost of coal electricity. Nobody gets (or should get) a pass on pollution, and renewables pollute too (in the production process), and this pollution was not cleaned and not included in the price of solar panels imported from China…

            But again – these are digressions.

            The fact is that renewables are heavily subsidized, and would not exist save for these subsidies. FF are not subsidized. You can claim that we need to pay whatever it takes to save the planet from perdition.
            You cannot claim (in good faith) that renewables are not more expensive than FF.

            I never understood why renewable advocates insist that they can compete, on price, with FF – it is glaringly obvious that this is not so, and easily provable. It is a frivolous try.

        • Jacob says:

          Of course, were not talking about “renewables at ANY price”, we’re talking about renewables at CURRENT prices.

          And, having such a wide and comprehensive approach, you sure favor including in renewable prices the price for backup power, grid enhancements, and the cost of balancing the intermittent supply.

          The main problem with renewables, though, isn’t their high price. It’s their uselessness. They produce little power, and at unpredictable intervals. They will never be able to provide more than a small part of our needs, and will always be parasitic upon the grid powered by other sources. In short: they’re next to useless.
          That applies to solar and wind.

          • Raff says:

            Jacob when you say, “Of course, were not talking about “renewables at ANY price””, I was just responding to your 11:15am “You support them at any price.”

            Of course it is best to consider all costs. Thats why I said I’m all for honesty about the costs and benefits of various fuels and technologies as long as it is a full and open debate. Include backup costs both for renewables and for conventionals, include grid costs, include pollution in China from rare metal refinement (always a favourite of antis) and pollution from tail pipes and smoke stacks, maybe include military action to secure supplies, whatever. But let’s not exclude certain costs that are very real just because they don’t entail direct payments. I don’t know whether such a calculation has ever been done or whether FF or renewables come out on top. I don’t know. Maybe FF
            would win.

            Maybe you can agree to a comparison like that. My expectation is that you will not – I’ve never met anyone in the anti-renewables camp who was prepared to admit that FF exploration and use has some costs that are not borne by the producer or user.

            I’m not pretending that renewables could have come this far without subsidy but it also clear that in some places and for some applications they are already cost competitive with FF. I expect those places and applications to increase – I imagine you don’t.

          • Jacob says:

            “I’ve never met anyone in the anti-renewables camp who was prepared to admit that FF exploration and use has some costs that are not borne by the producer or user.”

            Well, no more such indirect costs than renewables, probably less. (Wind turbines cause noise, flicker, kill birds, pollute the landscape, etc.) Everything has “indirect costs”, even renewables. Usually, the direct costs pretty much cover all costs. The other “costs” are un-measurable, therefore hard to compare.
            FF, contrary to renewables, pay some purely artificial costs too: exploring licences, royalties, extra taxes, etc.

            “in some places and for some applications they are already cost competitive with FF”

            Fine! Let them be deployed where they are useful. I’m not against useful tings. I can imagine a future, where efficient solar panels are installed on every roof, for the savings they achieve in reducing electricity bills. At that day they will supply, maybe, 5% of total electricity consumption. That is fine.

            What is not acceptable is the government forcing us to install tons of useless panels at current costs.

          • Raff says:

            As I suggested before, you cannot agree to a realistic comparison. Your suggestion that turbine noise and visual distraction are comparable to tail pipe and smoke stack emissions is laughable. As I said before, my expectation was that you cannot agree to a comprehensive comparison. I’ve never met anyone in the anti-renewables camp who was prepared to admit that FF exploration and use has some costs that are not bourn by the producer or user. You fit the mould perfectly.

          • Jacob says:

            “you cannot agree to a comprehensive comparison.”

            By “comprehensive comparison” you mean one that reaches the conclusions you love… else it’s not “comprehensive”.

            And’ I’ve never met a renewables lover who admits that they are 1. useless, and 2. expensive. The main point is “useless” – unable to provide the quantities and reliability needed.
            So, FF have their problems, sure, but at least they provide energy…

          • Raff says:

            Jacob, you are quibbling over the word “comprehensive”. Have you forgotten what you meant by “comprehensive” when you said: “And, having such a wide and comprehensive approach, you sure favor including in renewable prices the price for backup power, grid enhancements, and the cost of balancing the intermittent supply.”?

            Renewables useless? How many GWh of electricity did they produce last year? Was it not used? Expensive? That is what we were discussing – how to determine real comparative expense. Maybe you didn’t notice.

  12. Colin MacDonald says:

    The Tax taken off the oil and gas workforce is not to be dismissed. I myself send central government £15000/year. Then there’s petrol duty, VAT and so on. Multiply me be 150,000 and it’s a pretty tidy subsidy for central government. Of course without North Sea oil there’s nothing to say that us highly skilled (!) workers wouldn’t be making similar incomes churning out machine tools and microprocessors; my own feeling is that most of us would be oversees enriching the Australian/Canadian/insert country here/ exchequer.

  13. ImranCan says:

    Oil and Gas “subsidy” …. I demand 20 quid in tax from you and then I change my mind and ask for only 15 instead, in order to incentivise you to go and do something

    Renewable subsidy : I give you 15 quid out of my own pocket in order to incentivise you to go and do something.

  14. brent says:

    Slump in oil prices could mean fall in investment and future shortages – IEA
    ‘Well-supplied market in the short term should not disguise the challenges that lie ahead’, says international energy agency

    American shale oil and gas had transformed the market but post-2020 the world would increasingly find itself relying on Canada, Brazil and the politically volatile Middle East for world oil supplies, he said.

    Birol said countries such as Russia, China and India needed to wind down their consumer-price subsidies for fossil fuels, which deterred renewable power investment, squandered valuable energy resources and gave their citizens “all the wrong messages.”

    Sounds like there is a strong agenda to reform the consumer price subsidies

    • Jacob says:

      The claim that consumer price subsidies for oil (gas and diesel) in Russia China or India are deterring renewables is totally false, it’s just crazy.
      Renewables don’t produce gasoline or diesel or transportation fuel – they – sun and wind – produce electricity. The fossil fuels that produce electricity are nat-gas and coal. Little electricity is produced by diesel generators.

  15. tmitsss says:

    Has any Renewable Energy Company ever paid a tax on income? or any tax?

    • Luís says:

      When for instance the cost of PV in Spain is quoted as 0.06 €/kWh, 0.012 €/kWh of that is VAT alone.

      All companies in Europe pay corporate tax, at varying rates and within varying legislative frameworks. To what commercial legislation is concerned, an RE company is the same as any other company.

      In the latest PV project I got involved with, the company is paying a special tax every year just for existing, be it profitable or not.

  16. Luís says:

    Hi Euan,

    The pricing of oil products to consumers in OPEC members provides the classical definition of subsidy found in most Economics text books. I would not tackle the subject from that side. To my view the problem with this sort of claims is that fossil fuels products are probably the most taxed products in the planet.

    Round numbers, Europe consumes 20 Mb of petroleum every day. Assume an hypothetical figure of 75% of that marketed as consumer fuels. These fuels (diesel, petrol, etc) are heavily taxed, it varies from member state to member state, but in general consumers pay more in taxes than in the fuels themselves.

    Let us then assume, for further simplicity, that for each litre of fuel consumers pay on average 0.8 € in taxes. The thong-in cheek math:

    0.8 € * 156 l/b * 15 Mb * 356 d = 666 G€ in taxes per year. Note that this is Europe alone.

    Putting real numbers on this simple calculus would make for a great post.

    Still, I remain in favour of these taxes and (strategic) FIT for renewable energies.


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  22. Glyn Freeman says:

    Well written Euan. I can’t understand how people can’t get their heads around this. The fossil fuels receive no subsidy at all apart from in Marxist or politically delicate countries and even there the finance is taken directly from the fossil fuel revenue. Conversely with RE it’s an additional tax on the consumer that is used to pay for the “ideals” of the green brigade who have an irrational hatred for all things FF and Nuclear choosing to ignore the significant environmental and sociological damage caused by RE. Fuel poverty for the poor, uncompetitive raw materials and subsequent job losses for industry are the ultimate results of the “green” lobby..

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