End $ 300 billion subsidies for fossil fuels says energy watchdog

Nov 09, 2010 12:00 AM

Subsidies for oil, coal and gas sectors were 6 times higher than those for renewable energy in 2009, the latest International Energy Agency (IEA) assessment has revealed

By Tom Levitt

Ending government subsidies for fossil-fuels is the best way of cutting demand and stopping rising carbon emissions from the energy sector, says the Paris-based IEA, which urged the money to be switched to supporting the renewable sector.

Total subsidies paid to support fossil fuels amounted to more than $ 312 bn in 2009 in comparison to $ 57 bn in support for renewables. Iran, Saudi Arabia, Russia, India and China accounted for more than half of all the coal, gas and oil subsidies. The IEA, whose assessments most governments base their energy policies on, estimate that cutting fossil fuel subsidies would reduce the world's energy-related carbon dioxide emissions by 5.8 %.

“Getting the prices right, by eliminating fossil-fuel subsidies, is the single most effective measure to cut energy demand in countries where they persist, while bringing other immediate economic benefits,” said IEA executive director Nobuo Tanaka, who added that the renewable sector could play a “central role in reducing carbon-dioxide emissions, but only if strong and sustained support is made available.”

Greenpeace welcomed the call and said the fossil fuel subsidies were leading to “unfair competition with clean and climate friendly renewable energies.” The IEA assessment also said China, which overtook the US in 2009 to become the world's largest energy user, would be the key factor in tackling climate change.

Although coal-fired electricity generation was expected to continue falling in OECD countries, China was expected to see new capacity installed over the next decade that would exceed the current capacity of the US, EU and Japan. However, China's high demand for low-carbon technologies like solar PV and electric cars is expected to drive down costs in the renewable sector, with plug-in hydrid and electric cars expected to amount to 39 % of new sales by 2035.

“It is hard to overstate the growing importance of China in global energy. How the country responds to the threats to global energy security and climate posed by rising fossil-fuel use will have far-reaching consequences for the rest of the world. China is at the forefront of efforts to increase the share of new low-carbon energy technologies, including alternative vehicles, which will help to drive down their costs through faster rates of technology learning and economies of scale, and boost their deployment worldwide,” said Tanaka.