The cost of fossil fuels is greater than appreciated

Author

Charlie Hackforth

​I’m sure you're aware of the damaging effect of fossil fuel consumption on the atmosphere, and resultantly our climate. But what you may not be aware of is the massive global subsidising of their use, rationalised by some as necessary to keep the world economy running. And staggeringly, global fossil fuel subsidies currently stand at $5.3 trillion - yes, that’s trillion - or roughly 6.5% of the gross world product (GWP) in 2015. It might be suggested that this figure should be dropping with the increasing international investment in renewable energy sources, but between 2013 and 2015 it rose by $400 bn, or by around 8%.

The study from IMF academics was published back in August in the journal World Development, and is the first of its kind in the way it defines and quantifies fossil fuel subsidisation. Rather than just taking into account the direct subsidies towards lower fuel prices (just 0.7% of GWP in 2013), they also include indirect costs due to fossil fuel use such as air pollution deaths and global warming, which in all are over 7 times larger than the direct costs. Unsurprisingly, coal and petrols received much greater amounts of subsidy due to their more harmful emissions and more widespread use than, for example, natural gas. And whilst it is also no surprise that China, USA and Russia provide the greatest subsidies (in that order), the magnitudes are surprising. China subsidised fossil fuels three times as much as the US in 2015, with  the US providing more than double the subsidies paid by the entire EU, despite the former having more than 150 million fewer citizens. Startlingly, simply eliminating these subsidies would reduce global carbon emissions by over 20% and air pollution deaths by over 50%, which are two major areas of concern in the modern era. 

Whilst these figures are estimates they should be fairly accurate, and the authors hope that the study places heightened strain on policymakers to consider factors such as health and emissions when investing in energy. Difficulty comes when considering the power and control exerted by fossil fuel companies in policymaking, directly via lobbying and indirectly via campaign funding. However in any government and economy, decisions tend ultimately to be made for financial reasons, and whilst fossil fuel reserves are running low and becoming costlier to extract, the effects of their use are straining health services more and more. Eventually the cost of fossil fuel use to the bank balance and citizens health will be too great to ignore, and clean, renewable energies will be required to keep us functioning. One can only hope that with the fitness of our planet, economies and people at heart, world governments finally wake up, and that change comes sooner rather than later.

The study can be found here: http://www.sciencedirect.com/science/article/pii/S0305750X16304867