Guest Post by Willis Eschenbach
Anthony has posted a story about a laughable analysis of the cost of propping up renewables through subsidies. And long-time WUWT contributor KD helpfully pointed me to the document itself. Now that I have the actual document, here’s what they say about subsidies (all emphasis mine).
First, they point out that the cost of shifting to renewables will be on the order of $800 billion dollars per year. Overall, they say the cost will be $45,000,000,000,000 ($45 trillion dollars) by 2050, and could be as high as $70 trillion.
In other words, a substantial “clean-energy investment gap” of some $800 billion/yr exists – notably on the same order of magnitude as present-day subsidies for fossil energy and electricity worldwide ($523 billion). Unless the gap is filled rather quickly, the 2°C target could potentially become out of reach.
Now, a trillion is an unimaginable amount of money. Here’s a way to grasp it. If I started a business in the year zero AD, and my business was so bad that I lost a million dollars a day, not a million a year but a million dollars a day, how many trillion dollars would I have lost by now?
Well, I wouldn’t have lost even one trillion by now, only about $735 billion dollars … in other words, less than the estimated PER-YEAR cost of switching to renewables.
Then they go on to claim that hey, $800 billion per year is no big deal, because fossil fuel subsidies are nearly that large.
While the clean-energy investment gaps (globally and by region) may indeed appear quite sizeable at first glance, a comparison to present-day energy subsidy levels helps to put them into context. According to estimates by the International Monetary Fund and International Energy Agency, global “pre-tax” (or direct) subsidies for fossil energy and fossil electricity totaled $480–523 billion/yr in 2011 (IEA 2012b; IMF 2013). This corresponds to an increase of almost 30% from 2010 and was six times more than the total amount of subsidies for renewables at that time. Oil-exporting countries were responsible for approximately two-thirds of total fossil subsidies, while greater than 95% of all direct subsidies occurred in developing countries.
Now, this is a most interesting and revealing paragraph.
First, despite what people have said on the previous thread, they have NOT included taxes in their calculation of subsidies.
Next, to my great surprise an amazing 95% of all subsidies are being paid by developing nations. This underscores the crucial importance of energy for the poor.
In addition, they say that most of the money used to pay the fossil fuel subsidies comes from … wait for it … the sale of fossil fuels.
Next, it means that nothing that the developed world does will free up much money. Only 5% of the subsidies are in developed nations, they could go to zero and it wouldn’t change the big picture.
It also means that since these subsidies are not going to drivers in Iowa and Oslo, but are propping up the poorest of the global poor, we cannot stop paying them without a huge cost in the form of impoverishment, hardship, and deaths.
Finally, unless we shift the fuel subsidy from fossil fuels to renewables, which obviously we cannot do, the comparison is meaningless—we will still need nearly a trillion dollars per year in additional subsidies to get renewables off of the ground, over and above the assistance currently given to the poor … where do the authors think that money would come from?
I fear that like the pathetically bad Stern Report, this analysis is just another batch of bogus claims trying to prop up the war on carbon, which is and always has been a war on development and human progress, and whose “collateral damages” fall almost entirely on the poor.
And at the end of the day, despite their vain efforts to minimize the cost, even these proponents of renewables say it will cost up to $70 trillion dollars to make the switch, with no guarantee that it will work.
The Usual Disclaimer: If you disagree with someone, QUOTE THEIR WORDS. Don’t go off about something like “I see that you are claiming that X will do Y, I think that’s wrong blah blah blah”, that goes nowhere because we don’t know what you are objecting to. Please have the courtesy to quote the exact words that you disagree with, so we can all be clear about the substance and nature of your objection.
I see that in the study they make much of the disparity between fossil fuel subsidies ($523 billion annually) and renewables subsidies, which they proudly state are only about a sixth of that ($88 billion annually).
However, things look very different when we compare the subsidies on the basis of the energy consumed from those sources. To do that, I use the data in the BP 2014 Statistical Review of World Energy spreadsheet in the common unit, which is “TOE”, or “Tonnes of Oil Equivalent”. This expresses everything as the tonnes of oil that are equivalent to that energy. I’ve then converted the results to “Gallons of Oil Equivalent” and “Litres of Oil Equivalent” to put them in prices we can understand. That breakdown looks like this:
Fuel, Subsidy/Gallon, Subsidy/Litre
Fossil fuels – $0.17 per gallon, $0.04 per litre
Renewables – $1.19 per gallon, $0.31 per litre.
So despite the fact that renewable subsidies are only a sixth of the fossil subsidies, per unit of energy they are seven times as large as the fossil subsidies.
This, of course, is extremely bad news for the promoters of the subsidies. It means that to get the amount of energy we currently use, without using fossil fuels and solely from renewables, it would require seven times the current fossil fuel subsidy, or $3.5 TRILLION DOLLARS PER YEAR.
And of course, since there’d be no fossil fuel sales at that point, there’d be little money to pay for the subsidy.
Sometimes, the idiocy of the savants is almost beyond belief.