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.
Sigh …
w.
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.
[UPDATE]
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.
Reblogged this on Norah4you's Weblog and commented:
Läs och begrunda: 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. Från rebloggen nedan!
Stackars Miljöpartisterna. Nu visar till och med beräkningar utifrån fakta inte fiction att växling till återvinningsbart kostar mer än det smakar.
Se även: Åsa Romson trampar i klaveret, Norah4you 2 juli 2014
In around 20 years from now, the world will look back at today’s climate science and ask just why did they impoverish so many people to try and solve a non- problem.
The answer, as so often happens, is that the polítical left need causes to justify their existence, and if there are no good causes to be had, then you just have to make them up. And that is what today’s climate science is all about.
Thanks Willis.
Looks like they’re at it again…? some more…? still?
They use Progressive Math.
cn
And just the other day, Gov. Mooonbeam was lamenting the fact that with all the higher mpg cars out there that the state had mandated, California isn’t taking in enough tax dollars to support the freeway maintenance. So now they’re talking of taxing how many miles we drive?
Yeeeaah, that’ll work…
I’m sure someone will correct me if I’m wrong but, my understanding of the subsidies for fossil fuels in the G8 is that they come in the form of tax offsets, offered in return for making massive investments in future energy supply. Subsidies for renewables come in the form of guaranteed high prices even when the energy is surplus to requirements.
Well I’m having a hard time catching on to the “fossil fuels subsidies” concept.
It seems to me, for example, that the largest beneficiary of the USA oil industry operations is the US Federal Treasury, who evidently get more revenues from O&G than do those companies’ shareholders.
But at a more fundamental level, energy “subsidies” do not arise out of Scottish mist.
Somehow somewhere, there has to be a base energy source, that provides the unsubsidized energy and profits, that then leads to the taxes, from which are drawn the SUBSIDIES that fund ALL of the subsidized fossil fuel non-businesses.
You cannot run a growing profitable global enterprise on subsidies. Somewhere there has to be a power supply; the tortoise, on whose back, everything rests.
So I think, the “subsidized fossil fuel” concept, is pure mythology.
We started out in the fig trees, with free clean green renewable energy (figs), and it was unable to sustain, even a microscopic fraction of the current world population, of humans plus their indentured servants (farm animals).
It took fossil fuels (and fire) to enable us to survive and prosper down on the ground, without the figs, and there wasn’t anything to subsidize our energy sources.
Humanity and global industry, have grown despite wastage, such as the destructive effects of wars, and that is impossible with subsidies. Something REAL has to provide a net gain, or the system must collapse.
Free clean green renewable energy, is not a sustainable system.
So if most of the current subsidies are going to the poor in developing countries, if you switch everyone to renewable substitutes at a higher unit cost, then all the subsidies going to the poor today to buy “bad” fuels will have to continue to allow them to by “good” fuels, plus an additional amount equal to the market price difference between “good” fuels and “bad” fuels.
And as you note if most of the current subsidies come from sale of “bad” fuels you can’t simply shift that money to subsidize “good” fuels because you’ve destroyed the income stream. Higher costs and lower income — hardly a recipe for prosperity, regardless of how many green jobs you create.
Was that taken into account in their analysis?
Along with Smith above I also would like to see a clear definition of the term subsidy, especially as it applies to fossil fuel. How can the main source of modern wealth be subsidized? For example you say that:
“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.”
If it pays for itself how is it a subsidy? If renewable energy must be subsidized with the existing cheap fossil fuel energy how can it ever pay for itself. If I am missing something obvious please enlighten me.
Outstanding post. For more on foreign oil and natural gas subsidies:
http://www.businessweek.com/articles/2014-03-13/why-fuel-subsidies-in-developing-nations-are-an-economic-addiction
A discussion on US tax deductions that are often classed as subsidies to oil and gas (they aren’t) can be found at api.org.
A discussion of foreign income taxed by the US is in:
http://taxfoundation.org/article/how-much-do-us-multinational-corporations-pay-foreign-income-taxes
Our corporate income tax on foreign earnings has claimed yet another victim recently, it looks like Walgreens is moving overseas to join Medtronic, Weatherford, Halliburton, Pfizer, Aon, Eaton, Rowan, Transocean and many others. I guess the last corporation to move out of the US will have to turn off the lights. They will have to wait until the sun is shining and the wind is blowing at the right speed or the lights will be off anyway.
Willis
Work to do what?
@george e. smith
The tortoise’s back is promises of future profits. I will gladly pay you on tuesday for a hamburger today. It is similar to the so called Keynesian economics here in the US (IMO US economics is a far cry from Keynesian economics).
Willis, you have touched on one part of the idiocy of such green analyses, but there is much more. Aren’t the so called “subsidies” for fossil fuel production the usual business deductions for capital costs, labour and consumables? These companies make substantial outlays for exploration, development, capital costs, labour, consumables, delivery…. They pay income tax after deduction of allowable costs and they employ hundreds of thousands of people whom they pay, and who pay income taxes. All this and they still turnout cheap energy for the consumer. The fossil fuel price also carries retail taxes that in Canada and elsewhere make up half or more of the price. The fossil fuel companies are, indeed, subsidizing the government. With renewables, you have similar allowable deductable costs but in addition massive subsidies are paid by government plus manifold increases in prices for the energy subsidized by the consumer. I think a thorough holistic analysis must be done to take away the misleading term subsidies and to reveal numbers for renewables that are in comparison, perhaps triple the stated trillions. Comon, there must be some oil industry tax folks out there who know how to do an informative article on this stuff. Stop letting these lying clowns set the terms of the debate.
george e. smith says:
July 3, 2014 at 12:14 pm
Of course you are correct, there’s no free lunch.
In the OPEC countries (75% of the subsidies), the money for the subsidies comes from the mostly overseas sales of crude oil. Because the oil industry is not private in these countries, but part of the government, the government uses some of the huge profits from oil sales to subsidize the sales price of fossil fuels for their own people.
In the remaining developing countries, the subsidies are paid from whatever the sources of the country’s governmental revenue might be. Generally, this is a combination of nationalized extractive industries (mines, logging, etc.), taxes, tourism fees, duties on imported goods, extractive licenses granted to foreign or local firms for things like minerals and fish, export fees and taxes on the things extracted, and the like.
You’re right, nothing arises out of the Scottish mist … well, except for Scotch whisky. And since drinking the Scotch whisky increases the mist, this is one of the few examples of a true perpetual motion machine.
w.
Alan Watt, Climate Denialist Level 7 says:
July 3, 2014 at 12:19 pm
Shirley Ujest …
w.
Andy May says:
July 3, 2014 at 12:52 pm
We have a thread winner!
Outstanding,
w.
Look, the year 2100 is still far away but elections only a couple of years. Now facing the reality about the enormous costs and the difficulties of the implementation; the politicians start to bank on two horses. For example the closure of 5 coal plants in the Netherlands is postponed. The green agenda still holds but starts to be behind schedule.
I can’t believe that the “fossil fuel subsidy” argument is still around. In developed economies, the government would go broke without taxes on oil, coal, petrol etc.They charge for use of the land, they extract royalties, and then they hit consumers with taxes which often exceed the actual price of the product.
Try running that sort of argument when you do your next tax return. You could end up in jail, for fraud.
TerryBixler says:
July 3, 2014 at 1:02 pm
I have no clue what you are talking about, and no interest in guessing. From the head post …
w.
Gary Pearse says:
July 3, 2014 at 1:08 pm
Thanks, Gary, but no, they’re discussing something entirely different. In Venezuela, for example, the price of gas is pennies per gallon, and that has nothing to do with “capital costs, labour and consumables”. It is a direct subsidy by the Venezuelan government.
w.
Hi Willis: Thank you for your long hours on these topics. One thing that occurs to me is that the warmists and their supporters in media are afraid to use the words “carbon dioxide” in tandem when referring to CO2, and have convinced everybody they are working hard on reducing “carbon emissions.” As in soot, reinforced with images of smokestacks and references to asthma, but using their chosen term is misleading.
I know the shorthand “carbon,” // “… this analysis is just another batch of bogus claims trying to prop up the war on carbon …” // is widely used, but it is currently a war on plant food, not soot.
If time and space permit, request we say/write “carbon dioxide” and skip the preferred warmist term du jour.
Check out the price of gasoline in Iran and you get an idea what the subsidies are all about.
It’s a good thing money doesn’t grow on trees, there might be nary one left.
When was the last time, that throwing money at a problem, produced a net gain over time ?
In and of itself.
“A Trillion here, a Trillion there, pretty soon, you’re talking real money.”
Martin Durkin had a good illustration (Britain’s Trillion Pound Horror Story) of a Trillion (£). He claimed that if you made a stack of a Trillions worth of £50 notes it would be some 6.5 thousand miles high.
Now perhaps it’s late here in England and I’ve had a long day but 79 Trillion would get us to The moon and back.
Oops … posted on the wrong thread. Tis the hazard of tabbed browsing
The solution will be micro power plants. As long as we need city-sized power plants we will have politicians in the mix. At some point new tech will enable house or street sized power generation. Until then politicians, their cronies, and their sheeple enablers will keep the cost of energy sky high. Arguing with a liberal about the benefits of cheap energy is like playing tennis without a net. The average person living in a developed world is simply not capable of grasping the amount of work electricity does for them. Imagine spending a full day to wash your only 2 pairs of clothes, or using a wood stove to cook. You have to gather the wood, chop the wood, transport the wood, then cook in sweltering heat. Gathering water. Milking cows. Laboring in the fields. Building your own house. No medical care. No books, no mobile phones, no phones, no electronic entertainment, no lights, small houses, no bikes, no cars, no toilets, only the rich have horses, food shortages, etc etc etc. There are a handful of tree huggers that think that is a good idea and actually live it. The rest of the sheeple are simply clueless as to what they are talking about endangering or giving up. Freedom owes everything to the fact that slaves are not as efficient as electric powered machines.
In 2008 I gave a talk at a college about Gore’s claim of being able to switch to all renewable electricity in a decade. Just the wind turbines and nothing else, with no spare capacity at all, I figured as costing about $650 billion per year, which is to say all of national savings at that time. I pointed out that “all of national savings” meant no savings for investments, repair of infrastructure, and so forth. Their guy in charge of a very costly wind energy program at the college agreed with all I said, but still concluded his program was valuable and needed.
Renewable energy people derive great benefit from renewable subsidies, and rationalization being what it is, can convince themselves of the merit of renewables placed anywhere, not just where they make some economic sense; and also convince themselves that oil, gas, and coal are even more greatly subsidized still. Penetrating that shell of rationalization is the entire battle to tame the madness.