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.
The answer is simple. Folling the principles revealed in this survey we can easily pay a billion dollars of subsidies for renewables via a billion dollars of taxes on renewables. OK – perhaps the subsidy might need to be a little bit higher to allow them to pay the billion dollars in taxes. No problem. Just make it 2 billion. Problem solved. We should thank the authors of this survey for their insightful analysis of economic matters.
I can’t speak for subsidies around the world, but when anti-fossil fuels people point toward subsidies for fossil fuels in the U.S. they speak of “percentage depletion allowance”, which is a method of depreciation allowed to independent U.S. oil producers.
Might seem OT but…
Just this week I had a discussion with a young’in about radio, and that of course I pay for it, because the cost of the ads which are sold to companies to advertise are passed on to me, the consumer.
His head almost exploded, he couldn’t get his head around that.
BTW, the discussion was about an alternative weekly here in Toronto that has gone belly up, due to declining ad revenue. My point was that his generation (20 something) was so used to getting stuff for “free” by downloading it, we’ll see more of this in the future. He still didn’t get it…
The war on fossil fuels being waged by the Obama Administration and other governments is, in reality, a war on the (energy) poor. If energy prices, food prices, and other prices double as a result of subsidized renewable energy and the intentional destruction of the fossil fuel industry, those less fortunate will bear the brunt of it. The intellectual, moral, and ethical arrogance of Progressives is unspeakably despicable
Gary Pease:
Don’t know, because the news media aren’t too meticulous about how they use the term. But if experience is any guide, then some of that does enter into the post-tax components mentioned here:
“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?”
Off topic a little, but there was no year zero. In our calendar the day after December 31, 1 BC was January 1, 1 AD. That’s why the 20th century ended at midnight of
December 31, 2000/January 1, 2001.
Your about 735 billion loss was still correct.
Interestingly, on a “post-tax” (or indirect) basis – which also factors in tax breaks and the failure to account for negative externalities from energy consumption – the IMF’s estimate of global subsidies swells to $1900 billion. Advanced economies accounted for about 40% of this amount, with the U.S. taking the top spot at $502 billion. The second and third positions were occupied by China and Russia at $279 billion and $116 billion, respectively.
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Balderdash. The “tax breaks” in most Western countries are the same as those available to comparable businesses. Besides, since when did income belong to the government, except for the bits that they let us keep?
As for “negative externalities from energy consumption” – well, what about the positive externalities? Next time the author of that stupid statement finds him/herself in ICU, let’s hope that the “negative externalities” – whatever they may be – are front of mind. They should hobble off the trolley and die on a mountainside, to save the planet.
What bollocks.
I already resolved that potential problem. I moved to a location that is 4000′ away from my workplace and 6000′ away from a grocery store. I haven’t even driven 3000 miles since March 2012
Ralph says:
July 3, 2014 at 11:53 am
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…
My upper remark was to this post which I forgot to paste into the reply box
No matter how you slice it, a tax deduction which merely reduces a tax, and still results in a payment to the government, is in no way, shape, or form a “subsidy”. Not anymore than breaking someone’s legs instead of killing him is a form of healthcare.
Willis, the groups that put these “subsidy” estimates together also count the fact the US Federal Government does not charge itself Federal Taxes, as a subsidy. So the lack of fuel excises taxes the military is exempt from is somehow a subsidy.
I prefer not discussing things in terms of Carbon this or Carbon that. Carbon dioxide is twice as much oxygen as carbon. And thats just counting molecules, if you use weights its more than 2 and a half times as much oxygen as carbon right? Lets call it oxygen pollution instead and see how far this insanity continues.
I see that 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 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. That breakdown looks like this:
FUEL, SUBSIDY PER GALLON, SUBSIDY PER 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, they are seven times as large as the fossil subsidies per unit of energy.
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.
w.
Peter Miller says:
July 3, 2014 at 11:49 am
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.
________________________________________________________
Ah, like the vilification of DDT?
My way of thinking about a trillion: The distance from the earth to the sun is ca. 491,040,000,000 feet, or less than half a trillion. So a little less than six trillion inches.
Looks like they made use of the “Cognitive Dysfunction” ( C{duh?} ) operator in their calculations.
Its second only to the Eraser Property Of Variables* in usefulness in fuzzy math!
* If an equation or mathematical relationship is too complex or unwieldy, simply erase some of it!
The term ‘renewable energy’ is misleading. Whilst the energy source may be ongoing, the methods we use to harness that energy are not. Solar panels only last around 20 years, and wind turbines need constant maintenance on the moving parts and only last 10 years due to metal fatigue.
Ironically, fossil fuels are probably the purest form of renewable energy on the planet. After they are burnt and converted to CO2, the carbon is then sequestered back into the environment and after a few million years eventually turns back into fossil fuels again.
In a few million years the old discarded solar panels will still be worthless :-).
“the political 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” hear hear Peter Miller.
When i was a kid,in Australia or certainly my part of it, Sydney – was an environmental disaster.
Creeks, rivers, roads, air and the beautiful Port Jackson were treated with total disregard by all and sundry.
Not now, the environmental movement primarily through public awareness and concern and only when needed, legislation worked wonders – i know this to be an irrefutable fact.
But as human nature testifies,, many people joining the cause later, were far more involved with their own self-aggrandizement then simply making a difference in the way yachtsman ian Kirenan did with his “Clean up Australia” campaign.
.Politics is politics – these sycophantic,back-slapping activists are a long way from those, like me and my friends and colleagues who joined in and made the necessary difference – without spending a penny of the public purse, just a pittance of our own small change for gloves and garbage bags and the use of mates trucks and utes, and it WORKED.
Shame on the lot of you; muck-journos, pseudo-scientists, activists and politicians and your money grovelling CAGW lunacy.
Windsong, re “war on carbon” as shorthand:
Try thinking of it as a war on on all carbon-based life forms, not just plant food.
Then it’s more accurate than what it replaces, right?
Chuck Nolan said:
July 3, 2014 at 11:50 am
Thanks Willis.
Looks like they’re at it again…? some more…? still?
They use Progressive Math.
cn
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Aye, the same they use when they claim that illegal aliens are good for US economy.
Thanks Willis
“Sometimes, the idiocy of the savants is almost beyond belief.”
= = = = = = = = = = = =
Yes I can only agree, the idiocy of the savants is beyond belief.
Well, if I had one dollar for each day that has passed since the day that Jesus was born, I would still not be a millionaire.
So I haven’t really got a clue about billions or trillions of $, or where those sort of sums are going to come from, year after year?
“Fossil fuel subsidies..” Seems the word “subsidy” is still widely misused. I believe, but am not sure, that the majority of what the fossil fuel industry receives are tax breaks. Tax breaks are not subsidies, though I think the 2 are added together in the article to reach a total. A subsidy is money that is paid by a government to a business to allow it to continue to function. A tax break let’s one keep more of what is already theirs. Two different things. If the government allows you to keep more of what you earned they’re not giving you anything- a distinction the left seems unable to comprehend.
While the leader of our troops does not have enough in his budget to properlytrain the troops, the Military is required to spend it’s shrinking budget on biofuels at outrageous prices up to $48.36/gallon. 450,000 were purchased from a subsidized biofuel plant at $26.75/gal. This just happens to be one of his bundlers.
This hides the huge subsidy for renewable s and endangers our defense by wasting defense dollars on sommething that has nothing to do with defense. See below:
http://instituteforenergyresearch.org/analysis/great-green-waste/
“In many instances, the DLA purchases biofuels dramatically above fair market value. Military biofuels purchases since 2009 have cost an average of $48.36 per gallon, even though the Department of Defense (DoD) can execute bulk contracts of conventional fuels for about $3.24 per gallon. The largest purchase was 450,000 gallons in 2011 at a cost of $26.75 per gallon for fuel used in a Navy demonstration of the so-called “Great Green Fleet.” During this event, the Navy used a mix of biofuel and petroleum to fuel a guided missile destroyer and two destroyers, as well as some aircraft. The worst deal for taxpayers on a per gallon basis was a 2012 purchase of 55 gallons of biofuels for $245,000—a cost of $4,454 per gallon. These purchases are clearly subsidies, as they amount to the federal government purchasing products above market value when cost-competitive alternatives exist. This serves to prop up the company supplying the subsidized product because in the absence of DOD’s purchases, no market would exist.”
Thank you Willis for clarifying the issue of subsidies. I am now better armed to deal with all the trashy throw away lines peddled by greenies and lefties about the big subsidies that fossil fuel producers receive. They won’t want to hear it of course.
I have found in life that people like to spend other people’s money but it is a totally different matter when it comes to spending their own. Accountability!!!!