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.
Bloke down the pub says:
July 3, 2014 at 12:10 pm
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This is essentially my understanding, but that is not a subsidy (at any rate, not in the classic sense since there is no god given right to tax anything; the decision to tax, eg., what should be taxed and what rate is a political construct).
Investment in business (whether research and development, new plant and machinery etc) is usually always seen as a ‘cost’ of doing business, and can thereby be written down against revenue earnings thereby off-setting the tax liability of the company. But that is not a subsidy, it is a reflection of reality, and encorages investment which is a good thing.
The reason for this is obvious. Investment in business is good encouraging growth leading eventually to higher, or at any rate contined, revenue streams. If buisiness does not invest in itself, eventually they contract, fade and go bust, leading to a loss of revenue streams.
July 3, 2014 at 2:22 pm | Bart says:
You have an excellent way with words, Bart 😉
July 3, 2014 at 6:25 pm | Mike T says:
“In the Beginning … ” <|;-))
July 3, 2014 at 7:33 pm | pat says
————
Now that is a subsidy of rent seekers superannuation … why should I and others be responsible for their irresponsible investment strategies ?
A good assessment Willis, thanks. (Certainly better than the steel greenhouse)
To say that FFs are subsidised is a bit of a red herring as it is part of the legal profit gained within the competition of commerce. The subsidies paid for renewables are loaded onto the base cost to encourage the producers to do it. Without it none would bother because of crap efficiency problems.
The subsidies in the renewable sector are something different. They are essentially a distortion of the free market.
In essence, they elevate a particular provider of a product (say the windfarm) to the status of a preferential provider and provide that preferential provider with a fixed minimum selling price for his product (the unit price of electricity), and they compell the puchaser (the national grid who is essentially a state controlled monopoly) to buy a certain percentage of his raw energy requirements not on the open market (ie, the price at which he could buy energy from coal or gas powered stations) but rather from the preferential producer (the windfarm) at not less than the minimum unit price which the government has fixed.
I have no problem with windfarms being entitled to write down the costs of errecting a windfarm, from their profits. My gripe is that they are given preferential status enabling them to sell their product at uncompetitive price which I the consumer have to pay for. This is rendered even worse by the fact that the windfarm is producing a product that no one really ones given its unstable nature and the strains that it places on the grid and the rebalancing thereby required.
It is rendered even more silly that in order to support a windfarm, a conventially powered generator is required (windfarms only produce electricity for about 22% to 25% of the time, and therefor convential back up is required for about 75% of the time), and the conventionally pwered generator finds itself in a loss making scenario since it is only able to sell its product for about 75% of the time (since when the wind blows preference is given to wind). the conventional powered generator, like most businesses does not make its profit on the first 78% of sales (ie., on the amount sales that the government has restricted it to), but rather in the last 10 or 15% of sales 9which it cannot sell because of government restriction). Accordingly no one wants to invest in new conventionally powered generators (which are needed due to the vagrancies of wind) unless they too are given a specific subsidy.
The government is piling subsidy on subsidy, only to get a more fragile energy network, and one that does not result in the meaningfull reduction of CO2, given the need for conventionally powered back up and the inefficiencies of start/stop/ramp up/ramp down energy production that the conventionally powered generators are required to supply. It is like town driving, a car’s fuel consumption is worse in town with the cionstant stop start than it is on the freeway.
In effect nothing meaningfull is achieved at great cost.
PS. I am not convinced of the need to reduce CO2, but windfarms and their ilk, do not reduce CO2 emissions so there is no point in them
Roger
The green economists are unimaginative. They should advise governments to just print more money to give away as subsidy to renewable energy. It will lead to currency devaluation and inflation. Everybody ends up paying for it. Unlike people and corporations, governments do not become bankrupt because they can always print money to pay creditors and make everybody poorer.
johnmarshall says:
July 4, 2014 at 1:26 am
I’ve never had a single scientist that I respected find a single fault with the scientific statements in my post called “The Steel Greenhouse“. On the other hand, clueless anonymous popups often raise ludicrous objections, usually with as much backup as your claim has.
If you didn’t like that one, you’ll hate “People Living in Glass Planets“.
Say what? The Saudis take some of the profits from the government sales of crude oil. They use them to subsidize the cost of gasoline for their citizens. On what planet is that “part of the legal profit gained within the competition of commerce”?
Now there, we have complete agreement.
All the best,
w.
I had never heard that fossil fuels were subsidized (except for Venezuelan consumers) !
But rather heavily taxed, yes I know this.
In which “subsidy” form ? Renouncing a higher market price (sic), reducing too high tax collection in already too rich producing countries ?
Just accepting the claim that fossil fuels are subsidized is accepting entering in a bogus debate.
Venezuela does not subsidize oil, its export customers do – for sure it makes petrol available to its people at prices a lot closer to the cost of production (as do other big and oil/gas exporters) than the deceitful tax hungry governments in most other countries.
If the petrol and gas consumers of these countries had a clear indication of “who gets what” when they are at the pump, there would be mayhem, and who knows, even the sycophantic press might see THAT as a story.
What Saudi Arabia does to help its citizens is a social payment not a subsidy paid for the oil to start with.
Max Planck would not like your steel greenhouse since it violates Plancks Law as well as the laws of thermodynamics. But if you are wedded to the GHE and the ability to find energy out of nothing then go ahead.
Go ahead and design a generator that works within your ideas. If it works (?) you will make a fortune and become world famous. ( I expect the same reply as received from Anthony Watts)
Thanks Willis for your ever watchful eye…I have suspected as much for years, but not had the where-with-all to check it out – now I can see clearly in detail what is obvious from first principles, that more expensive energy supplies (renewables) will require much higher levels of subsidy – not just to get them off the drawing board, but to make them acceptable to the populace. What I did not realise was the nature of global subsidies – that most occur in developing nations and producer states, for the reasons articulated in Ukraine: ‘Subsidies endure because, as Ukraine’s politicians know, getting rid of one means immediate pain for citizens, a drop in popular support, and sometimes even civil unrest.’
There is only one thing I quarrel with in your analyses – or rather your comments upon….which is your assumption that ‘greens’ are at war with development and progress. The Green movement, which I helped to create in the 1970s, has metamorphosed from people who cared passionately about development and progress (but defined more in terms of healthy communities, ecologically sustainable agriculture and forests, protected biodiversity as much as any changes in income or access to modern lifestyles). Since that time, modern development policies have improved from the naked post-imperial resource hungry exploitation decades – though even now, less than 5% of global development aid goes to the basics of soil, water, sanitation and community.
During this time the ‘greens’ have lost track of the original ethos – they have become campaign professionals in the corridors of power – seeking those ready levers, targets and goals that play to their galleries. The scary-climate story of Hansen & Co was perfect for their narrow purposes. They don’t folow their own guidelines any more – no environmental impact studies of the policies they advocate, and they end up supporting ineffectual mitigation strategies rather than necessary adaptation and resilience. One ex-Greenpeace director from the old days when they stopped commercial whaling, nuclear and toxic dumping, acid rain and other crimes…now heads up a global wind energy company. Like any politician, Greens have their fingers in the pie.
It is too simplistic to say they make war on progress or development – they occupy all the corridors of the powers and economies that drive the modern concept of progress and development (for example the IMF, World Bank and EU). They would be happy to have ‘the poor’ pay for biofuels, barrages, wind turbines and even nuclear reactors – and they do not investigate the costs and impacts thoroughly, until the time comes for a new campaign against the monsters they helped unleash.
I feel you need to take a close look at ‘development’ and ‘progress’ – as with many commentators on WUWT, there is this belief that somehow gas and oil will go on for ever as cheap fuels and the Greens want to deny access for the poor. If we put aside the mirage of climate change – there is still an issue over the development model, 2 billion people without adequate sanitation, exhausted soils, broken communities and rampant global agrichemical businesses looking to grab land.
If you are interested in these issues, mail me peter.taylor(at)ethos-uk.com and I will send you a pdf of a study I did a few years back on global development aid and ‘resilience’.
Thanks again for all your work.
humans plus their indentured servants (farm animals)
===========
my indentured servants are machines. they are powered in large degree by fossil fuels. one advantage of these servants is that unlike animals, the machines only burn fuel when they are working.
rampant global agrichemical businesses looking to grab land
===========
REDD. Stealing land from the poorest or the poor in the name of saving the planet, and giving the profits to the riches people on the planet.
Hear REDD, see Red.
Willis Eschenbach: However, regarding “correcting their report” and taking them to court … you might not have noticed, but I didn’t find a single error in their report. In fact, I’ve used their figures throughout my analysis. So exactly what were you planning to charge them with in court? Being right?
That comment surprised me. Your post certainly reads as a corrective. So I went to the document and reread sections of it more carefully. Nowhere (that I found) do they advocate redirecting the subsidies from fossil fuels to renewables, nor do they hint that it would be possible to do so. They repeat the comparison of the magnitudes of the investments/subsidies, but omit any inference about redirecting the subsidy.
pat says:
July 3, 2014 at 7:33 pm
the Australian Govt is presently trying to overturn the Renewable Energy Target (RET), which is partly responsible for the ever-increasing electricity bills that are particularly hurting low-income customers. there are vested interests who are not happy about this, and who have had to reveal what the public barely realises – their retirement funds have been invested in risky, ever-changing CAGW policies.
I am a very small voice that has been pointing out for years that Australian superannuation funds have exposed their members to direct losses to the point where retirement income will be materially affected.
A whole generation of so called investment advisers, directors and fund trustees should be summarily dismissed for recommending, endorsing and signing the money over to investments in projects that are basically intangible and dependent on crony government largesse to manipulate laws to transfer taxation revenue and impose hidden costs on prices to end consumers to the benefit of companies that do not produce a material benefit to the individual nor the economy.
Energy fuels the economy. Oil subsidizes us, not the other way around.
“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”
If, as seems likely, the whole climate house-of-cards falls down….around 20 years from now I would:
1. Not like to be a scientist, of any science.
and:
2. Reckon the reverential attitude of most people to science, and scientists, will be damaged irretrievably.
JohnM says:
July 4, 2014 at 10:14 am
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This is a problem when you have consensus.
There must be numerous scientist out there who could have made it clear that science is never settled, far from the debate being over, the debate has never taken place, the factors that govern climate are far from fully known and clearly all the relevants factors are not fully understood, the claims as to certainty are exaggerated. Unfortunately, these scientists, for whatever reason, and we all know about pressure, did not have the courage to stand up and be counted.
It is inevitable that all will end paying the price, some would say that is deserved, they brought it upon themselves. That is what happens when honest men turn a blind eye.
“””””…..richard verney says:
July 4, 2014 at 1:26 am
The subsidies in the renewable sector are something different. They are essentially a distortion of the free market. …..”””””
They are much worse than that. Subsidies hide the simple fact that those schemes are not in fact, sources of energy; they are energy wasting schemes.
Any true source of real energy availability, can lift itself by its own shoe laces, and expand without being subsidized by energy systems that really are sources of real energy availability.
The problems of free clean green renewable energy schemes is NOT an economic problem; it’s a science and technology problem. They don’t work, to provide new energy; they waste existing sources of energy.
Your whizz bang Einsteinium / Californium nuclear power station can be rendered economic, with the stroke of a pen.
You simply put a tax of $1M per barrel, or barrel equivalent , on all petroleum; oil and natural gas, and use that tax money to subsidize your E / C reactor ; or for that matter, your neighbor’s PV solar panels.
Problem solved !
Well there is one hitch. The solar cells that were maybe $4 per peak Watt capability last week, will now cost you perhaps $150,000 per peak Watt this week, due to the price of oil going up. You can still only make the same amount of solar cells out of one barrel of oil’s energy. this week, as you could last week.
That “windfall profits” tax, on oil, really killed your solar farm plans.
And your Einsteinium / Californium reactor design, won’t fly either.
JohnM and richard verney:
Long ago at an IPCC Conference there was a side meeting organised by Fred Singer. I was a speaker at the side meeting which had an audience of mostly IPCC Delegates and members of Greenpeace who filled the room.
I then said,
“When the chickens come home to roost – as they surely will with efluxion of time – the politicians and journalists won’t say, “It was our fault”. They will say, “It was the scientists’ fault”. And that’s me, and I OBJECT!”
I still see no reason to change my view, and I still object.
Richard
Willis Eschenbach says:
July 4, 2014 at 1:43 am
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Thought experiments are all well and good, but they are no substitute for hard empirical data obtained from observation.
It may well be the case that for the next 20 or so years, there is some cooling. Heck even the UK Met Office, last year, said that there may be no return to warming before 2030. In this scenario, what we might have seen throughout the 20th century, and the first third of the 21st century is simply multi-decadel variation. Heck, even the Team, approximately a decade ago, were alive to that possibility.
if that is the position, we may (a century later) find ourselves at about the same temps as were seen in the 1930s (before the endless adjustments to these past temperatures) and during this period, nearly all manmade CO2 emissions will have taken place but with no rise in temps.
What will that say about the GHG theory? I suspect that in these circumstances, one will find a lot of scientist questioning the very foundations of the theory. Some will cling to the theory, but argue that there are negative feedbacks, but others will suggest that the fundamentals of the theory are unsound.
i am not predicting the future. I do not know whether it will begin to warm, or the ‘pause’ continue, or temperatures begin to fall. But I do consider that, in the evnet of their being future cooling, there is a strong likelihood that many scientists will question the fundamentals of the theory. At that stage, it may be necessary to re-evaluate your steel greenhouse since observation evidence will point to issues with it.
PS, Sorry that this is slightly off topic. It is unfortunate that Mr Marshall chose to make a throwaway observation in parenthesis.
.
richard verney says:
July 4, 2014 at 12:00 pm
Thanks, Richard. Yes, and hammers are all well and good, but they are no substitute for screwdrivers …
Not sure what your point is here. Albert Einstein was very fond of thought experiments … was he wrong too?
All the best to you,
w.
johnmarshall says:
July 4, 2014 at 2:47 am
Thanks, John. I am analyzing the IIASA report. In it, they use the word “subsidies” to refer to the Saudi Arabian payments. In order to make my analysis comprehensible, I tend to use the syntax of the paper that I’m analyzing. So if you have a problem with the use of the term “subsidy”, please take it up with the IIASA. I must warn you, however, that “subsidy” is the term of art used all over the planet for such payments, so you’ll have a long uphill swim to convince anyone.
That’s handwaving. If you have specific objections, please spell them out. Saying it “violates the laws of thermodynamics” or “Max Planck would not like [it]” means nothing at all. Well, it does strongly imply that you don’t understand Planck or the laws of thermodynamics, but other than that there is nothing in your words to grab on to, nothing to test, nothing to falsify. It’s just another random anonymous guy on the internet flapping his lips.
Since I have no clue what you’re talking about regarding Anthony, I can’t comment on that. As to “a generator that works within your ideas”, people sell “space blankets” all day long that work on the exact same principle as the steel greenhouse—a barrier that absorbs energy on one side, and radiates it away on two sides.
Regards,
w.
Peter Taylor says:
July 4, 2014 at 4:33 am
Thanks for your kind words, Peter. I too was surprised that 95% of the subsidies occur in developing countries. Always more to learn.
I’m not sure how that differs from a “war on progress or development”. Having the poor pay for biofuels sure seems like a war on progress to me.
Obviously, nothing will go on forever. However, we will not run out of fossil fuels in my lifetime, or the lifetime of my unborn grandchildren. We have 300 years of coal in the ground at current rates of use, we’ve just begun to unlock shale oil and shale gas, and we haven’t even touched the methane clathrates. As a result, it would surprise me immensely if we ran out of fossil fuels before we come up with a new energy source.
As to whether it will be “cheap”, that depends on the Greens, who are doing their best (and already succeeding) in driving energy prices through the roof.
Do the Greens want to deny access to cheap fuels for the poor of the world? Of course not, just ask any of them, they love the poor, they are in the war on carbon to help the poor … of course, their policy of driving up energy prices will in fact deny access for the poor, but pay no attention to the man behind the curtain …
In a world with billions of people living on $2.00 per day or less, wasting money in the war on carbon and driving up the price of energy for the poor is a crime. History will not judge the alarmists lightly …
And thanks for yours. I just went to your website, interesting stuff. A couple comments:
First, nothing in this world is “sustainable”. See my post here. Even the sun will flame out some day. As a result, “sustainable” has become a meaningless feel-good buzz-word with no definition except to imply that “I’m a good guy on the side of the angels and I’m here to help you poor benighted folk see the one true path”. Generally, if it is in the mast-head of a site as it is in yours, I pay no further attention to the site. Talking about “sustainability” without a bright-line definition for what you mean is nothing but a raw grab at people’s guilt, and I don’t have much truck with people who do that.
Next, despite pointing out that there are “rampant global agrichemical businesses looking to grab land”, you’ve managed to write an entire paper on carbon sequestration without mentioning that the “carbon offset” scam has led rapacious corporations to buy up large tracts of land in places like Africa on which they can claim some kind of carbon offset … once again, the war on carbon screws the poor to the wall.
Or take the “Clean Development Mechanism” funds collected from the poor dupes in England and Europe as part of the Kyoto Protocol. Despite the fact that in the US or Europe, the Greens block every proposal for a new dam to generate electricity, the CDM money has gone to China where it has been spent almost entirely on … dams to generate electricity. This is all, of course, under the guise of a “carbon offset”.
And unfortunately, just like the greens, your brilliant solution is … increase the taxes.
Great. While increasing numbers of British pensioners are shivering in fuel poverty, your brilliant and no doubt “sustainable” plan for fighting an imaginary problem is to jack up the cost of household electric and gas bills … do you truly not see the inhumanity of that path? Really?
You see why I stay clear of folks who want to sell me “sustainability”? Let me repeat my question from above that I asked about the Greens, but this time about you …
Do you want to deny access to cheap fuels for the poor of the world? Of course not, just ask you, you love the poor, you are in the war on carbon to help the poor … of course, your ecologically friendly and “sustainable” policy of driving up energy prices will in fact make electricity and gas more expensive for the poor, but pay no attention to the man behind the curtain …
So while some of your work is most beneficial and interesting … you missed the boat on carbon offsets. Carbon offsetting is a money-making scam, a pathetic feel-good gesture by people guilt-tripped by the greens into believing that CO2 is bad for the planet in the face of a glaring lack of evidence to support such a strange assertion. As soon as you dipped your toe into the question, you’ve proposed impoverishing pensioners with a new tax … I tell you, my friend, you do not want to be in favor of carbon offsets or anything like them. They poison everyone they come into contact with.
My best to you, and please take my comments the positive spirit in which they are intended. I do think that you are doing some good work, but my goodness, some of the rest …
Regards,
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. ”
If it goes the way the AGW people want, they will be looking at a couple billion graves and saying, “yep, it was worth it.” The program being pushed, in a cooling world, can only be for the purpose of getting rid of all those “useless eaters” that Kissinger famously talked about. Besides, all those relatively poor people live in those areas that will be basically unaffected by any form of ice age, don’t you know?