Two-faced world spends billions on climate help, fossil fuel

Not by the same people though...

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Comment The International Energy Agency tells us that the world is entirely cocked. For while we're spending tens of billions ($50bn by its estimate) in subsidising renewables and low carbon energy installations to beat climate change we are also, at the same time, spending $500bn in subsidising the use of fossil fuels to cause climate change.

This is a reasonably good definition of “cocked”, no? That, at least, is how I expect the IEA's report to be covered as it hits the papers (perhaps with the occasional substitution of that naughty word there). We might use this, Ben Goldacre style, as a method with which to sort journalism's sheep from its goats. The former are those who will report it this way, the second are those who will actually read the study and report what it actually says.

I, of course, am to be put firmly in the sheep pen. This is because, as as I write, the IEA won't let anyone see the report. They want everyone bright and shiny-eyed at their press conference on the 9th (that would be... today). So I certainly haven't read the report, but I can still tell you roughly what I think it's going to say, as there have been leaks of bits and pieces of it.

Yes, globally, $50bn is being spent on subsidising the installation of various renewables and low carbon energy systems. Yes, it is also true that $500bn is being spent, at exactly the same time, on subsidising the use of fossil fuels. However, there's a difference in the meaning of the collective “we” (aka the "world") for the two sets of subsidies.

We, as in we the inhabitants of the rich world, G-7, industrialised or “western” nations are most certainly heaving money at wind and solar farms with gay abandon. Probably too much in fact, as the technologies aren't quite ready for prime time yet. Solar PV costs for example, or at least manufacturing costs, are coming down at 4 per cent per quarter – and we'd almost certainly be better off waiting for another few iterations of the technological process and installing them in five to 10 years' time... when they're actually cheap. Of course, that's not what our elected officials are doing, but then we didn't ever say that they were perfect.

We've not yet got to the point though that we're ruled by the positively insane, so the countries and governments doing the eco-subsidising are not the very same as those which are subsidising fossil fuels. The second group includes the governments of a number of developing and oil-producing nations. These are the people spending the $500bn a year on subsidising the drowning of Bangladesh.


This diagram (larger version on page 8 of this slide show) illustrates what I mean. Iran, Russia, Saudi, India, China: these are the people forking out the subsidies.

The table of contents of the report I haven't seen yet shows the same thing: their subsidies case studies begin with Iran. What these countries are doing often makes sense in terms of internal politics (even if it's horrible economics and entirely insane from a climate change point of view). Iran for example spends $100bn a year on energy subsidies. That's some 12 or 13 per cent of its entire economy. And yes, very large parts of that go to subsidising petrol. You can see it from the point of view of the average fellaheen in the street: we've got loads of oil so why shouldn't it be cheap? Yet the incredibly low prices mean that there's not enough refining capacity in the country so they export crude, buy petrol at world prices on the world market and then sell it for less than cost in Teheran filling stations. No wonder the place is near broke. Also, if you know the right people you can ship the newly subsidised tanker of imported petrol straight out again and sell it at world prices. (There are even rumours that there's a few loads of Cru 2005 maturing as it still goes around the loop, gaining subsidies every time they cross the border.)

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