Study: Removing Oil and Gas “Subsidies” Might Increase Coal Use
Guest essay by Eric Worrall
An economic model based study has suggested that removing oil and gas tax breaks would have a modest impact on global emissions, falling far short of Paris pledges.
New Study Finds Cutting Oil Subsidies Will Not Stop Climate Change
The effect of removing fossil fuel subsidies would fall far short of the reductions promised in the Paris Agreement
Ending financial assistance for fossil fuel companies has long been discussed as a tactic to reduce greenhouse gas emissions and encourage investment in renewables. Oil, natural gas and coal companies worldwide receive hundreds of billions of dollars each year in tax breaks or other subsidies—and some experts argue that cutting them off would drive prices up and consumption down.
It’s a simple idea, but one that’s been sparsely investigated by scientists. Now, new research suggests that removing fossil fuel subsidies might not have the global effect that some climate advocates were hoping for.
The study, published yesterday in the journal Nature, used an ensemble of five models to investigate the impact of ending fossil fuel subsidies worldwide by the year 2030, assuming both high and low oil prices in the future. Doing so would have a modest impact on global greenhouse gas emissions, the research finds, cutting carbon dioxide emissions by a half-billion to 2 billion metric tons annually.
In other words, the effect of removing fossil fuel subsidies would fall far short of the reductions promised in the Paris Agreement—which many experts calculate are still not enough to stay within the desired 1.5- or 2-degree-Celsius temperature target.
“I think this will be surprising news to some people, because folks had just imagined that if you did subsidy reform, that would be beneficial to climate,” said David Victor, co-director of the Laboratory on International Law and Regulation at the University of California, San Diego, who was not a part of the new study. “But nobody had actually worked out the analysis, and that’s the contribution of this paper.”
“The effect is really limited regionally,” said lead study author Jessica Jewell, a research scholar at the International Institute for Applied Systems Analysis. “In the future, when we talk about subsidy removal, we really need to focus our efforts on oil and gas exporting regions.”
And if subsidy reform is broached in developing regions, she added, it should be discussed alongside “supportive policies to support those lower-income folks.”
The abstract of the study;
Limited emission reductions from fuel subsidy removal except in energy-exporting regions
Jessica Jewell, David McCollum, Johannes Emmerling, Christoph Bertram, David E. H. J. Gernaat, Volker Krey, Leonidas Paroussos, Loïc Berger, Kostas Fragkiadakis, Ilkka Keppo, Nawfal Saadi, Massimo Tavoni, Detlef van Vuuren, Vadim Vinichenko & Keywan Riahi
Hopes are high that removing fossil fuel subsidies could help to mitigate climate change by discouraging inefficient energy consumption and levelling the playing field for renewable energy. In September 2016, the G20 countries re-affirmed their 2009 commitment (at the G20 Leaders’ Summit) to phase out fossil fuel subsidies and many national governments are using today’s low oil prices as an opportunity to do so. In practical terms, this means abandoning policies that decrease the price of fossil fuels and electricity generated from fossil fuels to below normal market prices. However, whether the removal of subsidies, even if implemented worldwide, would have a large impact on climate change mitigation has not been systematically explored. Here we show that removing fossil fuel subsidies would have an unexpectedly small impact on global energy demand and carbon dioxide emissions and would not increase renewable energy use by 2030. Subsidy removal would reduce the carbon price necessary to stabilize greenhouse gas concentration at 550 parts per million by only 2–12 per cent under low oil prices. Removing subsidies in most regions would deliver smaller emission reductions than the Paris Agreement (2015) climate pledges and in some regions global subsidy removal may actually lead to an increase in emissions, owing to either coal replacing subsidized oil and natural gas or natural-gas use shifting from subsidizing, energy-exporting regions to non-subsidizing, importing regions. Our results show that subsidy removal would result in the largest CO2 emission reductions in high-income oil- and gas-exporting regions, where the reductions would exceed the climate pledges of these regions and where subsidy removal would affect fewer people living below the poverty line than in lower-income regions.
Read more (paywalled): https://www.nature.com/articles/nature25467
What a shocker. All those high level green campaigns to remove tax breaks for fossil fuels, yet nobody bothered to run the numbers on whether those tax breaks make a significant difference to demand for reliable, affordable energy.
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