Energy

This report summarizes the Climate Policy Initiative Workshop, hosted at DIW Berlin, that took place in November 2009.

At their meeting in Pittsburgh in September 2009, G20 Leaders called for an additional evidence base to support efforts by the member nations to reform and remove fossil fuel subsidies. At a workshop in Berlin in November 2009 we discussed the definition and quantification of energy subsidies, the evaluation of their impact, and the political economy of their reform.

Table comparing EIA energy subsidy estimates to a variety of other assessments conducted over the past 30 years in the United States. 

Table extracted from Doug Koplow, EIA Energy Subsidy Estimates:  A Review of Assumptions and Omissions, Earth Track, Inc., March 2010.  Access full report.  Access executive summary only.

Petroleum product subsidies have again started to rise with the rebound in international prices. This note reviews recent developments in subsidy levels and argues that it is necessary to reform the policy framework for setting petroleum product prices in order to reduce the fiscal burden of these subsidies and to address climate change. In 2003, global consumer subsidies for petroleum products totaled nearly $60 billion. They are projected to reach almost $250 billion in 2010.

Review of key federal policy trends in the energy sector, identifying the unprecendented scale of interventions, and the inadequate attention being paid to incentive alignment and assessment of leverage points. 

Beginning on slide 6, the presentation provides a specific review of how the government's large scale loan guarantee programs (such as under Title XVII of the Energy Policy Act of 2005 and the proposed much larger federal "Clean Energy Deployment Administration") are not structured to achieve proper risk management or high success rates.

"President Obama has followed up on his support for 'a new generation of safe, clean nuclear power plants,' laid out Jan. 27 in his State of the Union speech, by proposing to triple public financing for nuclear power...

"Budget hawks have a different set of concerns. They oppose government 'subsidies' to the industry (in the form of federal loan guarantees), saying taxpayers assume a huge risk given the industry's track record of cost overruns – and loan defaults – in the 1980s.

Patterns of energy production and use threaten the stability of eco-systems and the health and well-being of current and future generations. Still, energy subsidies worldwide amount to around USD 300.000 billion per year, or around 0.7 per cent of GDP.

Somewhere in Germany, a trucker is thanking you. A biofuel executive is cursing you. You probably don’’t know it, but you paid $1 for each gallon of the Brazilian biodiesel fuel blend the trucker is using. The fuel-maker is upset because your generous contribution is driving down the price at which he can sell his product.

For their elation and disgust, for your impoverishment, and probably for some harm to the environment as well, you can blame the United States Congress. This all results from yet another misguided attempt to manipulate economic behavior through the tax code...