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Fossil fuels subsidized by $10m a minute, says IMF

Repost from The Guardian
[Editor:  See additional coverage in the Wall Street Journal, “IMF Estimates Trillions in Hidden Fossil-Fuel Costs” … and in Salon, “Big Oil’s astronomical hand-out: Fossil fuels receive $5.3 trillion in global subsidies each year.”  – RS]

Fossil fuels subsidised by $10m a minute, says IMF

By Damian Carrington, 18 May 2015 09.30 EDT

‘Shocking’ revelation finds $5.3tn subsidy estimate for 2015 is greater than the total health spending of all the world’s governments

Fossil fuel companies are benefitting from global subsidies of $5.3tn (£3.4tn) a year, equivalent to $10m a minute every day, according to a startling new estimate by the International Monetary Fund.

The IMF calls the revelation “shocking” and says the figure is an “extremely robust” estimate of the true cost of fossil fuels. The $5.3tn subsidy estimated for 2015 is greater than the total health spending of all the world’s governments.

The vast sum is largely due to polluters not paying the costs imposed on governments by the burning of coal, oil and gas. These include the harm caused to local populations by air pollution as well as to people across the globe affected by the floods, droughts and storms being driven by climate change.

Nicholas Stern, an eminent climate economist at the London School of Economics, said: “This very important analysis shatters the myth that fossil fuels are cheap by showing just how huge their real costs are. There is no justification for these enormous subsidies for fossil fuels, which distort markets and damages economies, particularly in poorer countries.”

Lord Stern said that even the IMF’s vast subsidy figure was a significant underestimate: “A more complete estimate of the costs due to climate change would show the implicit subsidies for fossil fuels are much bigger even than this report suggests.”

The IMF, one of the world’s most respected financial institutions, said that ending subsidies for fossil fuels would cut global carbon emissions by 20%. That would be a giant step towards taming global warming, an issue on which the world has made little progress to date.

Ending the subsidies would also slash the number of premature deaths from outdoor air pollution by 50% – about 1.6 million lives a year.

Furthermore, the IMF said the resources freed by ending fossil fuel subsidies could be an economic “game-changer” for many countries, by driving economic growth and poverty reduction through greater investment in infrastructure, health and education and also by cutting taxes that restrict growth.

Another consequence would be that the need for subsidies for renewable energy – a relatively tiny $120bn a year – would also disappear, if fossil fuel prices reflected the full cost of their impacts.

“These [fossil fuel subsidy] estimates are shocking,” said Vitor Gaspar, the IMF’s head of fiscal affairs and former finance minister of Portugal. “Energy prices remain woefully below levels that reflect their true costs.”

David Coady, the IMF official in charge of the report, said: “When the [$5.3tn] number came out at first, we thought we had better double check this!” But the broad picture of huge global subsidies was “extremely robust”, he said. “It is the true cost associated with fossil fuel subsidies.”

The IMF estimate of $5.3tn in fossil fuel subsidies represents 6.5% of global GDP. Just over half the figure is the money governments are forced to spend treating the victims of air pollution and the income lost because of ill health and premature deaths. The figure is higher than a 2013 IMF estimate because new data from the World Health Organisation shows the harm caused by air pollution to be much higher than thought.

Coal is the dirtiest fuel in terms of both local air pollution and climate-warming carbon emissions and is therefore the greatest beneficiary of the subsidies, with just over half the total. Oil, heavily used in transport, gets about a third of the subsidy and gas the rest.

The biggest single source of air pollution is coal-fired power stations and China, with its large population and heavy reliance on coal power, provides $2.3tn of the annual subsidies. The next biggest fossil fuel subsidies are in the US ($700bn), Russia ($335bn), India ($277bn) and Japan ($157bn), with the European Union collectively allowing $330bn in subsidies to fossil fuels.

The costs resulting from the climate change driven by fossil fuel emissions account for subsidies of $1.27tn a year, about a quarter, of the IMF’s total. The IMF calculated this cost using an official US government estimate of $42 a tonne of CO2 (in 2015 dollars), a price “very likely to underestimate” the true cost, according to the UN’s Intergovernmental Panel on Climate Change.

The direct subsidising of fuel for consumers, by government discounts on diesel and other fuels, account for just 6% of the IMF’s total. Other local factors, such as reduced sales taxes on fossil fuels and the cost of traffic congestion and accidents, make up the rest. The IMF says traffic costs are included because increased fuel prices would be the most direct way to reduce them.

Christiana Figueres, the UN’s climate change chief charged with delivering a deal to tackle global warming at a crunch summit in December, said: “The IMF provides five trillion reasons for acting on fossil fuel subsidies. Protecting the poor and the vulnerable is crucial to the phasing down of these subsidies, but the multiple economic, social and environmental benefits are long and legion.”

Barack Obama and the G20 nations called for an end to fossil fuel subsidies in 2009, but little progress had been made until oil prices fell in 2014. In April, the president of the World Bank, Jim Yong Kim, told the Guardian that it was crazy that governments were still driving the use of coal, oil and gas by providing subsidies. “We need to get rid of fossil fuel subsidies now,” he said.

Reform of the subsidies would increase energy costs but Kim and the IMF both noted that existing fossil fuel subsidies overwhelmingly go to the rich, with the wealthiest 20% of people getting six times as much as the poorest 20% in low and middle-income countries. Gaspar said that with oil and coal prices currently low, there was a “golden opportunity” to phase out subsidies and use the increased tax revenues to reduce poverty through investment and to provide better targeted support.

Subsidy reforms are beginning in dozens of countries including Egypt, Indonesia, Mexico, Morocco and Thailand. In India, subsidies for diesel ended in October 2014. “People said it would not be possible to do that,” noted Coady. Coal use has also begun to fall in China for the first time this century.

On renewable energy, Coady said: “If we get the pricing of fossil fuels right, the argument for subsidies for renewable energy will disappear. Renewable energy would all of a sudden become a much more attractive option.

Shelagh Whitley, a subsidies expert at the Overseas Development Institute, said: “The IMF report is yet another reminder that governments around the world are propping up a century-old energy model. Compounding the issue, our research shows that many of the energy subsidies highlighted by the IMF go toward finding new reserves of oil, gas and coal, which we know must be left in the ground if we are to avoid catastrophic, irreversible climate change.”

Developing the international cooperation needed to tackle climate change has proved challenging but a key message from the IMF’s work, according to Gaspar, is that each nation will directly benefit from tackling its own fossil fuel subsidies. “The icing on the cake is that the benefits from subsidy reform – for example, from reduced pollution – would overwhelmingly accrue to local populations,” he said.

“By acting local, and in their own best interest, [nations] can contribute significantly to the solution of a global challenge,” said Gaspar. “The path forward is clear: act local, solve global.”

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    US taxpayers subsidizing world’s biggest fossil fuel companies

    Repost from The Guardian

    US taxpayers subsidising world’s biggest fossil fuel companies

    Shell, ExxonMobil and Marathon Petroleum got subsidises granted by politicians who received significant campaign contributions from the fossil fuel industry, Guardian investigation reveals
    By Damian Carrington and Harry Davies, 12 May 2015 07.00 EDT
    Marathon Petroleum refinery in Canton, Ohio, got a job subsidy scheme worth $78m when it started in 2011. Photograph: PR

    The world’s biggest and most profitable fossil fuel companies are receiving huge and rising subsidies from US taxpayers, a practice slammed as absurd by a presidential candidate given the threat of climate change.

    A Guardian investigation of three specific projects, run by Shell, ExxonMobil and Marathon Petroleum, has revealed that the subsidises were all granted by politicians who received significant campaign contributions from the fossil fuel industry.

    The Guardian has found that:

    • A proposed Shell petrochemical refinery in Pennsylvania is in line for $1.6bn (£1bn) in state subsidy, according to a deal struck in 2012 when the company made an annual profit of $26.8bn.
    • ExxonMobil’s upgrades to its Baton Rouge refinery in Louisiana are benefitting from $119m of state subsidy, with the support starting in 2011, when the company made a $41bn profit.
    • A jobs subsidy scheme worth $78m to Marathon Petroleum in Ohio began in 2011, when the company made $2.4bn in profit.

    “At a time when scientists tell us we need to reduce carbon pollution to prevent catastrophic climate change, it is absurd to provide massive taxpayer subsidies that pad fossil-fuel companies’ already enormous profits,” said senator Bernie Sanders, who announced on 30 April he is running for president.

    Sanders, with representative Keith Ellison, recently proposed an End Polluter Welfare Act, which they say would cut $135bn of US subsidies for fossil fuel companies over the next decade. “Between 2010 and 2014, the oil, coal, gas, utility, and natural resource extraction industries spent $1.8bn on lobbying, much of it in defence of these giveaways,” according to Sanders and Ellison.

    In April, the president of the World Bank called for the subsidies to be scrapped immediately as poorer nations were feeling “the boot of climate change on their neck”. Globally in 2013, the most recent figures available,the coal, oil and gas industries benefited from subsidies of $550bn, four times those given to renewable energy.

    “Subsidies to fossil fuel companies are completely inappropriate in this day and age,” said Stephen Kretzmann, executive director of Oil Change International, an NGO that analyses the costs of fossil fuels. OCI found in 2014 that US taxpayers were subsidising fossil fuel exploration and production alone by $21bn a year. In 2009, President Barack Obama called on the G20 to eliminate fossil fuel subsidies but since then US federal subsidies have risen by 45%.

    “Climate science is clear that the vast majority of existing reserves will have to stay in the ground,” Kretzmann said. “Yet our government spends many tens of billions of our tax dollars – every year – making it more profitable for the fossil fuel industry to produce more.”

    Tax credits, defined as a subsidy by the World Trade Organisation, are a key route of support for the fossil fuel industry. Using the subsidy tracker tool created by the Good Jobs First group, the Guardian examined some of the biggest subsidies for specific projects.

    Shell’s proposed $4bn plant in Pennsylvania is set to benefit from tax credits of $66m a year for 25 years. Shell has bought the site and has 10 supply contracts in place lasting up to 20 years, including from fracking companies extracting shale gas in the Marcellus shale field. The deal was struck by the then Republican governor, Tom Corbett, who received over $1m in campaign donations from the oil and gas industry. According to Guardian analysis of data compiled by Common Cause Pennsylvania, Shell have spent $1.2m on lobbying in Pennsylvania since 2011.

    A Shell spokesman said: “Shell supports and endorses incentive programmes provided by state and local authorities that improve the business climate for capital investment, economic expansion and job growth. Shell would not have access to these incentive programmes without the support and approval from the representative state and local jurisdictions.”

    ExxonMobil’s Baton Rouge refinery is the second-largest in the US. Since 2011, it has been benefitting from exemptions from industrial taxes, worth $118.9m over 10 years, according to the Good Jobs First database. The Republican governor of Louisiana, Bobby Jindal has expressed his pride in attracting investment from ExxonMobil. In state election campaigns between 2003 and 2013, he received 231 contributions from oil and gas companies and executives totalling $1,019,777, according to a list compiled by environmental groups.

    A spokesman for ExxonMobil said: “ExxonMobil will not respond to Guardian inquiries because of its lack of objectivity on climate change reporting demonstrated by its campaign against companies that provide energy necessary for modern life, including newspapers.”

    The Guardian is running a campaign asking the world’s biggest health charities, the Bill and Melinda Gates Foundation and the Wellcome Trust, to sell their fossil fuel investments on the basis that it is misguided to invest in companies dedicated to finding more oil, gas and coal when current reserves are already several times greater than can be safely burned. Many philanthropic organisations have already divested from fossil fuels, including the Rockefeller Brothers Fund whose wealth derives from Standard Oil, which went on to become ExxonMobil.

    In Ohio, Marathon Petroleum is benefitting from a 15-year tax credit for retaining 1,650 jobs and a 10-year tax credit for creating 100 new jobs. The subsidy is worth $78.5m, according to the Good Jobs First database. “I think Marathon always wanted to be here,” Republican governor John Kasich said in 2011. “All we’re doing is helping them.” In 2011, Kasich was named as the top recipient of oil and gas donations in Ohio, having received $213, 519. The same year Kasich appointed Marathon Petroleum’s CEO to the board of Jobs Ohio, a semi-private group “in charge of the economic growth in the state of Ohio”.

    A spokesman for Marathon Petroleum said: “The tax credit recognises the enormous contribution we make to the Ohio economy through the taxes we pay and the well-paying jobs we maintain. We have more than doubled the 100 new jobs we committed to create.” The spokesman said the company paid billions of dollars in income and other taxes every year across the US.

    “Big oil, gas, and coal have huge influence on politicians and governments and they get that influence the old fashioned way – they buy it,” said Kretzmann. “Through campaign finance, lobbying, advertising and superpac spending, the industry has many ways to influence candidates and government officials seeking re-election.”

    He said fossil fuel subsidies were endemic in the US: “Every single well, pipeline, refinery, coal and gas plant in the country is heavily subsidised. Big Fossil’s lobbyists have done their jobs well for the last century.”

    Ben Schreiber, at Friends of the Earth US, said. “There is a vibrant discussion about the best way to keep fossil fuels in the ground – from carbon taxation to divestment – but ending state and federal corporate welfare for polluters is one of the easiest places to start.”

    Schreiber also defended subsidies for renewable energy: “Fossil fuels are a mature technology while renewable energy is nascent and still developing. It makes sense to subsidise technologies that are going to help solve climate change, but not to do the same for those that are causing the problem.”

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      UN summit: Businesses and investors pressing for green policy

      Repost from The Associated Press

      Businesses and investors pressing for green policy

      By Johathan Fahey, AP Energy Writer, September 22, 2014
      AP Photo
      In this Saturday, Jan. 10, 2009, file photo, a flock of geese fly past a smokestack at the Jeffery Energy Center coal power plant near Emmitt, Kan. Hundreds of corporations, insurance companies and pension funds are calling on world leaders gathering for a U.N. summit on climate change this week to attack the problem by making it more costly for businesses to pollute. (AP Photo/Charlie Riedel, File)

      NEW YORK (AP) — Hundreds of corporations, insurance companies and pension funds are calling on world leaders gathering for a U.N. summit on climate change this week to attack the problem by making it more costly for businesses and ordinary people to pollute.

      The idea, long advocated by policymakers, economists and environmental activists, is that the world can’t hope to slow the heating of the planet until its cost is incorporated into the everyday activities that contribute to it, such as using gas- or coal-generated electricity, driving a car, shipping a package or flying around the globe.

      Business leaders representing trillions of dollars in revenue and retirement savings say they worry that global warming threatens the long-term value of their investments, and they want world leaders to adopt policies that would provide a financial incentive to people to clean up their act.

      That could include a tax on carbon emissions, a cap or some other mechanism.

      “There’s a market failure that needs to be fixed,” said Anne Simpson, senior portfolio manager and director of global governance at the $300 billion California Public Employees’ Retirement System, the largest public pension fund in the U.S.

      Despite a broad consensus that something needs to be done, it has been impossible so far for global leaders to agree on how to implement what amounts to a price on pollution, because energy is so important for economic growth.

      “It may be easier to get large businesses to agree that something should be done than to get them to coalesce around specific policy measures,” said Michael Levi, senior fellow for energy and the environment at the Council on Foreign Relations.

      At Tuesday’s U.N. summit, 120 world leaders will try to summon some of the considerable political will required if a new climate treaty is to be reached at international negotiations next year in Paris. The one-day summit is part of U.N. Secretary-General Ban Ki-moon’s push to help world leaders to reach a goal they set in 2009: prevent Earth’s temperature from rising more than 2 degrees Fahrenheit (1.1 degrees Celsius) from where it is now.

      On Sunday, scientists announced that the world set another record last year for the amount of carbon pollution spewed into the atmosphere.

      Ahead of the summit, business leaders such as Apple’s Tim Cook renewed or expanded pledges to help the planet by running their businesses more efficiently, investing in renewable energy or pulling their investments from fossil fuel companies.

      Last week, CalPERS and other big asset-holders such as the insurance and financial firms Allianz, BlackRock and AXA Group called for a “meaningful” price on carbon emissions. The World Bank said Monday that 73 countries and more than 1,000 companies have expressed their support for a price on carbon.

      Also on Monday, a parade of business and political leaders tried to rally support in a series of speeches in New York.

      “It doesn’t cost more to deal with climate change; it costs more to ignore it,” said Secretary of State John Kerry.

      Cook said customers care about the planet and will “vote with their dollars” for sustainably produced products. He outlined the steps Apple is taking to reduce the carbon emissions of its products and its supply chain, and called for broader action.

      “The long-term consequences of not addressing climate change are huge,” he said. “I don’t think anyone can overstate that.”

      While many insist a transition to a cleaner economy can boost economic growth or at least not harm it, many worry it would slow the global economy and make it more difficult for people in developing nations to get access to even basic electricity and transportation. Even those who agree that the transition must take place can’t agree on how to do it.

      The International Energy Agency estimates that $1 trillion per year must be invested through 2050 in clean energy in order to keep global temperatures from rising past a level that scientists consider especially dangerous.

      Charging a price for carbon emissions could prod polluters to change their ways by making it in their financial self-interest to do so. It would make fossil fuel investments less profitable and therefore less attractive. And it would make clean energy more lucrative.

      A host of new investment vehicles are already making it easier for investors and others to sink their money into renewable projects. The market for so-called green bonds – tax-free bonds that fund clean energy, energy efficiency or other sustainable projects – is expected to at least double to $20 billion this year, for example.

      Last week the $188 billion California Teachers’ Retirement System announced its intention to boost its investment in clean energy and technology to $3.7 billion from $1.4 billion over the next five years and said that could rise to $9.5 billion with changes in policy. Warren Buffet has said he is looking to double his $15 billion in investments in wind and solar projects.

      On another front, a group of activists is calling on foundations and endowments to reduce or eliminate investments in fossil fuel-related companies and direct that money toward clean energy. The group, the Divest-Invest Coalition, said Monday that foundations representing $50 billion in assets have signed on, though the fossil-fuel investments in those portfolios are a very small percentage of the total.

      Despite these signs, annual global investment in clean energy is only a quarter of what the IEA estimates is required.

      “We’re moving tens or even hundreds of billions, but we’re looking at a $1 trillion every year, and if we’re looking at $1 trillion, we need policy,” said David Pitt-Watson, chairman of the U.N. Environment Program’s Finance Initiative.

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