New analysis shows that government support for fossil fuel industry is about 10 times that offered to renewable energy firms
guardian.co.uk, Tuesday 3 August 2010
Despite repeated pledges to phase out fossil fuel subsidies and criticism from some quarters that government support for renewable energy technologies is too generous, global subsidies provided to renewable energy and biofuels are dwarfed by those enjoyed by the fossil fuel industry.
That is the conclusion of a major report released late last week by analyst Bloomberg New Energy Finance, which analyses subsidies and incentive schemes offered globally to developers of renewable energy and biofuel technologies and projects.
The report concludes that in 2009 governments provided subsidies worth between $43bn (£27bn) and $46bn to renewable energy and biofuel industries, including support provided through feed-in tariffs, renewable energy credits, tax credits, cash grants and other direct subsidies.
In contrast, estimates from the International Energy Agency (IEA) released in June showed that $557bn was spent by governments during 2008 to subsidise the fossil fuel industry.
Michael Liebreich, chief executive of Bloomberg New Energy Finance, said the study revealed that investors reluctant to finance renewable energy industries because they believe them to be heavily subsidised were operating under a misapprehension.
"One of the reasons the clean energy sector is starved of funding is because mainstream investors worry that renewable energy only works with direct government support," he said. "Setting aside the fact that in many cases clean energy competes on its own merits – for instance in the case of well-situated wind farms and Brazilian sugarcane ethanol – this analysis shows that the global direct subsidy for fossil fuels is around 10 times the subsidy for renewables."
However, the report predicted that the gap between fossil fuel and renewable energy subsidies should "narrow considerably" this year as support for renewable and biofuels increases as a result of green government stimulus packages worth an estimated $188bn, and fossil fuel subsidies operated by countries such as China are cut in line with falling oil prices.
The study said sizeable renewable energy subsidy schemes were emerging, with the US providing $18.2bn in renewable energy and biofuel subsidies in 2009, China offering direct subsidies worth $2bn alongside low-interest loans from state banks, and Germany providing about $19.5bn worth of support through its widely adopted feed-in tariff scheme.
However, the report will further increase pressure on G20 countries to make good on their recent pledge to phase out fossil fuel subsidies – a move that the IEA believes could single-handedly slash global carbon emissions by up to seven per cent.
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