Eliminating subsidies for coal, gas and oil could save as much as Germany's annual greenhouse gas emissions each year by 2015, according to Fatih Birol, chief economist at the International Energy Agency (IEA). While the G20 pledged in 2009 to phase out such fossil fuel subsidies in the "medium term", the hundreds of billions that governments spend each year rose in 2010.
Energy is significantly underpriced in many parts of the world, leading to wasteful consumption, price volatility and fuel smuggling. It's also undermining the competitiveness of renewables, Birol told The Guardian.
According to IEA research, 37 governments spent $409bn on artificially lowering the price of fossil fuels in 2010. Critics say the subsidies significantly boost oil and gas consumption and disadvantage renewable energy technologies, which received only $66bn of subsidies in the same year.
A phase-out would avoid 750m tonnes of CO2 a year by 2015, potentially rising to 2.6 gigatonnes by 2035, a level sufficient to provide half the emissions reductions needed to limit global warming to 2C, considered the limit of safety by many scientists.
That brings us back to our old question: who will bell the cat? Which government will brave it, to lose votes?
Showing posts with label Subsidies. Show all posts
Showing posts with label Subsidies. Show all posts
Thursday, January 19, 2012
Thursday, June 10, 2010
Time to remove the appendicitis
A draft of a comprehensive new study from the International Energy Agency reveals that total global subsidies to dirty fossil-fuel energy amount to $550 billion a year -- about 75 percent more than previously thought.
The Financial Times that got a peak at the draft quotes chief IEA economist Faith Birol: "I see fossil fuel subsidies as the appendicitis of the global energy system, which needs to be removed for a healthy, sustainable development future."
The IEA estimates that energy consumption could be reduced by 850m tonnes equivalent of oil -- or the combined current consumption of Japan, South Korea, Australia, and New Zealand -- if the subsidies are phased out between now and 2020. The consumption cut would save the equivalent of the current carbon dioxide emissions of Germany, France, the U.K., Italy, and Spain.
Meanwhile, a major new report from environmental group Greenpeace says that existing technologies can provide 95% renewable electricity by 2050 without affecting economic growth.
The Energy [R]evolution also claims that this can be achieved while phasing out nuclear power and creating 12 million jobs by 2030 – a third more in the global power sector than if a ‘business as usual approach’ is continued.
The scenario modelled in the report proposes an investment system that shares costs fairly and would provide energy to two billion currently without access to a reliable supply.
Global CO2 emissions under the plan would peak in 2015 and then start falling, by 2050 emissions would be 80% lower than 1990 levels.
The Energy [R]evolution relies on a decentralised energy system, producing power and heat close to point of use to minimise energy wastage from conversion and distribution.
A supergrid, however, would be needed to transport large amounts of offshore wind and concentrating solar power to where it is needed.
Greenpeace proposes phasing out all subsidies for fossil fuels and nuclear power and setting mandatory targets for renewable energy and combined heat and power generation. Renewable generators would also be granted priority access to the grid.
Feed-in tariffs would be used to guarantee returns for investors and cap-and-trade emissions trading would be used to make the energy sector bear the brunt of energy production costs.
All energy-consuming appliances, buildings and vehicles would be subject to strict efficiency standards and better labelling would be required to inform consumers about the environmental performance of products.
But all that after the appendicitis operation.
The Financial Times that got a peak at the draft quotes chief IEA economist Faith Birol: "I see fossil fuel subsidies as the appendicitis of the global energy system, which needs to be removed for a healthy, sustainable development future."
The IEA estimates that energy consumption could be reduced by 850m tonnes equivalent of oil -- or the combined current consumption of Japan, South Korea, Australia, and New Zealand -- if the subsidies are phased out between now and 2020. The consumption cut would save the equivalent of the current carbon dioxide emissions of Germany, France, the U.K., Italy, and Spain.
Meanwhile, a major new report from environmental group Greenpeace says that existing technologies can provide 95% renewable electricity by 2050 without affecting economic growth.
The Energy [R]evolution also claims that this can be achieved while phasing out nuclear power and creating 12 million jobs by 2030 – a third more in the global power sector than if a ‘business as usual approach’ is continued.
The scenario modelled in the report proposes an investment system that shares costs fairly and would provide energy to two billion currently without access to a reliable supply.
Global CO2 emissions under the plan would peak in 2015 and then start falling, by 2050 emissions would be 80% lower than 1990 levels.
The Energy [R]evolution relies on a decentralised energy system, producing power and heat close to point of use to minimise energy wastage from conversion and distribution.
A supergrid, however, would be needed to transport large amounts of offshore wind and concentrating solar power to where it is needed.
Greenpeace proposes phasing out all subsidies for fossil fuels and nuclear power and setting mandatory targets for renewable energy and combined heat and power generation. Renewable generators would also be granted priority access to the grid.
Feed-in tariffs would be used to guarantee returns for investors and cap-and-trade emissions trading would be used to make the energy sector bear the brunt of energy production costs.
All energy-consuming appliances, buildings and vehicles would be subject to strict efficiency standards and better labelling would be required to inform consumers about the environmental performance of products.
But all that after the appendicitis operation.
Saturday, January 3, 2009
Gorging on the common menu
Oil prices are going down and will continue to. This is mostly due to a combination of inflation and cut in production. However, lulled by this, people are back to splurging on road travel and buying cars, not only in India but also in ‘depressed’ US!
This is where we need farsighted leaders to act in unpopular ways and impose bigger taxes on oil and automobiles. Not only will this reduce oil consumption but also help slowdown global warming. Oil is a fast depleting resource and making it cheap will only see it vanish faster. Do we leave some for the future generations or drink it all up?
As Daryl Siry, former marketing officer with Tesla Motors, puts it, ‘Global warming and concern about CO2 emissions is a global, social problem that has extraordinary long term impacts but when you look at it on an individual level, the marginal returns that a selfish individual can gain by ignoring the greater good far exceeds the marginal cost to that individual in the short run. In the long run, though, everyone pays more.’
He gives a very apt analogy that hits the hammer on the nail! ‘For those not familiar with this concept of economics, an example that everyone has experienced is the group dinner where everyone agrees to split the bill. Relieved of their individual accountability to pay for only what they use, each person orders more than what they would normally order, knowing that the additional costs will be borne by the group. The individual also reasons that if they alone behave responsibly, they will not be rewarded with a lower bill but rather will still have to bear the higher cost of the average bill.
‘The predictable result is that the average bill is much higher than if each paid their own way. A nasty side effect is paranoia and suspicion, as people watch what their friends are ordering and get angry at the irresponsibility of each other.’
He goes on to conclude on a pessimistic (but realistic) note why the coming months will see environmentalism buckling under popular pressures, as every one proceeds to gorge on the planet’s resources.
There is no dearth of climate science nay-sayers even today. Petitions by scientists and their following are passé.
Somehow these people seem to be missing a bigger point. The path of unrestrained consumption they promote is just not sustainable, climate included or not! It simply will not be enough for too long unless we cut down our consumption and waste.
On the subject of tax, and why consumption taxes are better than income taxes, read what a professor of economics at Harvard University has to say in his blog. ‘Gas is a component of consumption. An increased reliance on gas taxes over income taxes would make the tax code more favorable to growth. It would also encourage firms to devote more R&D spending to the search for gasoline substitutes.’
Should the price on petrol and diesel be slashed or taxed further? Would it not be a good idea to slash personal income taxes and up the consumption gas on fuel? Let us know what you think.
This is where we need farsighted leaders to act in unpopular ways and impose bigger taxes on oil and automobiles. Not only will this reduce oil consumption but also help slowdown global warming. Oil is a fast depleting resource and making it cheap will only see it vanish faster. Do we leave some for the future generations or drink it all up?
As Daryl Siry, former marketing officer with Tesla Motors, puts it, ‘Global warming and concern about CO2 emissions is a global, social problem that has extraordinary long term impacts but when you look at it on an individual level, the marginal returns that a selfish individual can gain by ignoring the greater good far exceeds the marginal cost to that individual in the short run. In the long run, though, everyone pays more.’
He gives a very apt analogy that hits the hammer on the nail! ‘For those not familiar with this concept of economics, an example that everyone has experienced is the group dinner where everyone agrees to split the bill. Relieved of their individual accountability to pay for only what they use, each person orders more than what they would normally order, knowing that the additional costs will be borne by the group. The individual also reasons that if they alone behave responsibly, they will not be rewarded with a lower bill but rather will still have to bear the higher cost of the average bill.
‘The predictable result is that the average bill is much higher than if each paid their own way. A nasty side effect is paranoia and suspicion, as people watch what their friends are ordering and get angry at the irresponsibility of each other.’
He goes on to conclude on a pessimistic (but realistic) note why the coming months will see environmentalism buckling under popular pressures, as every one proceeds to gorge on the planet’s resources.
There is no dearth of climate science nay-sayers even today. Petitions by scientists and their following are passé.
Somehow these people seem to be missing a bigger point. The path of unrestrained consumption they promote is just not sustainable, climate included or not! It simply will not be enough for too long unless we cut down our consumption and waste.
On the subject of tax, and why consumption taxes are better than income taxes, read what a professor of economics at Harvard University has to say in his blog. ‘Gas is a component of consumption. An increased reliance on gas taxes over income taxes would make the tax code more favorable to growth. It would also encourage firms to devote more R&D spending to the search for gasoline substitutes.’
Should the price on petrol and diesel be slashed or taxed further? Would it not be a good idea to slash personal income taxes and up the consumption gas on fuel? Let us know what you think.
Monday, October 20, 2008
Time for Shastang Surya Namaskar
Guess who said this: ‘We should not give in to those who say environment goals should take a back seat till economy improves… that would be short-sighted.’That was California governor Arnold Schwarzenegger, addressing a solar energy conference. Under his leadership, the state has been leading in green initiatives. The above quote was at a time the US markets were at the peak of their fall.
Such conviction is as much a booster to the renewable energy sector as the recent tax incentive legislation that was made a law. The extension of tax credits in the US has seen maximum advantage to the solar sector with eight years while wind, hydro, etc got between 1-2 years. Tax credits can cover around 30 percent of project costs for solar. Homeowners in the US with solar PVs installed also can avail 30 percent tax credit.
The whole exercise amounts to $18 billion which is to be paid by closing tax loopholes for oil and gas industry.
India has also announced a number of incentives like subsidy, soft loan, 80 percent accelerated depreciation, confessional duty on import of raw materials and certain products, excise duty exemption on certain devices/systems etc. for the production and use of solar energy systems. The Indian Renewable Energy Development Agency provides revolving fund to financing and leasing companies offering affordable credit for purchase of PV systems.
India’s National Action Plan on Climate Change (NAPCC) is likely to become a significant driver of new investment opportunities in the country’s renewable energy portfolio, and in solar generation in particular. Its national Solar Mission to be ready this year end will chart the route for boosting solar PV production by 1000 MW annually by 2017, and another 1000 MW from CSP by the same period.
A generation based incentive has been offered for solar since this year. The generator claims subsidies based on the power it supplies to the grid. A financial assistance of Rs 12 per kilowatt hour in case of solar photovoltaic and Rs 10 per kilowatt hour in case of solar thermal power is being given by the MNRE. Financial incentives for the semiconductor industry is also expected to aid the solar sector.
But doubts still persist.
For the capital intensive sector that it is, linking subsidies to performance could deter investors. But making it capital based would mean that higher the capital, more the subsidy and hence there is no effort to keep costs down. That has been the evidence due to which the new generation based subsidy is being tried out. It had also been seen that high thresholds for capital subsidies meant few players could enter the arena.
Low interest long-term finance is what many seek. Others believe interest subsidies along with generation subsidies will be a sure recipe for wooing many.
It is calculated that India receives 5000 trillion kilowatt-hours of solar energy annually, and that even 1 percent of this harnessed could meet all the energy demands required in 2030! What stops us then?
In an industry that has focused on manufacture and exports instead of adoption, lack of infrastructure has been a big deterrent. Evacuation networks or networks that carry the power generated into the grid need to be put in place. At present hardly 2 MW of solar power is grid-linked.
Perhaps as manufacturing that caters to growing domestic demand picks up (with many companies like Signet Solar, Tata BP Solar, Moser Baer, investing thousands of crores into their plants,) costs will come down. But what many advocate is a feed-in tariff, where an assured and high rate, is fixed for power fed into the grid. That is believed to have been behind the success of solar in Germany where rates three and four times that of market rate was offered. It hardly meant a 2 percent rise in bills for customers.
Any reason why India should not opt for this? Besides the fact that UK still believes it is too 'interventionist' and prefers to go by RPOs. Lol! we still look up there for guidance, right?
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