United States: Still subsidising dirty energy

May 29, 2010
About $70 billion flows annually to the global fossil fuel industry, but subsidies for producing renewable energy are far lower.

At the G20 Economic Forum in Pittsburgh in September, President Barack Obama said his administration would combat climate change by phasing out the US government’s grandiose subsidies to the fossil fuel industry.

But a report released on April 13 by Synapse Energy Economics (SEE) said Obama hadn’t followed through on his promise to cut dirty energy handouts.

The study, titled “Phasing Out Federal Subsidies for Coal”, said Obama was overseeing the continuation of taxpayer resources being given away to build and expand arguably the largest contributor to global warming — coal-fired power plants.

Steve Kretzman, from Oil Change International, said: “On an annual basis, globally, there are at least [US]$250 billion dollars in global fossil fuel subsides, and some people will think that number is closer to $400 billion.”

The US is the leading shareholder in the globe’s top lender, the World Bank. The bank recently approved a staggering $3.75 billion loan for the construction of a coal-fired power plant in South Africa. The bank finances fossil fuel extraction and coal plant retrofitting all over the world.

Since the United Nations Framework Convention on Climate Change came into effect in 1994, international financial institutions have doled out more than $137 billion in direct and indirect support for new coal-fired power plants.

The World Bank’s own Extractive Industries Review has even recommended the bank stops financing coal and oil development. This has been ignored.

The SEE report authors said: “The US government should take aggressive action to make the World Bank follow the recommendation of its own Extractive Industries Review and withdraw from financing coal development.

“If the bank refuses to do so and, instead, approves projects, the US should phase out our support.”

Coal subsidies keep the cost of consumption for consumers artificially low because production prices are decreased. As such, the true costs, environmental as well as economic, aren't included in the price of coal.

About $70 billion a year flows to the global fossil fuel industry, but subsidies for producing renewable energy are far lower.

Kretzman said: “You know, solar, wind, efficiency — these things get about $12 billion on an annual basis ... So that’s a really imbalanced energy market.

“A few years back, there was a study of climate change in particular, and it was noted by Nicholas Stern, who was the World Bank’s chief economist, that climate change is the greatest market failure of all time, and that the subsidies — the fossil fuel subsidies — are the major reason for this market distortion.”

Even so, Obama has not taken any substantive measures to curb the enormous subsidies that flow to the fossil fuel industries, coal in particular. Many federal policies, as SEE’s study indicated, are in conflict with the administration’s alleged efforts to adopt a clean energy policy.

Obama’s administration is also investing more taxpayer dollars into the research and development of so-called clean-coal technology.

In February 2009, a total of $3.4 billion was set aside for carbon capture and sequestration (CCS) projects, otherwise known as “clean coal”.

In December, energy secretary Stephen Chu announced that the Summit Power Group in Texas would receive the first installment of $350 million to help develop the state’s first CCS project, known as the Texas Clean Energy Project.

It was the largest award given so far by the Department of Energy’s (DoE) Clean Coal Power Initiative, which was enacted by former president George W. Bush.

In Obama’s home state of Illinois, the DoE is also funding a clean-coal project known as FutureGen, which would also employ CCS technology. In all, this administration has set aside $1 billion to promote the project.

There is still not a single CCS commercial project operating anywhere in the world. Taxpayer dollars, critics claim, should instead be invested in renewables such as wind, solar and geothermal.

Tom Smith, executive director of Public Citizen in Texas, said: “We don’t support the use of coal for electrical generation, period. There are significant problems with the mining of coal ...

“[T]hen you have significant problems with coal waste disposal, like coal ash in Tennessee or contamination of watersheds.”

Other critics of clean-coal theories state the technology, in reality, is simply unattainable.

In theory, for CCS to work, large underground geological formations would have to house this carbon dioxide. But a recent peer-reviewed article in the Society of Petroleum Engineers’ publication said the CCS jig is up because the technology just doesn’t seem feasible.

Report author Professor Michael Economides wrote in a February 20 editorial for the Casper, Wyoming Star-Tribune: “Earlier published reports on the potential for sequestration fail to address the necessity of storing CO2 in a closed system.

“Our calculations suggest that the volume of liquid or supercritical CO2 to be disposed cannot exceed more than about 1 percent of pore space.

“This will require from 5 to 20 times more underground reservoir volume than has been envisioned by many, including federal government laboratories, and it renders geologic sequestration of CO2 a profoundly non-feasible option for the management of CO2 emissions.

Economides concluded: “There is no need to research this subject any longer. Let’s try something else.”

To put this in laymen’s terms, the areas that would house carbon produced from coal plants will have to be much larger than originally predicted. So much so, in fact, that it makes CCS impossible to implement.

By Economides’ projections, a small 500 megawatt plant’s underground CO2 reservoir would need to be the size of a small state like Vermont to even work.

The SEE report said: “The [subsidisation of coal] not only sets the nation back in achieving energy and environmental policy goals, but also places taxpayer dollars at risk.”

[Abridged from Alternet. Joshua Frank is co-author with Jeffrey St. Clair of Red State Rebels: Tales of Grassroots Resistance in the Heartland.]

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