Fossil fuel subsidies

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The fundamental reason the “free market” ideal is unhelpful in energy is that it’s impossible to ever truly settle what is and isn’t a market-distorting subsidy. Some subsidies, like explicit cash grants or tax breaks, are easy enough to identify, but beyond that there is a whole complex world of implicit subsidies. If an energy source has negative impacts that are not incorporated in its market price (negative “externalities,” in the jargon), that means other people are paying for those impacts. The source is implicitly subsidized. Here’s the thing: Every energy source and energy industry has both positive and negative externalities. Deciding which ones “distort markets,” which ones count as implicit subsidies (or implicit taxes) virtually always comes down to a subjective judgment.

And the implicit subsidies dwarf the explicit subsidies, so arguing about the latter while unable to agree on the former is uniquely pointless.
In practice, most political disputes over subsidies just end up obscuring values-based arguments about what kind of future we want behind a veil of pseudo-objective economic jargon. One’s own favored energy sources receive commonsense support; the other side’s energy sources are on corporate welfare. And so it goes.
Various oil subsidies that oil fans don’t consider subsidies. (OSI) 

This week brought an excellent example, in the form of a new paper from Securing America’s Future Energy (SAFE), a clean-energy advocacy group composed of retired military and business leaders. It attempts to put a number on one of the great, neglected implicit subsidies for oil: the costs to the US military of defending oil supplies, everything from guarding shipping lanes to maintaining troop commitments in key oil-producing nations. The number, it turns out, is high: $81 billion a year at the low end, which is almost certainly conservative.

But is that a subsidy for oil? It is certainly one way oil dependence has shaped the country, its history, and its institutions — one of countless ways — but does putting a dollar figure on it and calling it a “market distortion” clarify anything or convince anyone? We will ponder those questions in a moment, but first, a quick look at the study..

Putting a dollar value on one of oil’s biggest subsidies: military protection - Vox

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The “hidden cost” of our largely fossil fuel-based energy and transport systems could add up to around $25 trillion (£18 trillion) – the equivalent of more than a quarter of the world’s entire economic output.
That’s according to new research, which estimates the hidden environmental, social and health costs associated with different forms of transport and electricity generation.

There are many “hidden costs” associated with these systems, which occur from production to end use by humans, the researchers say. For example, the burning of fossil fuels for electricity generation not only drives damaging climate impacts such as more frequent and severe extreme weather events, but also deadly air pollution.

Our global reliance on petrol vehicles is also fuelling climate change and air pollution, as well as an increased strain on our health systems through car accidents. These impacts are not reflected in the market price of fossil fuels, explains Prof Benjamin Sovacool, an energy policy researcher from the University of Sussex and lead author of the new research, which is published in the journal Energy Research & Social Science..

‘Hidden cost’ of energy and transport could add up to $25 trillion, research estimates | The Independent