The article in the url below highlights the massive amount of money that is still being used to subsidize the fossil fuel industry (see also Strategic CSR – Energy subsidies and Strategic CSR – Free markets). Although the total amount dropped in 2020, that was mostly due to a significant drop in demand (due to the pandemic), rather than any enlightened reevaluation of the extent to which governments should be supporting this economic activity to the extent that it is. Cumulatively, the annual subsidies add up to a lot of money:
"In the five years from 2015 to 2019, G-20 governments provided $3.3 trillion of direct support to coal, oil and gas, and fossil fuel-fired power generation. That number has been pretty stubborn over the years, falling from a high of $706 billion in 2015 to a low of $636 billion in 2019 — a change of only about 10%."
While the opportunity costs of such investments are massive (both avoiding alternative investments, but also causing greater pollution and associated health issues), the money might be largely wasted if it is invested in assets that, ultimately, need to be stranded:
"Support at the business level, however, could be even more significant for the long-term prospects of decarbonization. Government funding capacity may not be strictly limited, but it's also not infinite, and funds devoted to supporting an incumbent fossil fuel industry are by definition not able to fund energy transition. Just as importantly, government support has the potential to lock in assets — and the behaviors that go with them — for decades. Those include assets and behaviors related not just to the consumption of fossil fuels, but also to the production and distribution of same, not to mention the politics that go along with them. Government action also creates future unfunded liabilities in the form of potential bills for clean-up and environmental mediation. Finally, governments may be creating future stranded assets, projects that for either policy or economic reasons could soon be permanently out of the money."
These ongoing subsidies are particularly frustrating as the need to shift to more sustainable energies is urgent, yet the longer we wait and the more money we pump into the extraction industries, the longer and harder it is going to be for us to reach true net zero:
"If we want to achieve a net-zero energy system by mid-century, companies and governments will need to invest anywhere from $92 trillion to $173 trillion in the next three decades, according to BNEF's latest New Energy Outlook. Doing so will be difficult, but not impossible. Every dollar supporting any path other than zero net carbon dioxide emissions by 2050, however, makes net zero all the more difficult in the meantime."
Take care
David
David Chandler
© Sage Publications, 2020
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The World's Biggest Governments Are Still Propping Up Fossil Fuels
By Nathaniel Bullard
July 22, 2021
Bloomberg
