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CLIMATE CHANGE: More Subsidies for Fossil Fuels in Recovery Plans

Stephen Leahy

UXBRIDGE, Canada, May 29 2009 (IPS) - Despite the economic slow down, growing numbers of world leaders are calling for urgent action on climate change while many governments used their economic stimulus packages to increase subsidies to the fossil fuel industry.

Consider Europe, with the strongest public commitment to reduce carbon emissions that are causing climate change.

In the past five years, 8 billion U.S. dollars of public money went to Europe's fossil fuel companies mainly to the natural gas sector. And in May the European Parliament approved an additional 3.35 billion dollars in subsides as part of Europe's 225 billion dollars economic recovery plan, according to a new research report by Friends of the Earth (FOE) Europe.

"We Europeans are supposedly leading the world on the path to a new green economy but we're putting billions of euros into fossil fuel sector that's taking us in the opposite direction," Darek Urbaniak of FOE Europe.

CCS: ‘Unproven’ Technology Carbon capture and storage (CCS) is the shiny new subsidy to complement the more common production subsidies such as tax rebates, investment credits, low royalties, capital cost allowances, insurance guarantees and so on. While developing world subsidises the cost of fuel, the rich nations of the world subsidise costs of fuel exploration and production. CCS is yet-to-be developed technology intended to strip carbon from the emissions from coal, oil and natural gas energy production which are responsible for 25 percent of global emissions. The carbon is then to be stored underground, under the ocean or somewhere else, hopefully forever. CCS is behind the much-promoted claims for "clean coal" and clean fuels. Research into CCS has been ongoing for a number of years at a number of small research centres mainly funded by governments in Europe and North America. "It's an unproven technology. Only a few research centres will receive all that money. That's not going to stimulate economic growth," said Darek Urbaniak of FOE Europe. Apparently Canada isn't worried about economic growth either since the majority of its 860 million dollars for clean energy in its recent economic stimulus also went in CCS research. In addition, the Canadian province of Alberta has committed an extra 1.75 billion dollars to CCS research, according to John Dillion of Karios, a Canadian social justice organisation. Alberta, located in western Canada, has become the Saudi Arabia of the North because of its extensive deposits of tar sands. The region has become Canada's largest oil producer and ships over 1.3 million barrels of oil to the U.S. every day. However making oil from the tar sands – deep tar laden sands underneath the boreal forest – results in the world's "dirtiest oil" with 300 percent higher carbon emissions, making the region Canada's biggest source of emissions. U.S. President Barack Obama has spoken about the need to use oil from low-carbon production and tax those from higher. And that's why there are massive new investments by government in CCS, Dillion told IPS. "Everything is focused on keeping the tar sands going." And this newest subsidy is in addition to the estimated 300 million dollars a year that oil companies in the tar sands have been getting the last few years. And they've been on the dole since the 1970s. "There'd be no tar sands without all that government investment", he said.

"Its complete hypocrisy," Urbaniak told IPS from Brussels.

Perhaps recognising this fact, global business leaders at the World Business Summit on Climate Change that concluded May 26 called on governments to "strive to end the current perverse subsidies that favour high-emissions transport and energy".

Speaking at the opening of the summit, Secretary-General Ban Ki-moon said: "Continuing to pour trillions of dollars into fossil-fuel subsidies is like investing in sub-prime real estate." And he concluded: "We must direct investment away from dirty energy industries."

The United Nations Environment Programme (UNEP) has recommended that one third of the around 2.5 trillion dollars worth of planned economic stimulus packages worldwide should be used to 'green' the world economy, as this would help "power the global economy out of recession".

Instead the European parliament decided the 5.36 billion dollars dedicated to new energy projects be split so that the source of the climate problem, the fossil fuel industry got 3.35 billion dollars while green solutions like wind, solar, biomass energy sources receive just 2 billion dollars in new funding, the FOE Europe analysis ‘Public money for fossil fuels in the EU’ reported.

"Wind only received a half billion euros (670 million dollars) while 1.25 billion (1.67 billion dollars) is being used to subsidise research into carbon capture and storage," Urbaniak says.

Canada has spent more on oil and gas subsidies than all of its climate change programmes in the past three years, says Albert Koehl of Ecojustice, a Canadian environmental NGO.

Indeed since Canada first agreed to the Kyoto Protocol in 1997 to reduce its carbon emissions, it has spent more than 2 dollars in tax subsidies to the industry for each 1 dollar spent on action to implement the accord.

"It’s a pure windfall for the oil and gas industry. Taxpayers are paying for the industries' pollution," Koehl said in an interview from Toronto.

"We're trying to build a new green economy but much of our money is going to a dinosaur industry."

Canada is evidently not very interested in going green, spending 13.7 times less per capita than the U.S on renewable energy notes John Dillion of Karios (see sidebar).

Although nowhere near the one-third that UNEP recommended, the Obama administration has earmarked some 70 billion dollars out of its 787 billion dollars economic stimulus for greening the U.S. economy.

Of this 32 billion dollars is for clean energy production, including at least 4.4 billion dollars for carbon capture and storage (CCS) research and development, according to an analysis by Taxpayers for Common Sense, an independent and non-partisan NGO based in Washington DC.

That's a surprising turnabout. After investing billions in CCS projects such as FutureGen, a private-public partnership to build the world's first near-zero emissions power plant, even the fossil-fuel friendly George W. Bush administration abandoned the effort as too costly.

Whether there are additional subsidies to the fossil fuel industry in the rest of the economic stimulus, the research simply hasn't been done in the rush of bailouts, budgets and new legislation says Janet Larson, Director of Research at the Earth Policy Institute, an environmental policy NGO in Washington DC.

Taxpayers for Common Sense haven't analysed the 1,500 page stimulus bill yet either. But in last fall's 700 billion dollar bailout for the U.S. financial sector they noted there were some new tax breaks worth 2.2 billion dollars through 2013 for the oil and gas industry.

And of course there haven't been any significant reductions in subsidies although President Obama's proposed budget for 2010 does.

"There is an awful lot money in the stimulus bill," Larson told IPS. And alternative energy is getting some of it. But one fact remains clear: "Alternative energy is never going to catch up to what the fossil fuel industry has received."