5300 billion dollars per year. This is the amount of direct and indirect global subsidies to fossil fuels, according to the last IMF valuation: that is to say 6.5% of global GDP. Talking about direct and indirect subsidies implies this amount not only involves the subsidies to production and consumption of fossil fuels, but also an estimate of the main negative externalities produced. These are very difficult to calculate and are probably underestimated. It is surprising discovering half of these 5300 billions are sanitary costs1: this means more than 3% of global GDP is composed by pollution sanitary costs.
The other side of the coin is that subsidies to renewables add up to 120 billion dollars2, a fifth of direct subsidies in favor of fossil fuels, and a nullity in comparison to the amount of 5300 billion dollars that represent the overall cost of fossil fuels. If we got rid of these subsidies to dirty energy sources, we could cut CO2 emissions up to 20% and make renewables competitive without subsidies3. The paradox is that we are promoting energy sources which generate positive externalities, such as renewables, whose marginal benefits are higher than marginal costs4; but in the meantime we are subsidizing in a larger scale polluting energy sources, whose economic, social and environmental costs turned out to be extremely higher than benefits. A strategy that clearly does not make any sense and underlines the absolute hypocrisy of policy makers.
In may, at Garmisch, in Germany, took place the annual G7 conference where the Prime Ministers of USA, Great Britain, France, Germany, Italy, Canada and Japan claimed that global warming has to be maintained within 2°C, as wished by German Prime Minister Angela Merkel. It is a praiseworthy and encouraging statement along the path that brings to the COP21 in Paris. But unfortunately too many times world political leaders turned out to be extremely good at speaking but failed to deliver the goods when it was necessary to act. For instance, let’s think over Obama, elected for the first time US President in 2008 with the promise to be a champion in the fight against climate change and to lift US economy out of the crisis through the creation of thousands green jobs too. Facts speak for him. Pursuing the energy strategy “All of the above” he has set out the rush to fossil fuels unconventional extractions that are more expensive and produce more greenhouse gases. In the meanwhile, in the US renewables cover only a tiny 13% of electrical production, a poor performance in comparison to many EU countries. Overseas, in Europe, in addition to the 20/20/20 binding law a new Roadmap 2030 was laid down that involves a 27% share of renewable energy and a 40% curb in CO2 emissions with respect to 1990 levels, all within 2030. In short, not enough. Only Sweden and Portugal support a binding agreement that contemplates 40% of energy produced from renewable sources by 2030. Germany, Denmark and Greece aim at 30%, all the other countries, first of all UK, aim at a downward agreement5. In Germany Angela Merkel has leaded the country out of nuclear and toward a gradual transition to green sources also thanks to local communities that chose to regain property of electric utilities, and to enhance ambitious plans for renewable energies development. On the other hand, simultaneously with nuclear plants closure German coke consumption increased, partially undermining the project credibility. In Italy the Prime Minister Matteo Renzi has turned out to be very shy in front of green policies in contrast with his proclaims. He first tried to tax self-consumption of electrical energy produced by private citizens with PV panels on their rooves. Then he cut retroactively by 20% the subsidies to photovoltaic and finally, with the Stability Law, set up new drills in the Adriatic Sea.
The same hypocrisy can be found among the top institutions of world economy. In 2014 World Bank increased funds to fossil fuels from 2.7 to 3.3 billion dollars even though it took a stand publicly against fossil fuel subsidies and in favor of a carbon tax. Moreover, there are lots of free trade treaties that often violate States’ autonomy in policy decisions in order to protect multinationals’ profits. For instance in 2013 Germany had to pay 3 billion euros to Vattenfall to compensate for the economical damages due to the decision to phase out German nuclear plants. In such contest, in January IMF President Christine Lagarde claimed that low oil price gave the opportunity to introduce the much needed Carbon Tax, a fundamental instrument to collect the necessary funds to fight climate change and finance green technologies development in poorest nations. Was this speech followed by any action? Unfortunately not. I hope that anytime soon we can pass from speech to action, as the time to hesitate is over. It is high time for radical changes.
1-WHO data (World Health Organisation)
2-IEA data (International Energy Agency)
3-From an article of “Qualenergia”
4-Source: IEFE Bocconi research
5-From an article of “Huffington Post”