Switching a fraction of fossil fuel subsidies could pay for energy transition

Sept 2019—Perverse subsidies are those that provide incentives to do the wrong thing, and our policies are rife with them. Subsidies are usually a way for the government to help the creation of a critical industry, but once in place, the players (companies, related industry and employees) start to see them as their right. As they continue, these perverse subsidies muddle price signals, making the old technologies seem a better deal than they are. Such is the case with energy.

According to a recent study, redirecting even a fraction of the immense fossil fuel subsidies could set us on a climate friendly path. Renewables are already close to price-competitive. So a little help would spur progress, making renewables significantly cheaper. Then over time, technological improvements should make those subsidies unnecessary.

Coal, oil and gas get more than $370bn (£305bn) a year in support, compared with $100bn for renewables, the International Institute for Sustainable Development (IISD) report found. Just 10-30% of the fossil fuel subsidies would pay for a global transition to clean energy, the IISD said.