Richest nations fail to agree on deadline to phase out fossil fuel subsidies
washingtonpost.com
washingtonpost.com
1. This was a meeting of the G20; it's LARGE nations, not RICH nations.
2. Poor nations are responsible for the overwhelming majority of fossil fuel subsidies. The worst offenders are China, Russia, Saudi Arabia, Brazil, and Mexico. Someone else noted that Saudi Arabia was a major blocker of an agreement to cut subsidies, and someone asked why "we" (ie, the US/Europe) don't just ignore them and go ahead and cut subsidies ourselves. The answer is because Saudi Arabia is the one doing the subsidising; only they can cut their own subsidies.
3. What subsidies rich countries do provide tend to be highly contentious, and depending on how you measure them are either small or non-existent. A poor country might sell petrol and heating oil for a fraction of its cost of production, which is an obvious subsidy to the oil and gas industry. For, eg, the US, most if its "subsidy" is stuff like IRS rules that say that a petroleum company can count most of a fine for an oil spill as a business expense. Should a fine be classified as a business expense? If you think it shouldn't be, the fact that the IRS (partially) disagrees represents a small subsidy. Then again, a lot of fines do get counted as expenses, and the US is hardly alone in having rules like that. Similarly, a lot of coal is mined in the Powder Basin Region, which is not designated as a coal producing region. Under US law, land in coal producing regions is subject to slightly higher leases than land outside them, which means the coal companies who lease land in the Powder Basin are paying slightly less than they "should" be paying. Or alternatively, coal companies who lease land in other coal regions are paying slightly more. Or maybe coal companies should pay whatever the law specifies; it's not like there's any global standard on what the right cost should for leasing coal reserves. But if you think that the US has magically set the perfect price for coal producing regions, AND that the Powder Basin Region should totally be designated a coal producing region, then sure, that's a small subsidy for the companies who lease land in the Powder Basin. And so on.
In short, better headline: Poor oil producers say "no thanks" to suggestions from rich countries that they should cut their subsidies for domestic consumption.
Well, who would have thought... But seriously, why do we (or rather, G-19) even listen to them? Why can't we just cut the subsidies ourselves, have investments in renewables grow and watch SA slowly drown it its oil?
It's really questionable why Iran is seen as bad guys while Saudi Arabia is not. Saudi Arabia is many times worse than Iran.
Aren't these types of alliances fluid and opportunistic?
The United States maintains global hegemony, props up the value of its currency, and reduces the cost of imports for its citizens, in some significant part due to the "petrodollar". That's the agreements the US formed with oil producing nations like Saudi Arabia to only sell oil denominated in US dollars.
Forcing all oil trade be done in USD requires nearly every nation carry large USD reserves, increasing demand for and the strength of the US dollar, increasing the currency's stability, and increasing other nations' reliance on relations with the US.
A weaker Saudi Arabia, and a weaker oil market, is also a weaker US dollar, and weaker US power internationally. This pits environmental concerns against economic and political ones at a very high level. While the subsidies may be small enough that they're eventually dropped, this is my understanding of why the US maintains such close ties to S.A. even when our goals are not otherwise aligned.
http://www.bloomberg.com/news/articles/2016-05-16/u-s-disclo...
The positive effects like seignorage are outweighed by other effects. Japan discouraged an attempt by China to hold the yen. Similarly Europe and China have opposed purchase by foreign central banks.
> It turns out that foreign investment is only good for an economy if it brings needed technological or managerial innovation, or if the recipient country has productive investment needs that cannot otherwise be funded. If neither of these two conditions hold, foreign investment must always lead either to a higher debt burden or to higher unemployment. Put differently, foreign investment must result in some combination of only three things: higher productive investment, a higher debt burden, or higher unemployment, and if it does not cause a rise in productive investment, it must cause one of the other two.
For the USA, total subsidies of ~$20 billion (which are mostly things like tax deductions and exemptions, not direct payments) vs. energy market size of over $1 trillion.
You could eliminate them to "feel good" but that's mostly what it would be.
The 20G$ is only the direct cost. But what about the environmental cost? The social cost of concentrating wealth in the hands of rich companies? The loss of water resources to hydraulic fracturing? Or the lost benefits of not investing in something besides a dead-end energy technology?
Seriously. The worst problem with economists is that they tend to confuse the cost of something with its price.
Now in SA, to keep the population calm and quiet, they subsidize petrol to be (well) under 1 Riyal per liter. Last time I checked a riyal was about an american quarter. So the subsidies are so incredible in SA that gasoline is less than a buck per gallon. At least last time I checked.
Now if we get rid of subsidies nothing will really change in the USA as the day to day noise level in prices and stuff is way higher than the tiny level we have. But if SA got rid of subsidies, I bet you could estimate the lifespan of the kingdom in hours. Minutes? It wouldn't last long.
Its very much like people arguing about American foreign aid spending and Americans think that foreign aid spending is like 20% of the federal budget whereas reality is its more like 1% and almost all of that 1% is sent to Israel and "the rest of the world" gets like 0.01% of the federal budget in aid.
Without subsidies the government in S.A. will fall.
Would you agree its not a matter of if, but when the failure occurs?
The problem with made up subsidies is they can be carried to content free absurdity. So providing election donation funds to a candidate opposing condom distribution in schools is a subsidy because it increases crude consumption for 75 years when a kid pops out and starts consuming.
"Citing data from the International Monetary Fund (IMF), Musk lamented he’s “competing against something that has a $6 trillion per year subsidy,” and that the low gas prices that subsidies create are “weakening the economic-forcing function to sustainable transport and clean energy in general.” Source: http://ecowatch.com/2016/05/05/elon-musk-fossil-fuels/
At the global scale we have a big mistake since decades. Fixing it is going to be the most difficult challenge ever to date. But I’m optimistic in the accelerated speed of change in tech-science, market, prices, policies and social awareness even with the fact the we are now far from the right path to achieve it.
We need a very holistic transtion to save people and planet from climate change and pollution dramatic impacts. Including re educating society towards sustainability. This includes helping to transform skills of people and professionals from traditional unsustainable industries and societies to sustainable ones. This requires action from private, public and nonprofit sectors and people, to cope with the speed of the change needed according to majoritarian scientific consensus.
So seven years and counting.
>[U.S. Secretary of Energy] Moniz said the United States would eventually need legislative action in Congress to reach longer-term emissions goals, but he said that he believed public pressure for Congress to act would mount as sea levels rise and “Mother Nature’s voice” continues to get louder.
Translation: Nothing will be done until things take an unambiguously disastrous turn -- if then. How reassuring.
...no. They don't have free and open elections to their legislative branches, and even if they did they are rubber stamp chambers, and even if they weren't, the autocrats who run those countries are going to do whatever it takes to maintain power.
What you need to envision is a path to a world where the Russian/Brazilian/Chinese/whatever poor aren't going to riot if their below-market fuel supplies are cut off, or at least a world where such riots won't cause the fall of a government. Because until we get there, democratic pressure is going to be trumped by street power and autocratic populism. And the Brazilian "street" isn't going to riot for cutback to fuel subsidies, so...