Market News

 February 06, 2012
Cutting Fossil Fuel Subsidies Alone Could Accomplish Half of World's Carbon Reduction Goals

 There is a lot of discussion in Washington these days about ending tax credits and subsidies for long-standing industries like coal and oil suppliers. But these subsidies are considered sacrosanct by many politicians, often the same politicians who decry any investment into green energy as "socialism." But a study by the International Energy Agency finds that by ending fossil fuel subsidies, the "free-market" would make most cost-efficient choices. This natural shift could get the world halfway to its ambitious carbon reduction goals. A big talking point in the Republican party these days is ending government subsidies and interference in the free market.

This mainly applies to green energy grants in the GOP's eyes of course, but as President Obama said in his State of the Union address, America has subsidized oil and coal companies for over a century. If the GOP is serious about cutting back on the government, the first thing to go should be subsidies to the oil and coal companies. By the IEA's calculations, the world spent over $409 BILLION subsidizing fossil fuels in 2010. That is compared to just $66 billion spent subsidizing clean energy.

But the argument goes that a truly free market would be free of these troubling subsidies, which obviously favor energy sources like coal and oil, no matter how dirty or hard to come by they are. And many politicians like to distort the facts to make it look like the government heavily subsidizes green energy alternatives, which simply isn't true when compared to fossil fuel subsidies. The free market could go a long way towards pushing clean energy forward, if only governments would force the fossil fuel industry to finally stand on its own two legs. And when cheap energy isn't so cheap anymore, people will seek out cheaper, cleaner alternatives. Then again, ending fossil fuel subsidies could lead to violence like the recent protests and reprisals seen when the Nigerian government ended gas subsidies, effectively doubling the price of petrol overnight.