The International Renewable Energy Agency (Irena) spent the last 18 months number-crunching all the direct and indirect subsidies granted in 2017. The aim was to accurately quantify the support for polluting energy sources in comparison to renewables.
What they found was that the global fossil fuel sector received annual subsidy support worth $3.1 trillion, 20 times more than the world’s governments offered renewables. This study highlights what climate campaigners have long been condemning as a scandal.
Total direct subsidies to renewables in 2017 stood at $166bn, mostly for power generation. Meanwhile, direct subsidies for the fossil fuel sector were at $447bn. However, the direct subsidies were “dwarfed by indirect benefits and unpriced externalities,” such as the costs of fossil fuel combustion that are not taken into account by the producers—for example, air pollution at $2.3trillion.
To rectify this discrepancy, the agency envisions a “rebalancing” through strong policy support for the energy transition. The readjustment would reduce existing direct subsidies through 2050 – where renewables receive $209 billion, and fossils get $139 billion to support carbon capture and storage initiatives.
Michael Taylor, Irena’s head of renewable cost status and outlook, said:
[That prospect shows that] contrary to popular wisdom, the energy transition can be achieved without ever-ballooning subsidies.
Economista, a Spanish news outlet, hosted a forum at the beginning of September where Irena Director General Francesco La Camera attended. He called attention to the need for a surge of new energy investments to drive the transition off of carbon.
He said:
By 2030, more than half of the world’s energy generation may come from renewables, five times more than what is currently planned. But this increase implies that substantial spending will be necessary. From now until 2030, total investment in energy transformation will approach $50 trillion; though that effort will produce a GDP increase of about $16 trillion over the same time span.
Meanwhile, Taylor told Recharge that new forms of subsidies might spring up to support the emerging hydrogen economy as the energy transition unfolds.
Taylor said:
A number of markets seem to be readying a concerted effort to get behind H2 and push costs down quickly. I think it’s very useful that a lot of countries are looking at hydrogen at the same time. A lack of co-ordination in early support for solar PV and onshore wind was a drag on those sectors becoming competitive as fast as they could have done.
Irena’s study is the first one to analyze subsidies on a global scale with a unified approach. Data on subsidies has previously been subject to a wide range of definitions and methodologies, with each country approaching it differently, and reports being mostly regional.
