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IEA Opposed To Cheap Energy For Developing Nations

October 31, 2018
tags: ,

By Paul Homewood

 

h/t Robin Guenier

 

Once again, the IEA is trying to stir things up re “fossil fuel subsidies”:

 

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Worldwide fossil fuel consumption subsidies almost halved between 2012 and 2016, from a high point in 2012 of more than half a trillion dollars. But the estimate crept higher again in 2017, according to new data from World Energy Outlook 2018, and the run-up in the oil price in 2018 is putting pricing reforms under pressure in some countries.

The new data for 2017 show a 12% increase in the estimated value of these subsidies, to more than $300 billion. Most of the increase relates to oil products, reflecting the higher price for oil (which, if an artificially low end-user price remains the same, increases the estimated value of the subsidy). In 2016, for the first time, the value of subsidies to fossil-fuelled electricity were higher than for oil. The 2017 data sees oil return as the most heavily subsidised energy carrier.

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Fossil fuel consumption subsidies are in place across a range of countries. These subsidies lower the price of fossil fuels, or of fossil-fuel based electricity, to end-consumers, often as a way of pursuing social policies including energy access.

There can be good reasons for governments to make energy more affordable, particularly for the poorest and most vulnerable groups. But many subsidies are poorly targeted, disproportionally benefiting wealthier segments of the population that use much more of the subsidised fuel.

Such untargeted subsidy policies encourage wasteful consumption, pushing up emissions and straining government budgets. Phasing out fossil fuel consumption subsidies is a pillar of sound energy policy.

The period of high oil prices from 2010-2014 provided strong motivation for many oil-importing countries to pursue subsidy reform. The fall in price that began in 2014 presented the opportunity. A host of countries, from India to Indonesia and from Mexico to Malaysia, have implemented pricing reforms in recent years.

https://www.iea.org/newsroom/news/2018/october/hard-earned-reforms-to-fossil-fuel-subsidies-are-coming-under-threat.html

 

Every time a report like this comes out, Greenpeace and co leap up and down, pretending that taxpayers are actually handing money over to wicked oil companies.

In fact, as the IEA admit, these are “consumer subsidies”, and not “producer subsidies”. The latter are, of course, what we are paying to wind farms in this country, to enable them to compete with fossil fuels.

By contrast, consumer subsidies are given to keep prices down for the consumer, in this case energy, which may or may not come from fossil fuels.

The IEA explain their methodology below:

 

The IEA estimates subsidies to fossil fuels that are consumed directly by end-users or consumed as inputs to electricity generation. The price-gap approach, the most commonly applied methodology for quantifying consumption subsidies, is used for this analysis. It compares average end-user prices paid by consumers with reference prices that correspond to the full cost of supply. The price gap is the amount by which an end-use price falls short of the reference price and its existence indicates the presence of a subsidy.

https://www.iea.org/weo/energysubsidies/

 

My first reaction is just what the hell does any of this have to do with the IEA?

If, for instance, the Indian government wants to subsidise the price of electricity, so that its citizens are able to afford to run air conditioners, then that is up to them, and nobody else.

Similarly, if Iran wants to subsidise natural gas to enable its people to survive in winter, what right does the IEA to criticise?

The Report actually notes that such subsidies can be beneficial, but then ludicrously go on to complain that some richer people might benefit as well:

There can be good reasons for governments to make energy more affordable, particularly for the poorest and most vulnerable groups. But many subsidies are poorly targeted, disproportionally benefiting wealthier segments of the population that use much more of the subsidised fuel.

In reality, energy taxes are one of the most regressive taxes of all. Removal of subsidies would have the same effect.

Subsidising energy for industry is also seen to be important by many countries, who would worry about the loss of competitiveness if they were withdrawn.

 

The IEA, of course, has ulterior motives, and could not give a toss about the wellbeing or livelihoods of ordinary people in developing nations, where all of the subsidies are concentrated. No EU country appears on the list, nor the US, Canada or Australia:

 

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https://www.iea.org/weo/energysubsidies/

 

That is because the IEA is set up under the auspices of the OECD, the rich nations club.

Originally the IEA was designed to help countries co-ordinate a collective response to major disruptions in the supply of oil, such as the crisis of 1973/4.

In theory, its four main areas of focus are:

  • Energy Security: Promoting diversity, efficiency, flexibility and reliability for all fuels and energy sources;
  • Economic Development: Supporting free markets to foster economic growth and eliminate energy poverty;
  • Environmental Awareness: Analysing policy options to offset the impact of energy production and use on the environment, especially for tackling climate change and air pollution; and
  • Engagement Worldwide: Working closely with partner countries, especially major emerging economies, to find solutions to shared energy and environmental concerns.

https://www.iea.org/about/ourmission/ 

However, it no longer seems to care about energy security, fostering economic growth or eliminating energy poverty.

Instead, it appears to have an overarching remit to tackle climate change. If there was any doubt at all about this, check out Fatih Birol’s despair last week at the news that CO2 emissions were continuing to climb.

And as far as he is concerned, developing countries can go to hell.

11 Comments
  1. HotScot permalink
    October 31, 2018 10:29 pm

    120,000,000 (yes, one hundred and twenty million) people will die in the developing world, by 2050 (32 years away) from smoke inhalation related conditions because they have to burn cow shit and twigs for cooking and heating (WHO numbers).

    The solutions are not simple, but a start could be made by diverting aid to building fossil fuel power stations to alleviate a large proportion of the problem.

    Now I sound like some sort of activist!

    • November 1, 2018 9:17 am

      But World Bank policy is to refuse loans to countries that want coal-fired power stations, on the excuse that it’s against their climate policy.

  2. Athelstan permalink
    November 1, 2018 8:25 am

    Utter pish, IEA should hang their heads in shame.

  3. November 1, 2018 10:48 am

    For many of the countries shown this is utter nonsense. If a state owned oil company extracts the oil or gas, selling it at cost to the people of that country is not a subsidy. The alternative is that everybody pays the market price and the profits are remitted to the people either in cash or as state services.

    That is just accounting, not subsidy.

    As a side note, there is substantial disagreement that a flat tax is “regressive”. A progressive tax us one where the RATES of taxation increase with income of consumption, not where the tax as a percentage of income is higher. That just measures differences in income. We all pay the same for petrol even if it is not taxed at all but that is not regressive.

  4. November 1, 2018 11:02 am

    This Green Inquisition was on display yesterday on BBC WS Hardtalk, in which a South African govt official was castigated for maintaining coal power stations and exports, at the same time as being castigated for expensive electricity and massive debts of the state owned electricity company, at the same time as being castigated for very low amounts of renewables.

    Amusingly renewables propaganda 101 was deployed in reverse, with the True Believer govt official quoting large nameplate capacities, and the Green Zealot presenter quoting back the tiny renewables percentage of the total generation.

    One can only conclude that many have been fooled by green propaganda, that renewables are cheap, so why are they not being deployed/used, the basis of the widespread conspiracy theory that dark forces (rather than simple economics and practicality) are holding back the transition to green nirvana.

  5. Harry Passfield permalink
    November 1, 2018 11:21 am

    I only surprised that the 5% VAT rate in the UK for energy (instead of 20%) isn’t claimed to be a subsidy.

    • November 1, 2018 12:22 pm

      I believe it has been, Harry. I seem to remember one of the more naive spokespersons for one of the NGOs tried to claim that electricity from fossil fuels was “subsidised” for that reason.

      It was shot down fairly quickly but of course the damage had been done. “Blinder played”, one might say!

  6. November 1, 2018 11:41 am

    Look at the folks who claim to be the champions of the poor and downtrodden. Listen as they blame us for all of the plights of those people. I have learned that they accuse their “enemies” of doing what they are actually and have actually been doing. They have no real interest in the deaths they incur with their policies.

    If you look closely, likely you will find that these folks all want lower populations and secretly rejoice over the famine and disease which could be avoided by advent of reliable electricity in these countries. Your own Mr. Attenborough wants many of us dead. I have noticed that he does not volunteer to exit stage left as a shining example of what he preaches. They never do.

  7. Athelstan permalink
    November 1, 2018 12:56 pm

    Perfected BS of alarmunism, the oceans ate all their homework.

    https://www.bbc.co.uk/news/science-environment-46046067

    dress it up in modelled quasi science and dressed up in the pure maths statistical jiggerpokery.

    ‘nature’ – puhleeze don’t giggle

  8. Robert Best permalink
    November 1, 2018 1:09 pm

    These folks would argue, “How Green Energy Policies Reduce Energy Bills”-

    https://greenbusinesswatch.co.uk/how-green-energy-policies-reduce-energy-bills

    • November 1, 2018 1:34 pm

      They are claiming that energy savings and subsidies go hand in hand, but they don’t.You can have one, but not the other.

      In any event, the govt is claiming credit for energy savings that it has had little to do with.
      Over the years, energy efficiency has occurred because of technological advances, not govt diktat. Just think of cars which used to get 30mpg (if you were lucky), and now get 60 mpg. Suppose the govt doubled petrol duty, arguing that actually drivers would be no worse off than in 1980.

      The other factor, of course, is the cost of making these energy savings. For instance, putting insulation in your house may save energy, but also costs thousands of pounds to install. These up front costs are never taken into the equation

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