Published September 9, 2008 10:44 AM

The World Spends $300 Billion Subsidizing Fossil Fuels

The Cost of Eliminating Fossil Fuels? Maybe No More than the Cost of Burning Them

August 27, 2008 at 8:57AM by Dan Shapley

The world is spending $300 billion every year to subsidize fossil fuels that pollute the air, wreck the climate ... and run the world's economy.

So what if we, as taxpayers, stopped spending $300 billion on coal, oil and natural gas, and started spending it instead on wind, sun and water?

That's the question at the heart of a new report from the United Nations Environment Program, which concludes that eliminating fuel subsidies would not only reduce greenhouse gas emissions, but might just inspire new economic growth. (Further, it concludes that fossil fuels subsidies sold as a way to help the poor keep the lights on actually do more to help the rich.)

“In the final analysis many fossil fuel subsidies are introduced for political reasons but are simply propping up and perpetuating inefficiencies in the global economy – they are thus part of the market failure that is climate change,” UNEP Executive Director Achim Steiner said.

Isn't it remarkable how subversive the U.N. can be?

The world spends about 0.7% of GDP on fossil fuel subsidies. The cost of curtailing carbon emissions to meet scientific goals by 2050 has been estimated at 1% of GDP. (The cost of not curtailing carbon emissions, measured in weather calamities, mass migrations and the like, could be 5-10% of GDP.)

The problem, of course, is that most nations are not willing to give up fossil fuels, their subsidies, or their profits. We focus on ourselves, and the addiction to oil we all admit to. But think about Russia, fat on oil wealth, and willing to thumb its nose at the international community. Can we reasonably expect that Russia will join in the latest United Nations talks, ongoing this week in Ghana, and agree to slash its carbon emissions?

Russian fossil fuel subsidies, at $40 billion annually, are the largest on the planet, according to the U.N. report. Others that top the list: Iran, China, Saudi Arabia, India, Indonesia, Ukraine and Egypt.

Wiping out oil subsidies, unfortunately, is akin to telling countries -- many of them unwilling to listen to international opinion in the first place -- not to act in their own national interest.

Still, the U.N. report is telling: The cost of transforming an economy to run on renewable fuels always seems daunting, so ingrained are our dependencies on fossil fuels. But if you consider how much is spent to make those fossil fuels affordable in the first place, the price tag doesn't look so daunting.