Why is Dirty Energy Still So Cheap?

The clean tech sector has experienced remarkable success in the past few years, yet there still remains one huge roadblock from mass implementation – cheap fossil fuels. Some may think this is simply a matter of free-market capitalism at work. The real truth is that petroleum and coal industries continue to receive massive subsidies from governments around the world, while renewable energy firms receive only a small fraction of that amount.

A new report from Bloomberg New Energy Finance indicates that governments gave $46 billion of support to renewable energy last year through tax credits, feed-in tariffs, and alternative energy credits. In contrast, the International Energy Agency stated that $557 billion was spent to subsidize fossil fuels in 2008.

Rather than impose an appropriate tax structure so that governments can benefit from some of the most profitable companies in existence, lawmakers are considering further cuts in subsidies to the clean tech sector. This is particularly true in Europe, which is ironic since this is where some of the most progressive clean energy policies have been implemented in recent years.

The New York Times reported that Spain, Germany, France, Italy and the Czech Republic have all announced subsidy cuts to the wind and solar industries. There are hints that the U.K. may also follow suit in an attempt to balance their state budget deficit of 160 billion pounds.

“There is a challenge. There is an economic crisis and a climate crisis. Governments want to cut costs, but they also need to combat climate change. There is a careful balance to be struck,” Stephen Lilley, managing director of green investment bank Climate Change Capital, told ClimateWire.

What many governments do not realize, however, is that they are facilitating continued ecological degradation and deeper budget deficits by not addressing the total amount of subsidies given to the fossil fuel industries. They also send a loud signal to investment communities about the value of clean tech firms.

“One of the reasons the clean energy sector is starved of funding is because mainstream investors worry that renewable energy only works with direct government support,” said Michael Liebreich, chief executive of New Energy Finance. When government support wanes for clean energy, so does VC funding.

Now is an opportune time for policymakers to get it right. In light of this summer’s worst oil spill in history, coupled with the desperate need for governments to bring in revenue, it is time for a serious overhaul of subsidies for fossil fuel industries.

Shannon Arvizu, Ph.D., is a clean-tech marketing and policy consultant in the transportation sector. To find out how to maximize market demand and increase the bottom-line for clean technology, visit www.MissElectric.com.

Shannon Arvizu, Ph.D., is a clean tech educator and cutting-edge consultant for the auto industry. You can follow her test drives in the cars of the future at www.misselectric.com.

2 responses

  1. 1. The world economy today turns its focus to austerity, deficit reduction as all eyes are on the full recovery.
    2. The vast deficit from huge oil imports plus trade deficit with China points to job loss while most analysts are looking forward to the miracle, full recovery. Against this backdrop, the hands-off approach on such challenge sharply contradicts the chanting of mounting debt.
    3. I’m dwelling in one of the developing countries where most folks are distressed with the too high fuel costs severely, with their discretionary spending nearly out of reach while the USA still holds multi-national firms all over the globe.
    4. Health care issue in the USA is domestic, though, affordable energy base is believed to be a matter of survival throughout the world. Naturally the USA, a central market, needs to take a bold step into renewable energy, electrification of transport so that the international economy can be back on its feet. Beyond that, the world-wide economy is eagerly awaiting a new comer as a catalyst just like an IT business as the gigantic capital for investment is sitting idle.
    Renewable energy, Health Care bill are fundamental parts of change without which the nation is unable to sustain its growth. The stimulus package alone might be insufficient to ride out this economic storm.

    5. Today, the USA faces a crucial choice between war / demolition & renewable energy / security. In case costly war, military spending is redirected to positive change, it would be sure to turn around the sagging economy.
    Shortly after the USA had celebrated the progress in Iraq, just before GOP candidates had been on the cusp of taking office in the previous presidential election, this recession took a big toll on the economy, reflecting costly war, military spending worked against its growth.
    6. Thankfully, just as insightful Al Gore predicted, even if fewer people then agreed with his claim, recent findings show that tangible increase in the renewable energy is economically and technically feasible. And the battery price of EVs is set to drop significantly in a couple of years.
    7. It might be important to recall that the tipping point of $145 a barrel two years earlier, the persistent pain at the pump forced current economic slump.
    As we are well aware, the high gas prices had prompted soaring consumer prices and inflation pressures, as a direct consequence, the Federal Reserve Bank
    raised key interest rates on end followed by surge in mortgage rates, taking a heavy toll on the construction, financial market.
    8. It might not be the time to swing to status-quo leaning on the burgeoning recovery as the world-wide stimulus package barely propping up the fragile recovery faces scale-back, and the developing countries are plagued by higher fuel prices.
    In this tough economy, the existing oil prices appear to realistically equal the highest price two years earlier. Worse still, for necessity, the cost tends to soar surprisingly when the supply falls short as we saw it at times.

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