Fossil fuel subsidies "dwarf" support for renewables

Despite repeated pledges to phase out fossil fuel subsidies and criticism
from some quarters that government support for renewable energy technologies is
too generous, global subsidies provided to renewable energy and biofuels are
dwarfed by those enjoyed by the fossil fuel industry.

That is the conclusion of a major report released late last week by analyst
New Energy Finance
, which analyses subsidies and incentive schemes offered
globally to developers of renewable energy and biofuel technologies and

The report concludes that in 2009 governments provided subsidies worth
between $43bn (£27bn) and $46bn to renewable energy and biofuel industries,
including support provided through feed-in tariffs, renewable energy credits,
tax credits, cash grants and other direct subsidies.

In contrast, estimates from the International Energy Agency (IEA)
in June
showed that $557bn was spent by governments during 2008 to subsidise
the fossil fuel industry.

Michael Liebreich, chief executive of Bloomberg New Energy Finance, said the
study revealed that investors reluctant to finance renewable energy industries
because they believe them to be heavily subsidised were operating under a

"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," he said. "Setting aside the fact that in many cases clean
energy competes on its own merits – for instance in the case of well-situated
wind farms and Brazilian sugarcane ethanol – this analysis shows that the global
direct subsidy for fossil fuels is around 10 times the subsidy for renewables."

However, the report predicted that the gap between fossil fuel and renewable
energy subsidies should "narrow considerably" this year as support for renewable
and biofuels increases as a result of green government stimulus packages worth
an estimated $188bn, and fossil fuel subsidies operated by countries such as
China are cut in line with falling oil prices.

The study said sizeable renewable energy subsidy schemes were emerging, with
the US providing $18.2bn in renewable energy and biofuel subsidies in 2009,
China offering direct subsidies worth $2bn alongside low-interest loans from
state banks, and Germany providing about $19.5bn worth of support through its
widely adopted feed-in tariff scheme.

However, the report will further increase pressure on G20 countries to make
good on their
to phase out fossil fuel subsidies – a move that the IEA believes
could single-handedly slash global carbon emissions by up to seven per cent.

You can return to the main Market News page, or press the Back button on your browser.