Subsidies at 16 Times Carbon Prices Stymie Pollution Curbs

By Mathew Carr

Subsidies for fossil fuels are overwhelming efforts to curb pollution, the International Energy Agency said.

Tax-breaks, subsidized fuel prices and other government support amount to an incentive to pollute worth $115 per metric ton of carbon-dioxide, the agency said Monday in its Energy and Climate Change report. That compares with an average $7 cost to buy emission permits in carbon markets, according to the Paris-based group.

While Europe has moved to boost its emissions price and nations including India and Indonesia are cutting subsidies, countries need to make more ambitious pledges to limit heat-trapping gases, the IEA said. Fossil-fuel support systems represent 13 percent of global emissions, compared with the 11 percent governed by carbon markets, according to the group.

“If you dirty up the world, I will reward you. This is the message,” Fatih Birol, IEA chief economist, said Monday in an interview in London. “These are the countries where the growth comes from.”

Curbing those incentives will probably be reconsidered by G-20 nations this year leading up to the Paris climate summit in December, he said.

Carbon dioxide emissions from energy use rose 0.5 percent to a record 35.5 billion tons last year, according to BP Plc data. Still, growth was the slowest since a drop in 2009, as Chinese coal consumption held steady. Under climate pledges delivered so far, the world’s estimated remaining spend for curbing emissions will be consumed by about 2040, the IEA said.

That limit is consistent with a 50 percent chance of keeping the rise in temperature below 2 degrees, the agency said.

Paris Talks

The test of success of climate talks in Paris in December will be “the conviction it conveys that governments are determined to act to the full extent necessary” to achieve the goal of keeping the rise in temperatures below 2 degrees Celsius (3.6 Fahrenheit) compared with a pre-industrial average, the IEA said.

Energy-related greenhouse gases will probably continue to rise after 2030 under a scenario that covers climate pledges made so far, said the adviser to 29 nations from the U.S. to Turkey.

Without stronger action before or after 2030, the world’s path would be consistent with an average temperature increase of about 2.6 degrees by 2100 and 3.5 degrees after 2200, it said.

The global economy will probably expand by 88 percent from 2013 to 2030 and energy-related carbon dioxide emissions by 8 percent, according to the IEA.

Latin America

In North America, carbon prices and subsidies each cover about 4 percent of emissions, the agency said. The subsidies amount to $36 a ton on average, while the carbon price is $9 a ton. Latin American subsidies are $208 a ton, compared with $173 a ton in the Middle East, $168 in Africa, $104 in India and $29 in China, the IEA said.

“Many countries say they want to keep the subsidies because they want to protect the poor. This is completely wrong,” said Birol, who will become executive director of the agency in September. “What we found out was that of this $500 billion subsidy, only 8 percent of this money goes to the lowest 20 percent income groups. More than 90 percent of this money goes to medium-and-high income groups.”

The subsidies are calculated as the ratio of the economic value of those fees to the carbon dioxide emissions released from the subsidized energy consumption, it said.Φ

Mathew Carr is a reporter for Bloomberg Business News. He states that he wants to help improve the efficiency of emission and energy markets by excellent reporting. His specialties: Emission markets, climate change science and politics, natural gas markets, financial reporting.

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