Tiffany Hsu

Tiffany Hsu is a general assignment reporter for the Business section. She focuses on alternative energy, but also covers foreclosure rates, unemployment, small businesses and other topics. She graduated from the University of California, Berkeley, and still refuses to give up her Nor-Cal pride.

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[Tom thompson]

Fossil Fuel Subsidies Are 12 Times Support for Renewables

http://www.technologyreview.com/blog/energy/25545/

Thursday, July 29, 2010
Fossil Fuel Subsidies Dwarf Support for Renewables
A report from Bloomberg New Energy Finance details international government energy spending on biofuels and renewable energy.
By Kevin Bullis

Fossil fuels are the backbone of economies worldwide, so governments spend a lot to support them. A new report from Bloomberg New Energy Finance says altogether governments spent between $43 anf $46 billion on renewable energy and biofuels last year, not including indirect support, such as subsidies to corn farmers that help ethanol production. Direct subsidies of fossil fuels came to $557 billion, the report says.

This disparity raises the question--if the report is right and fossil fuels require so much backing, can they compete with renewables without government support? After all, some renewables--such as sugarcane based biofuels and some wind farms--can already compete with fossil fuels. Without the huge government subsidies for fossil fuels, wouldn't they be eclipsed by renewables?

The answer, for now, is no. So far renewables just can't provide enough fuel and power to displace fossil fuels. The infrastructure to make and distribute them isn't adequate, and many renewables have shortcomings that can make them difficult to work with--solar panels, for example, only generate electricity when the sun is out. If the fossil fuel subsidies disappear, gasoline and electricity prices will increase. That will help renewables compete, and increase in scale, but it will take years--likely decades--for them to reach levels high enough to replace all fossil fuels.

http://www.bloomberg.com/news/2010-07-29/fossil-fuel-subsidies-are-12-times-support-for-renewables-study-shows.html
Fossil Fuel Subsidies Are 12 Times Support for Renewables, Study Shows
By Alex Morales - Jul 29, 2010 9:59 AM GMT-0700

Global subsidies for fossil fuels dwarf support given to renewable energy sources such as wind and solar power and biofuels, Bloomberg New Energy Finance said.

Governments last year gave $43 billion to $46 billion of support to renewable energy through tax credits, guaranteed electricity prices known as feed-in tariffs and alternative energy credits, the London-based research group said today in a statement. That compares with the $557 billion that the International Energy Agency last month said was spent to subsidize fossil fuels in 2008.

“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. “This analysis shows that the global direct subsidy for fossil fuels is around ten times the subsidy for renewables.”

Countries from the U.S. and Germany to Brazil and China are trying to boost power derived from crops, the wind and the sun in order to lower emissions of greenhouse gases while increasing the security of energy supplies. The Group of 20 nations a month ago renewed a commitment to phase out fossil fuel subsidies “over the medium term.” No target date was set.

The single most expensive clean energy subsidy last year was Germany’s feed-in tariff, which cost ratepayers $9.6 billion, New Energy Finance said. Across Europe, such tariffs amounted to $19.5 billion.

The U.S. in 2009 provided the most clean energy subsidies, at $18.2 billion, according to New Energy Finance. China provided about $2 billion of support, a “deceptive” figure because the country’s state-owned banks also provide “much crucial support” through low-interest loans, the group said.

So far this year, the state-controlled China Development Bank has extended $24 billion in loans to Yingli Green Energy Holding Co., Trina Solar Ltd., Suntech Power Holdings Co., Xinjiang Goldwind Science & Technology Co. and Solarfun Power Holdings Co.

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net.