Bloomberg News

Fossil-Fuel Subsidies May Rise to $660 Billion, IEA Says

October 04, 2011

(Updates with Fatih Birol comments in third paragraph.)

Oct. 4 (Bloomberg) -- Fossil-fuel subsidies may rise to $660 billion in 2020 from $409 billion in 2010, according to the International Energy Agency.

The biggest payers of subsidies are energy producers Iran, Saudi Arabia and Russia, the IEA and Organization for Economic Cooperation and Development said today at a presentation of a joint study. The report recommends changing the subsidies to curb government spending and reduce greenhouse-gas emissions.

“Making energy cheap means we use fuel in a wasteful manner,” Fatih Birol, the IEA’s chief economist, said in Paris. “Without reforms, subsidies will increase to about 0.7 percent of global gross domestic product.”

The poorest 20 percent of the population got 8 percent of the $409 billion last year, Birol said. More than 1 billion people in the world have no access to power and these subsidies aren’t getting to them, he said.

“The subsidies are going to the middle and upper classes,” OECD Secretary General Angel Gurria said. “This analysis is shouting that change is needed.”

The support compares with $57 billion in 2009 for renewable sources, including wind turbines, wave machines and solar panels, rising to $110 billion in 2015, according to IEA figures published last year. Higher subsidies for fossil fuels that emit carbon dioxide may undermine efforts to deal with climate change.

“If there is a well-executed phase-out it will induce more efficient consumption,” Maria van der Hoeven, IEA executive director, said in Paris. “The time of cheap energy is over.”

--Editors: Rob Verdonck, Alessandro Vitelli

To contact the reporters on this story: Tara Patel in Paris at tpatel2@bloomberg.net; Catherine Airlie in London at cairlie@bloomberg.net

To contact the editors responsible for this story: Rob Verdonck at rverdonck@bloomberg.net; Stephen Voss at sev@bloomberg.net


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