Fossil Fuel Subsidies: The Politics and Economics of Climate Change
What accounts for such dismissal of ideas supported by a variety of international organizations? It’s not denial of the consensus of climate scientists; neither the API nor the IPAA refutes the role of greenhouse gases in man-made global warming. Rather, they stress the very particular and pivotal role that fossil fuels play in the US economy, and lament how misunderstood this role is by environmentalists and other supporters of eliminating subsidies—for them, the geopolitical necessities of the early Cold War that led to subsidies through the foreign tax credit haven’t changed much. In fitting tribute to their industry, Gerard and Russell rely on automotive metaphors to illustrate their claims. For Gerard, oil and natural gas constitute “one of our nation’s vital economic engines”; for Russell, the fossil fuel industry “drives the U.S. economy.”
Additionally, the oil and gas industries face unique challenges. Discovering and developing new oil and gas sources requires significant investments. As discoveries become more difficult, and the technology needed to extract oil and gas gets more sophisticated, oil and gas production gets even more expensive. To sustain production, oil executives might say, the fossil fuel industry needs more government help than ever.
Beyond their antipathy to intellectual analyses of their industry, the API and the IPAA object to the priorities that an end to subsiudies implies. The focus of the API and IPAA is the immediate economic impact of such a plan, which could raise costs throughout the economy while adding pressure to an industry that employs millions. The environment does not play as meaningful a role in their thinking; neither do forecasts that look decades into the future. It’s no wonder they sound so perplexed by policy designed to address climate change; they see environmental policy through an economic lens.
Outlook: Copenhagen and Beyond
This is not the first time that fossil fuel subsidies have come under scrutiny. A 2005 article in the Washington Post criticized that year’s Energy Policy Act for including $85 million in subsidies for fossil fuel and renewable energies. A paper in the Annual Review of Energy and the Environment in 2001 was critical of fossil fuel subsidies, especially indirect subsidies that lack transparency and allow for government to act in ways that are inconsistent with broader government policy.
The G-20 summit appeared to be a launching pad to draft a concrete proposal in time for Copenhagen. Yet while the G-20 agreed to phase out fossil fuel subsidies at the Pittsburgh Summit, the timeline was vaguely set for “the medium term,” to the disappointment of environmentalists who have high hopes for Copenhagen.