With the oil in the dumps, the world considers ending fossil-fuel subsidies

EU Energy Commissioner Kadri Simson wants to make a Green Deal part of the pandemic recovery plan. Simson told Bloomberg, “Getting rid of fossil fuel subsidies while lowering taxes on electricity can nudge us in the right direction, without putting too much pressure on the consumers.”

The cost of subsidies for electric vehicles, like the ones proposed this week by LA’s Transportation Electrification Partnership, are commonly characterized as giveaways. But support for fossil fuels — like what the US government has provided for decades and President Trump wants to expand — are conveniently ignored as the cost of keeping the economy moving.

The UN secretary general yesterday condemned the support emitters as part of pandemic relief.

Meanwhile, the EU is eyeing the €200 billion ($217 billion) it spends every year subsidizing oil, coal, and natural gas. The European Parliament believes that the subsidies hinder efforts to reduce greenhouse gases.

The pandemic has caused a collapse and oil prices and questions about the long-term viability of legacy fuels. Simson said:

Many investors are turning their interest away from fossil fuels and into renewable energies, where they see higher long-term returns. That’s why I believe the recovery plan is an opportunity to accelerate support for renewable energy.

Closer to home

California is home to the nation’s biggest electric-vehicle market and a major producer of fossil fuels. While California’s oil and natural gas industry contributes billions of dollars in state and local revenue, they come at high cost to public health, especially disadvantaged communities.

The UC Berkeley Center for Law, Energy and the Environment issued a report today about how policymakers can reduce and eventually phase out oil and gas production in California.

Oil and gas on federally owned lands in California may fall under federal legal authority. And the Trump Administration has opened more than 700,000 acres of federal lands in California for oil and gas drilling.

But UC Berkeley says there are steps California legislators could take, such as implementing per-barrel or per-well severance tax or fee and dedicate the revenue to projects that further the goal of transitioning away from fossil fuel. The goal would be to level the tax tied to the carbon intensity of the oil or gas produced.

Legislators could also require the California Air Resources Board to develop and implement a phase-out of all in-state oil and gas production by a date that tracks overall climate goals.

Electrek’s Take

While oil remains in a slump, and nobody wanting the stuff, now is the time to remedy our backward relationship to energy policy — most critically, the $5 billion in annual subsidies that distorts the global oil industry.

United Nations Secretary-General Antonio Guterres last week stated the case in no uncertain terms:

Fossil fuel subsidies must end, and polluters must start paying for their pollution.