By Kyla Mandel, Editor of DeSmog UK. Originally published at DeSmogBlog.
Major global insurance companies are urging G20 leaders to commit to a specific timeline for rapidly phasing out fossil fuel subsidies – something they’ve repeatedly failed to do over the years despite numerous promises to end support for the industry.
In a joint statement issued ahead of the G20 conference in China this weekend, insurers with more than USD$1.2 trillion in assets under management warn that support for the production of coal, oil, and gas is at odds with the nations’ commitment to tackle climate change agreed in Paris last December.
The statement, signed by Aviva, Aegon NV, and MS Amlin, calls for governments to set “a clear timeline for the full and equitable phase-out by all G20 members of all fossil fuel subsidies by 2020.”
It adds that the phase-out should begin by eliminating all subsidies for fossil fuel exploration and coal production.
“Climate change in particular represents the mother of all risks – to business and to society as a whole,” said Mark Wilson, chief executive of Aviva.
“And that risk is magnified by the way in which fossil fuel subsidies distort the energy market. These subsidies are simply unsustainable.”
‘Empty Promises’
G20 nations have been pledging to phase out fossil fuel subsidies every year since 2009. Yet, research by the Overseas Development Institute (ODI) and Oil Change International shows governments spending $444 billion in 2013 and 2014 supporting the fossil fuel industry.
Shelagh Whitley, lead research fellow working on subsidies at ODI, said: “These subsidies fuel dangerous climate change. If we are to have any chance of meeting the 2C target set at the Paris climate summit then governments need to start a programme of rapid decarbonisation.
“It is extremely worrying therefore that the G20 energy ministers earlier this year acted as if Paris hadn’t happened by repeating the same empty promises they have been making since 2009.”
In May, G7 nations agreed to phase-out fossil fuel subsidies by 2025. However, when G20 leaders gathered the following month, they were met with criticism for failing to follow the G7 in setting a date to end the subsidies.
Renewables Investment
And insurance companies aren’t the only ones putting pressure on the upcoming G20 meeting to set a clear phase-out timeline.
Last week the Institute and Faculty of Actuaries (IFoA) joined the ODI in calling for leaders to end support for fossil fuels by 2020.
Chair of the IFoA’s Resource and Environment Board, Nico Aspinall, said: “Without these subsidies, there would be a more level playing field for the investment in renewable energy sources we desperately need to avoid the worst consequences of climate change in the future.”
Also last week, a group of 130 major institutions controlling $13tn in investments called on the G20 nations to ratify the Paris agreement this year along with committing to increasing investment in clean energy and disclose climate-related financial risks.
As ODI’s Whitley put it: “The finance sector recognises the importance of moving away from fossil fuels, governments need to realise they may be the only ones left not moving.”
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I didn’t realize fossil fuels were subsidized. Does this take into consideration the taxes levied on gas and diesel, which we constantly pay at the pump?
Many of the subsidies take the form of tax deductions and credits that are not available to renewable energy production, so the amounts don’t show up in government budgets.
In North Carolina, ignorance was pleaded in order to keep marijuana illegal. Medical marijuana. Supposedly marijuana is “decriminalized”. That is a joke in that no change in policing really follows. I estimate 30 percent of policing, if not more, is part of the Drug War.
I mention this for the Tax Credits of 35 percent had greatly advanced renewables, energy capture, & biofuels. In order to make it so that ignorance could not be pleaded as a reason to withdraw those great supports I arranged that the engineering university NCSU send to the legislature experienced experts to brief the legislature before the vote to alter that subsidization.
I had a Vice Chair position on the Precinct.
So the Briefing was scheduled post vote. All renewables & energy capture support in NC, North Carolina, Not Conscious, was withdrawn. No attempt was even made to reduce the percentage of tax credits from 35 to even 25 or 15 even.
Jobs in the industry of biofuels were lost. (One of the shows on Transcendian is an interview with a man collecting grease for biofuels.)
North Carolina, well, where the leadership is loathsome, & the Civil War goes on with the C.S.A. winning.
From my perspective it is about Corporation Control of all energy sources, and it will be done when they, Duke Energy feels like it. Independent businesses will be crushed.
At the time of these events, I said, No Competition is Too Small to Crush.
Interesting that scientists say by 2020 a great deal of Antartica’s Ice Sheets will for real slide into the sea.
I am with Lambert, collapsing in place. Collapse in place.
Better if you are on high ground, or live on a boat.
http://www.bizjournals.com/charlotte/blog/energy/2015/07/north-carolina-producing-more-power-from-natural.html
What part ofNG replacing coal don’t people get?
Wind /solar are miniscule.
2020 is laughable
Many of the subsidies take the form of tax deductions and credits that are not available to renewable energy production, so the amounts don’t show up in government budgets.
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Wind and solar are not subsidized. Give me a freaking break. Besides the amount of energy these two sources generate are minuscule. Look at the insurance companies which signed this. No US firms that I can tell. This is dead on arrival!
Agreed. I was referring to the subsidies for fossil fuels.
Not to mention all the military spending, action, and blow back (that has a cost!) that comes from ensuring the flow of oil out of the middle east. If you added those costs to a gallon / liter of fuel, it would be significantly more expensive.
I am not sure how the taxes we pay will effect the subsidy side. The industry does not have to pay the taxes and can transfer expenses to consumers even when oil prices plummet.
Google Fossil fuel subsidies. The US subsidies for oil and gas are typically in land deals. The transfer of public lands to private interests is done at significant mark downs. The clean up of the polluted lands are also pushed onto US tax payers. Direct subsidies also exist for exploration of new wells.
If the US transferred all subsidies from fossil fuels to renewable then the world would change in 20 years. Solar nano tech projects still need a lot more basic research = $$$ before they can be implemented. If graphene reaches its potential then we may have a habitable planet in 75 years.
“I didn’t realize fossil fuels were subsidized. ”
Same here.
I realize its genuinely hard to get rid of the stuff but at least stop subsidizing it?
Yes, the subsidizing of fossil fuels seems to have become a major GLOBAL environmental issue (because they are subsidized globally). It’s not just a concern of people worried about wasting tax dollars (on the subsidies) but seems to have become a serious concern of many environmental organizations.
There is no easy path to eliminate fossil fuels, but at least stop subsidizing. And consider nationalization of energy production. I don’t know if that will automatically fix all the problems of course, but on the other hand how are they ever to be fixed when massive profits (companies like Exxon are some of the most profitable in the world) are achieved by destroying the world? How can they ever be improved in that framework? But yes at least stop subsidizing like yesterday.
Considering how corporations get paid these days, with CEO pay out of control, we can assume at least some of this money goes to campaign contributions to keep the gravy train rolling.
Everything is interconnected. If we can implement Campaign finance reform, we may free some politicians from their corporate overlords.
http://www.taxpayer.net/images/uploads/Understanding%20Oil%20%20Gas%20Subsidies(2).pdf
this dosnt even address the MIC parasitic load to the whole cost analysis per barrel
The (oil) depletion allowance is one example of a fossil fuel subsidy.
https://thinkprogress.org/happy-100th-birthday-big-oil-tax-breaks-3c9731c4bc85
https://en.wikipedia.org/wiki/Oil_depletion_allowance
https://www.irs.gov/publications/p535/ch09.html
A 1989 study from the World Resources Institute estimates U.S. petroleum subsidies at $300 billion (1989 dollars) a year. That’s $582 billion in current dollars, says the internet’s CPI inflation calculator.
The WRI study does not include pollution / health costs. It does include the cost of roads not paid for by gasoline taxes, and tax breaks like the depletion allowance–oil well owners get to write off 15% of that income because it’s depleting the well, so they only pay tax on 85% of their well income.
“The IEA calculates that the global subsidy bill for fossil fuels stood at about $490bn in 2014” (FT)
An IMF Report says $5.3 trillion in annual subsidies worldwide.
Daniel Yergin’s history of the oil business (The Prize), says it’s an industry that has never had a free market. Some monopoly or cartel (Rockefeller to OPEC) has always controlled or manipulated its price.
Finally, the biggest, bizarre-est distortion in the oil business: Accounting. Oil revenue is counted as income. This is roughly like counting withdrawls from your bank account as income. Oil “income” is much more like a withdrawl of natural capital.
Imagine asking a bank for a loan that require $2,000 in income, trying to persuade the loan officer that, because you have $2,000 in savings, that qualifies you for the loan. The loan officer would call security and have you ejected as a crazy person. Nevertheless, that’s the kind of accounting oil companies use.
You are joking: “The finance sector recognises the importance of moving away from fossil fuels, governments need to realise they may be the only ones left not moving.”
I don’t know, maybe that is the position of the finance sector (they are still involved with fossil fuels, well so is everything involved in this economic system truthfully).
But it’s mostly not the position of other sectors with influence on the government of course, like the energy industry itself.
Also phase out subsidies for ‘renewable energy’ and we might have a deal. Let everyone stand on their own.
Per Wiki, in 2011, global fossil fuel subsidies were north of $500B and renewables were at $88B. The article also did not mention efforts by big coal and it’s users to eliminate incentives for installation of renewable energy. Nor is there any mention of decades of subsidies going to big fossil.
Finally, one type of energy causes an immense amount of carbon to be released while the other is more neutral.
Forgive me for being skeptical of your point, but doesn’t it boil down to “The law forbids the rich as well as the poor from sleeping under a bridge”?
At the very least, since 1913, and possibly earlier.
No all those gifts to Big Fossil need to go to renewables.
Yea, even on the silly standing on one’s own argument, wouldn’t renewables have to be subsidized for years hence just to EQUAL the advantage fossil fuels have already been given via subsidies? To even “level the playing field”.
None of those “gifts” should go to anyone.
Renewables will find their appropriate places if they are not at the handicap of a traditional FF subsidies headwinds to the tune of +$20B/yr in tax exemptions and lease giveaways.
And that’s not counting the over the moon cost of MIC assets and deployment to “secure” our exUS energy supply channels, which I presume exceeds the direct subsidies and preferential tax treatment to the FF industry.
If the government left every new industry to “stand on its own”, we would have no microchip industry today. It was only the DoD’s willingness to pay above-market prices for the earliest chips that enabled the industry to take off.
Private capital is famously and notoriously unable to take a long view on risky new technologies. Fundamental breakthroughs come mostly from government-funded research.
2020 is too late.
Pithy claim. How about a Link ?
If 2020 is to late, 2016 is probably as well.
It’s a continuum, I doubt a “it’s too late” inflection point is humanly definable w/ the granularity of a calendar date/year.
As Steve H I’m sure would agree, not much in Nature is linearly predictable.
a-yup. Tho sometimes if you whack nature with a log it straightens out. The problem is when folks start to make predictions based on extrapollutions.
A fun exercise is checking previous modelling scenarios and comparing them to observed values since then. Right now Fig. 1.7 is tracking the worst-case scenario-d, which puts us at 500 ppm CO2 about 2030.
Very exciting times, what with non-linear unknowns and whatnot. It’s my hope we manage to grab the bar and not introduce new factors trying to fix it. Let’s not make things worse by guessing.
Last week the Institute and Faculty of Actuaries (IFoA) joined the ODI in calling for leaders to end support for fossil fuels by 2020.
http://www.mining.com/web/snl-energys-latest-coal-forecast-and-gas-fired-generation-overtakes-coal-burn-for-1st-time/
The there from here by 2020? Interesting proposition unless they want to call natural gas a renewable
When I was younger I heard the ‘really smart’ people went into actuarial science. So mooks like me were the ones running climate change and groundwater models, while the really smart ones were figuring where satellites went in Alpha Centauri, or incrementalizing the deaths of us all and short-selling the individual factors. Why so late to the table for the actuaries? Was each company trying to put their rivals in the sucker position? I guarantee someone knew about Forrester’s work and they saw The Limits to Growth.
Did someone suddenly grow a heart? Or did the graph hit the crossing point where the variance swamps the expected values? Not that I’m bitter. I just wish they’d have piped up maybe a couple decades ago, before the enormous latent heat of the Arctic and Antarctic had been ignorantly used up.
I think you probably know the answer to your own question, but actuarial tables are probably always going to lag big, plodding dangers like this. They don’t plan for things like influenza plagues either, which are far more fast moving.
I’m not happy with the current situation either, but if it’s the insurance behemoths that move us in the right direction, I think I’m going to have to get over it.
But if we do that, say the grovelling and bum-kissing pols, who will give us MONEY now? Climate change be hanged, GIMME!
The profession that is really missing from the climate change battle is the economics profession.
The measure economists promote, GDP, is always positive valued, when we need a concept of negative GDP growth in which digging up hydrocarbons, burning them to add atmospheric CO2, causing long term damage to the world’s climate, should subtract from GDP, not add to it.
Insurance companies want to insure quantifiable risks, and your suggestion that the high variance in future climate outcomes is making it more difficult to profitably write insurance with acceptable risk/reward seems a good one..
This may be an insurance industry “shot across the bow” to inform governments that governments will be expected to increase their insurance exposure as insurance companies exit some markets.
The US government is already in the insurance business, with crop insurance, nuclear power insurance, deposit insurance and flood insurance, none of which have to be profitable or correctly adjust for risk.
I’ve read that Floridians, even though much of the state is near sea level, are not worried about rising sea levels affecting their real estate because they expect the Federal government to financially protect them.
I aver that insurance companies did not grow a heart, but it is good they are promoting this..
Yes, just like they were protected from a foreclosure crisis.