You Won’t Believe How Big Fossil Fuel Subsidies Are

Andrew Burton/Getty Images

Andrew Burton/Getty Image

Americans generally hate paying for other people’s stuff. Our social programs cost hundreds of billions of dollars, for example, and that bothers a lot of taxpayers. The U.S. also shells out an awful lot of money to big business in the form of subsidies — a fact that does get some people’s knickers in a twist, but typically flies under the radar. We do know that the fossil fuel and energy industries are some of the largest recipients of corporate handouts, and that the subsidies they receive go a long way in helping bolster corporate profits while also keeping consumer prices low.

What most people didn’t know was just how big those subsidies are. According to the International Monetary Fund, they’re far bigger than anyone outside of the inner circle would have ever guessed.

We’ve discussed before how fossil fuels — including the gasoline to run our vehicles, the natural gas to heat our homes, and the coal used to generate electricity — are subsidized in a large way, and are much more expensive than most of us realize. But this new IMF estimate says that global fossil fuels subsidies are expected to top $5.3 trillion in 2015, a figure bound to cause taxpayers the world over the blow their tops.

To put things into perspective, as a follow-up to what The Guardian did, that $5.3 trillion in government handouts to fossil fuel companies calculates out to roughly $10 million per minute, every day, and eclipses all spending on healthcare by all of the world’s governments combined. It’s an astronomical figure, and raises some very serious questions about the vitality and viability of the fossil fuel industry. The IMF says that, “by removing those subsidies, eliminating post-tax subsidies in 2015 could raise government revenue by $2.9 trillion (3.6 percent of global GDP), cut global CO2 emissions by more than 20 percent, and cut pre-mature air pollution deaths by more than half.”

Although the IMF does admit that those numbers need to be taken with caution, it’s still a rather mesmerizing estimate.

What does the world get in exchange for that $5.3 trillion? In the U.S., we do get affordable energy to give our lives a level of convenience and comfort, there’s no denying that. But what most of us don’t realize is that the fossil fuels we are burning through are much more expensive than we end up paying. Our tax dollars end up paying for the bulk of the price, and with such a lofty price tag being placed on the industry by the IMF, the question of whether it’s time to switch to renewables on a large scale is more relevant than ever.

One of the major hurdles holding clean renewable energies back is costs. HGTV pegs the cost of switching a home over to solar power at $50,000, with tax incentives, and the American Wind Energy Association claims a wind turbine that generates enough electricity to power a home costs roughly $30,000. Those are expensive options, but considering how much of our collective tax money is going to the fossil fuel industry, they’re not as expensive as it seems. In fact, renewables may even be cheaper.

The WorldWatch Institute says that though America is home to 5% of the world’s population, we burn through about 25% of the world’s fossil fuels. Oil Change International estimates total U.S. subsidies for fossil fuel companies at $37.5 billion annually — which seems out of proportion to the IMF’s estimates. If the U.S. were to account for the 25% of the fossil fuels we use annually, and pony up a quarter of the IMF estimate, we’d be shelling out $1.325 trillion every year.

“This very important analysis shatters the myth that fossil fuels are cheap by showing just how huge their real costs are,” climate economist Nicholas Stern of The London School of Economics told The Guardian. “There is no justification for these enormous subsidies for fossil fuels, which distort markets and damage economies, particularly in poorer countries.”

If America was to take all of the money currently being poured into the fossil fuel industry, and instead use it to convert to other technologies, not only could we save an astounding amount of money, but also tackle environment-related issues. The trick is getting this information to the public, and ultimately having the public sentiment outweigh the lobbying dollars of big business to force change.

That battle is already underway, but Americans will probably be out several trillion dollars more until anything seismic happens.

Follow Sam on Twitter @SliceOfGinger

More from Business Cheat Sheet:

More Articles About:   , ,