WORLD LEADERS left Paris over the weekend promising to cut global greenhouse emissions significantly. Fulfilling the promise will not be easy. But one step should be.
In the United States, the debate on fossil-fuel subsidies centers on tax breaks for drillers, which cost the Treasury about $4 billion annually. These are unconscionably wasteful, and Congress should eliminate them immediately. Other countries should follow suit.
But globally, the bigger problem lies with governments that subsidize consumers of fossil fuels, not producers. Nations in the Middle East and elsewhere in Asia and Africa, as well as Latin America, particularly those with abundant oil and gas, are the worst offenders. According to the International Energy Agency (IEA), a global think tank, some 40 countries subsidize fossil-fuel consumption, creating a huge incentive to release carbon dioxide. Governments spend a staggering half-trillion dollars on these counterproductive policies, about four times more than global subsidies for renewables such as solar and wind energy.
Many governments recognize that fossil-fuel consumption subsidies are bad, but once offered they can be hard to withdraw. Widespread protests forced the Nigerian government to reinstate gasoline subsidies in 2012. This year Kuwait re-lowered diesel fuel prices in the face of political pressure.
But low world oil prices lately have allowed some countries to do better. Indonesia eliminated gasoline subsidies, and India ended diesel subsidies last year. The IEA argues that scaling down these supports over the next several years is a relatively simple way to help keep the door open to meeting the world's global warming target — no more than 2 degrees Celsius. In some places, subsidies are so large and entrenched the IEA anticipates a long drawdown. Middle Eastern nations subsidize 75 percent of the cost of fossil fuels; the IEA suggests cutting that to 20 percent by 2030.
Beyond overcoming popular pressure, the challenge for governments seeking to do the right thing will be ensuring that poor citizens aren’t rendered even more desperate in the process. The solution is not to keep distortionary energy subsidies, but to direct money that the governments save into anti-poverty programs that will do more good.
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