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King Coal and the queen of subsidies
http://www.sciencemag.org/content/349/6254/1286.full[font face=Serif]Science 18 September 2015:
Vol. 349 no. 6254 pp. 1286-1287
DOI: 10.1126/science.aad0674
Perspective
Energy
[font size=5]King Coal and the queen of subsidies[/font]
[font size=4]Ottmar Edenhofer
Mercator Research Institute on Global Commons and Climate Change, Potsdam Institute for Climate Impact Research, Technische Universität Berlin, Germany.
E-mail: ottmar.edenhofer{at}pik-potsdam.de[/font]
[font size=3]Coal is the most important energy source for the Chinese economy. Other rapidly growing economies in Asia and Africa also increasingly rely on coal to satisfy their growing appetite for energy. This renaissance of coal is expected to continue in the coming years and is one of the reasons that global greenhouse gas (GHG) emissions are increasing despite the undisputed worldwide technological progress and expansion of renewable technologies. The implications for long-term GHG emissions are serious because, once installed, a coal power plant will emit for decades. Fossil fuel subsidies support investments in coal capacities around the globe and thereby threaten the achievement of climate change mitigation goals. Targeted reform of these subsidies could yield benefits for climate change mitigation as well as other development objectives.
...
As a result of technological progress and economies of scale, the costs of generating electricity from wind and solar power have declined substantially. Wind generation now costs 70 US$ per megawatt-hour (MWh) on average, and geographically favorable sites can compete with the costs of coal-fired power (∼50 US$/MWh). Solar photovoltaic projects have reached 80 US$/MWh and within a few years can also be expected to match the costs of coal generation. However, the costs of intermittency of wind and solar add an additional markup of about 30 US$/MWh in cases where these technologies are deployed on a large scale as a result of increasing backup capacity requirements. Because of these additional costs, coal becomes more attractive for investors than renewable sources in many countries. In addition, coal is increasingly traded on the world market, dashing the hopes of many concerned with climate change that coal is only economically viable for a few countries with large domestic endowments.
At the same time, finance ministers around the globe subsidize fossil fuels, mostly by enabling the sale of these fuels on the domestic market below world market prices. In 2013, these pretax subsidies amounted to about 550 billion US$ worldwide. Energy subsidies are often believed to mainly support low-income households, but this belief is not well supported. Energy subsidies are typically captured by rich households in low-income countries and do little to support the poor. In all regions, the poorest 20% of the population received less than 8% of the benefits of the subsidies, whereas more than 40% of the subsidies were captured by the richest 20%.
Well-designed fossil fuel subsidy reform has considerable potential to raise the financial means necessary to reduce poverty. As a recent study has shown, if current fossil fuel subsidies were to be redirected to investments in basic infrastructures over the next 15 years, substantial strides could be made in reducing poverty. This includes universal access to clean water in about 70 countries, to improved sanitation in about 60 countries, and to electricity in about 50 countries (out of roughly 80 countries that do not yet have universal access). Such investments would also increase the long-term growth prospects of poor economies.
...[/font][/font]
Vol. 349 no. 6254 pp. 1286-1287
DOI: 10.1126/science.aad0674
Perspective
Energy
[font size=5]King Coal and the queen of subsidies[/font]
[font size=4]Ottmar Edenhofer
Mercator Research Institute on Global Commons and Climate Change, Potsdam Institute for Climate Impact Research, Technische Universität Berlin, Germany.
E-mail: ottmar.edenhofer{at}pik-potsdam.de[/font]
[font size=3]Coal is the most important energy source for the Chinese economy. Other rapidly growing economies in Asia and Africa also increasingly rely on coal to satisfy their growing appetite for energy. This renaissance of coal is expected to continue in the coming years and is one of the reasons that global greenhouse gas (GHG) emissions are increasing despite the undisputed worldwide technological progress and expansion of renewable technologies. The implications for long-term GHG emissions are serious because, once installed, a coal power plant will emit for decades. Fossil fuel subsidies support investments in coal capacities around the globe and thereby threaten the achievement of climate change mitigation goals. Targeted reform of these subsidies could yield benefits for climate change mitigation as well as other development objectives.
...
As a result of technological progress and economies of scale, the costs of generating electricity from wind and solar power have declined substantially. Wind generation now costs 70 US$ per megawatt-hour (MWh) on average, and geographically favorable sites can compete with the costs of coal-fired power (∼50 US$/MWh). Solar photovoltaic projects have reached 80 US$/MWh and within a few years can also be expected to match the costs of coal generation. However, the costs of intermittency of wind and solar add an additional markup of about 30 US$/MWh in cases where these technologies are deployed on a large scale as a result of increasing backup capacity requirements. Because of these additional costs, coal becomes more attractive for investors than renewable sources in many countries. In addition, coal is increasingly traded on the world market, dashing the hopes of many concerned with climate change that coal is only economically viable for a few countries with large domestic endowments.
At the same time, finance ministers around the globe subsidize fossil fuels, mostly by enabling the sale of these fuels on the domestic market below world market prices. In 2013, these pretax subsidies amounted to about 550 billion US$ worldwide. Energy subsidies are often believed to mainly support low-income households, but this belief is not well supported. Energy subsidies are typically captured by rich households in low-income countries and do little to support the poor. In all regions, the poorest 20% of the population received less than 8% of the benefits of the subsidies, whereas more than 40% of the subsidies were captured by the richest 20%.
Well-designed fossil fuel subsidy reform has considerable potential to raise the financial means necessary to reduce poverty. As a recent study has shown, if current fossil fuel subsidies were to be redirected to investments in basic infrastructures over the next 15 years, substantial strides could be made in reducing poverty. This includes universal access to clean water in about 70 countries, to improved sanitation in about 60 countries, and to electricity in about 50 countries (out of roughly 80 countries that do not yet have universal access). Such investments would also increase the long-term growth prospects of poor economies.
...[/font][/font]