“Nothing worse for development than subsidies.” So says Jose Maria Figueroa, former President of Costa Rica, in a panel discussion today about the need for eliminating energy subsidies around the world. In the developing world, fossil fuel energy usage is subsidized to the tune of $750,000,000,000 annually (that’s 750 “B” as in “billion”). Though politically difficult (recent rioting in Iran focused on ending gasoline subsidies), getting rid of these subsidies could cut CO2 production by 20% of the amount targetted by the UN by 2050.
But this isn’t just an issue in the developing world. The OECD countries have subsidies totalling about $30,000,000,000 according to recent studies. And in November 2009, the G20 agreed to eliminate these subsidies in the developed world. According to William A Pizer, of the US Department of the Treasury, this means eliminating various tax credits and depreciation allowances for fossil fuel in this country. Obama has been arguing for this for some time, and the energy companies have responded that it hurts energy security and American jobs. True perhaps, but by tying these reductions to agreements with the EU and other large economies, the US is moving closer to this reform long opposed by the energy companies.
Mr. Pizer stated this quite plaingly and bluntly today. Energy subsidies in the US will go.