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NEW YORK/LONDON, September 16 – While many G20 nations are showing some commitment to tackling climate...Read More
There has been much discussion of fossil fuel subsidies as both an inefficient use of public tax dollars and a barrier to the scaling up of low- and no-carbon energy sources. As “green” incentives are reduced, the phase-out of fossil fuel subsidies becomes even more urgent in order to reduce market distortions and ensure a level playing field in energy markets.
Production subsidies summing up to:
- Nearly US$8 per tonne in the US Powder River Basin ($2.9b/year); and
- Nearly US$4 per tonne ($1.3b/year) in Australia.
The removal of these subsidies would result in:
- A 8%-29 % reduction in demand for US PRB coal, with associated cumulative reductions of 0.7 to 2.5 GtCO2 to 2035, equivalent to 9 to 32 coal plants.
- A 3%-7% reduction in demand for Australian Seaborne coal, though with unknown carbon reductions due to substitution of coal from other (often also-subsidized) producers.
Removing subsidies to coal extraction should be a central plank of any country’s fiscal and environmental plan. Particularly as subsidies to renewable energy come under increasing pressure, subsidies to the mature coal sector should not be ignored. A broader geographic range for coal subsidy elimination will boost the carbon benefits, as the ability for coal supplies to move in from other subsidized markets will be constrained.