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EU: Subsidies for dirty energy

Nuclear Monitor Issue: 

(June 13, 1997) A recent estimate of global energy subsidies in the early 1990s gives a total of US$359 billion per year, 2 percent of world Gross Domestic Product (GDP). Although a large part of this is spent in the former Soviet Union and in developing countries, OECD governments including those in Europe and also in the European Union itself, continue to give enormous amounts of financial support to producers and users of fossil and nuclear energy.

(474.4699) WISE Amsterdam -These subsidies still exist despite global agreement that carbon dioxide (CO2) and other greenhouse gas emissions need to be drastically reduced and despite concerns over nuclear power.

EU: fight the climate
In the period 1990-1995 alone hundreds of billions of dollars were spent by the European Union and the EU member countries in direct subsidies to nuclear and fossil fuel industries. The public money for fossil fuels is almost seven times as high as for renewables, and for nuclear energy more than three times as much. Each year an average of US$14.9 billion was given to fossil and nuclear energy, which is more than three times higher than the US$4.7 billion renewables and energy conservation received together. This is the conclusion of a new report, written by researchers from the Free University, Amsterdam, ordered by the Greenpeace International Climate Campaign.

These results contradict the official European policy to curb the emission of greenhouse gases, to lessen the production of toxic wastes, and to enhance renewable energy.

It is clear that the official energy commitments to fight the greenhouse effect is limited to words and is not yet brought into practice. The production of CO2and toxic wastes is heavily promoted and subsidized, in spite of the ever-increasing proof of dramatic climate change through this gas and the unresolved problems with nuclear wastes.

Obviously the EU and the European governments don't take this problem seriously. Although they signed an international treaty in 1992 to protect the climate, they have since spent more than US$60 billion on those environmentally dangerous industries. Their policy is a joke: saying one thing, doing the opposite.

The EU countries most to blame are: France, Germany, Spain and the UK. Together they spent US$12.97 billion annually on subsidizing fossil fuels and nuclear energy, more than 85% of the European total.

Hidden subsidies far greater
There is an enormous amount of (partly secret) hidden subsidies.

Some examples of these hidden or implicit subsidies:

  • Obligation to use domestic coal;
  • Reduced electricity prices for large (industrial) users;
  • Government guarantees for investments and other types of "soft credits";
  • Exemption from risks or liabilities for producers, such as cleaning of contaminated soils, compensation for damages and for decommissioning of nuclear power plants;
  • Tax exemptions, such as for airplane fuels; and
  • Transport subsidies, such as for coal in the US.

Even after superficial analysis of a few key examples, hidden or indirect subsidies are far greater than that of direct subsidies. Two examples illustrate this. In the UK the privatization and restructuring of the electricity industry made the lack of profitability visible. To keep the nuclear industry alive, several tens of billion dollars were spent by the government.

The OECD's estimate for energy subsidies in Italy was $10 billion, against a total of $354 million direct subsidies in the Greenpeace report. This shows that the largest part of the subsidy iceberg is still below the surface, and the total subsidies are far greater than the direct subsidies alone.

Dirty work or clean jobs
Nuclear and fossil fuel industries and most governments argue that high costs of clean energy (like solar, wind and biomass) are uneconomic and cannot play a significant role in the short term. If this should be the case at present, it is mainly caused by the huge subsidies for nuclear and fossil energy. The often mentioned argument that the direct subsidies function to protect jobs does not hold true. New jobs and probably even more will be created if those subsidies are used for energy conservation and renewables. Economically it is more efficient to relate subsidies as close as possible to the purposes they are meant to achieve. Investing during the next two decades just over US$650 million annually could make the solar energy market in Europe self-sustaining. With 1 million solar roofs installed by 2010, this would create 58,000 jobs and save 2 million tons of CO2 emissions each year.

Overtaking the backlog
Some governments are already reducing subsidies to fossil and nuclear energy. But even if all these subsidy programs are reduced to zero, renewables and conservation face an unequal struggle: fossil fuels and nuclear energy have enjoyed public heavy financial support for several decades, in contrast to the relatively late and low subsidies for renewables and energy-saving options.

Together with the present failure to internalize environmental costs and benefits of different fuels this does provide a major reason for largescale economic support for renewables until its full commercialization is secured.

Since the inception of the European Coal and Steel and Atomic Energy Treaties governments supported fossil fuels and nuclear energy. Renewables and energy conservation each got less than the amount of R&D subsidies for fossil fuels and less than a fifth of that given to nuclear fission and fusion R&D.

Because of this historical bias just stopping subsidies for nuclear and fossil fuels alone would not automatically change the competitive position of renewables versus fossil and nuclear energy.

The one-sided public spending contradicts any notion of real competition or "liberalizing" the energy markets. The official EU policy goals to reduce carbon dioxide emissions, to increase the share of renewables or to establish real competitive energy markets are not supported by the historic and existing energy subsidy policy.

Stopping the subsidies to dangerous energy alone could cut global CO2 emissions by between 4-18 percent, according to the International Panel on Climatic Change (IPCC).

The US$15 billion annual subsidy to fossil and nuclear energy is equal to the total support required during the next two decades to make solar energy international cost competitive with traditional energy.

The EU and European governments should do as they promised. They should take real action to fight the climate change:
Eliminate the US$15 billion annual subsidies on environmentally dangerous energies transfer these funds to renewables and energy conservation. They should also publish annually all direct and indirect energy subsidies.

Source: Ruijgrok and Oosterhuis, "Energy Subsidies in Western Europe", Vrije Universiteit Amsterdam, May 1997; Greenpeace International
Contact: Greenpeace International Climate Campaign, Amsterdam.
Tel: +31-20-523 6222; Fax: +31-20-523 6200;