Polluting energy receives multibillion dollar carbon subsidy: new study Media Release

Sep 23, 2014 - 10:00am

Australia’s polluting energy sector benefits from an annual subsidy of $14-39 billion from the unpriced cost of climate damages on economic growth, environmental systems, health, and security, finds new analysis by The Climate Institute.

“The carbon pollution of Australian energy imposes a public cost of many billions of dollars every year,” said Erwin Jackson, Deputy CEO of The Climate Institute. “It’s by far the biggest subsidy in the energy sector.”

For all the talk of subsidies to mining or to renewables, the carbon subsidy to energy is the biggest hand-out of them all.

The analysis reveals an annual “carbon subsidy” of approximately $14-39 billion, provided to emitters across electricity, transport, direct combustion and fugitive emissions. The electricity sector alone receives a carbon subsidy of about $7-20 billion a year. This estimate builds on recent work on energy subsidies undertaken by the International Monetary Fund (IMF).

“Without the Renewable Energy Target, a policy to close ageing, high-polluting coal plant and, or, an explicit price on carbon, this carbon subsidy will continue to grow,” Jackson said. 

These estimates are based on the United States government’s calculations of the social cost of carbon pollution. The US has valued these costs at A$12-103 per tonne, with a central estimate of A$37. The IMF also recently calculated the real costs of fossil fuels for over 150 countries including Australia, using a carbon cost of US$35 per tonne.
Jackson said: “Other countries like the United States, Canada and the United Kingdom recognise the economic costs of carbon pollution, and the IMF is calling on all countries to end this subsidy to fossil fuels.”

“Australia is looking backwards, while our major trading partners are moving forward. Rather than working out how best to decarbonise our power sector, which is required if Australia is to play a fair part in meeting the global goal of avoiding 2°C warming, we are entrenching market distorting subsidies to polluting industries.”

“We should looking much further ahead in the future of electricity, out to 2030, 2040 and beyond—and that means, in the absence of an explicit carbon price, a longer, stronger Renewable Energy Target and measures to close ageing, high-polluting coal plant.” 

The total carbon subsidy to electricity between now and 2030 would reach $165-500 billion, even if the current RET stays in place. If the RET is curbed, the subsidy would increase by about $0.7-2 billion annually. If the RET were abolished altogether (and current arrangements grandfathered), the carbon subsidy would increase by about $0.8-2.5 billion annually.

“For all the talk of subsidies to mining or to renewables, the carbon subsidy to energy is the biggest hand-out of them all,” Jackson said.

To download the policy brief, visit www.climateinstitute.org.au/articles/publications/counting-all-the-costs.html

For more information   
Kristina Stefanova | Communications Director, The Climate Institute | 02 8239 6299

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