Fossil-fuel subsidies overshadow renewables

Governments spend more than 10 times as much on fossil-fuel subsidies than renewable energy technology, new research suggests.

Approximately $43-46bn (£27-29bn) was invested worldwide in renewable energy and biofuel technologies, projects and companies in 2009, according to Bloomberg New Energy Finance (BNEF).

By comparison, $557bn was spent on subsidising fossil fuels in 2008, the International Energy Agency estimated last month.

‘One of the reasons the clean energy sector is starved of funding is because mainstream investors worry that renewable energy only works with direct government support,’ said Michael Liebreich, chief executive of BNEF.

‘Setting aside the fact that in many cases clean energy competes on its own merits – for instance in the case of well-situated wind farms and Brazilian sugar-cane ethanol – this analysis shows that the global direct subsidy for fossil fuels is around ten times the subsidy for renewables.

‘And that is without taking into account the enormous security and public health costs of fossil fuels, as well as the appalling pollution catastrophes on the Gulf Coast, the Niger Delta and elsewhere.’

However, the gap between what governments spend on subsidising fossil fuels and clean energy is expected to narrow considerably in 2010. Worldwide support for renewables and biofuels should grow as the $188bn in global stimulus funds allocated for clean energy reaches the economy.

Also, the amount that governments such as China spend to keep fossil fuel prices artificially low for consumers has dropped as oil prices retreated from their mid-2008 peaks.

Renewable investment in BNEF’s analysis included the cost of feed-in-tariffs, renewable energy credits or certificates, tax credits, cash grants and other direct subsidies.

The US spent the largest amount of money on clean energy subsidies in 2009 with an estimated $18.2bn, including $3.8bn from the Treasury Department as part of the federal stimulus programme. Around 40 per cent of this went towards supporting the US biofuels sector with the rest going towards renewables.

China, the world leader in new wind installations in 2009 with 14GW, provided approximately $2bn in direct subsidies. But support for clean energy in the country also comes in form of low-interest loans from state-owned banks, while state-run power companies have been strongly encouraged to invest in renewables.

Feed-in-tariffs subsidising the purchase of clean electricity in Europe accounted for roughly $19.5bn of the total 2009 spend, or just less than half of the global total.

Germany had the world’s most expensive clean energy subsidy programme, costing ratepayers an estimated $9.6bn in 2009 and reflecting the high number of solar generators installed in the country.