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Coal empire strikes back

THE coal industry is using Big Oil’s own stick to beat it with, backing a major University of Cambridge report that Prince Charles has launched, calling for the removal of all fossil fuel subsidies, particularly to the oil and gas industry.

Anthony Barich

The World Coal Association has jumped on this opportunity to turn the tide on Big Oil, whose European majors called on world governments last month to implement a carbon pricing system to help phase out coal – a call backed by Woodside Petroleum CEO Peter Coleman.

The view put forward by Royal Dutch Shell, BP, Statoil, Total and Eni was at odds, however, with their US counterparts Chevron and ExxonMobil, with the latter’s CEO Rex Tillerson calling it an impractical solution that consumers would never get behind.

Then came this over the weekend in the document produced by the University of Cambridge’s Institute for Sustainability Leadership: “Another powerful way to reflect and manage true costs is to remove or redirect subsidies that otherwise make unsustainable economic activity cheaper.

“For example, in relation to fossil fuels, soil damage, biodiversity loss or the perpetuation of poverty … governments should consider whether their current approach to subsidies may in fact be encouraging economic activities that run counter to sustainable development goals.”

The report said “novel fiscal policies” were required to ensure that the true costs of environmental and social externalities were borne by the economy rather than being “offloaded on society”.

“Examples of externalities include carbon emissions, various forms of pollution and waste, resource depletion, ecosystem loss and a wide range of social inequalities,” the report proffered.

“This task could be tackled, for example, by differentially taxing business activities according to their environmental and social impacts – and rewarding positive performance.

“An example of this approach would be the use of revenues raised from carbon pricing to enable private financing of low carbon, climate resilient infrastructure.”

New WCA CEO Benjamin Sporton took the opening and took it, especially given the International Energy Agency has indicated that subsidies to coal represent roughly 0.5% of total fossil fuel subsidies.

He said coal was an affordable fuel, which was why subsidies to coal were virtually non-existent compared to those for other fossil fuels.

“If the oil and gas industry is serious in its commitment to climate action it should support a phase out of fossil fuel subsidies,” he said.

“Removing inefficient subsidies to the oil and gas industry is part of that reform.

“Any move to reform fossil fuel subsidies, however, must be accompanied by policy parity for all low emissions technologies. Clean energy investment between 2004 and 2013 totalled almost $2 trillion, of that only $20 billion went into cleaner fossil fuel technologies like carbon capture and storage.”

A recent International Energy Agency report showed that renewables would contribute 30% of the effort to the 2C target while carbon capture and storage would contribute 14%.

Sporton said that if CCS was expected to contribute about 50% of the carbon dioxide mitigation of renewables, then it should constitute 50% of the investment – yet, at present, it’s barely 1%.

“We must put all low emission energy sources on an equal footing to make sure we have the best hope of achieving global climate objectives,” Sporton said.

“However, I reject the notion that untaxed externalities should be considered subsidies as recently proposed by the International Monetary Fund.

“The IMF model fails to account for the significant benefits that access to affordable, reliable electricity from coal brings to economies. If you are going to price external costs you should also price external benefits.

“Some commentators like to point to the health effects of air pollution caused by burning coal in older less efficient plants in China.

“What they fail to point out is that over the past three decades 600 million people have been lifted out of poverty in China in an economic revolution powered by coal. Taking those millions of people out of poverty has no doubt had dramatic health benefits.”

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