Looking at pictures of the Los Angeles wildfire devastation or closer to home, how a tornado tore through Mangawhai, it's obvious that the climate emergency is very real and hugely damaging. To the point that insurance is becoming way too expensive for many people, or impossible to obtain in some areas.
What are we doing about it? Well, stats compiled by Our World In Data and data from the International Monetary Fund (IMF) suggest we're subsidising the fossil fuels that accelerate climate change enormously. IMF suggests the explicit subsidies to producers and consumers, along with implicit subsidies amount to US$7 trillion.
That is a mind-bogglingly large number; Our Word In Data says it's around seven per cent of the world's gross domestic product (GDP). Some oil producing countries such as Saudi Arabia, Turkmenistan, Libya, and Algeria spend heaps on fossil fuel subsidises, over US$500 per person and sometimes over US$1000 per capita.
What are the subsidies like in our part of the world? In the case of Aotearoa New Zealand, we subsidise fossil fuels, probably more than what people realise.
Although the amount is down steeply from the peek of US$9.75 pp in 2012, it is rising again and reached US$3.70 pp in 2021.
That's nothing compared to Australia, currently roasting in a heatwave with the fire danger being "extreme." It subsidises fossil fuels by US$359.50 per capita.
The IMF said there's been agreement among the Group of 20 advanced and emerging economies to phase out inefficient fossil fuel subsidies since 2009. Some countries have done so, including India, Morocco and Ukraine with taxes being introduced in certain nations.
This is what needs to happen, the IMF said in 2023: subsidies out, price increases phased in, because artificially keeping fossil fuel prices low has a number of negative consequences:
"Subsidies are intended to protect consumers by keeping prices low, but they come at a substantial cost. Subsidies have sizable fiscal consequences (leading to higher taxes/borrowing or lower spending), promote inefficient allocation of an economy’s resources (hindering growth), encourage pollution (contributing to climate change and premature deaths from local air pollution), and are not well targeted at the poor (mostly benefiting higher income households).
Removing subsidies and using the revenue gain for better targeted social spending, reductions in inefficient taxes, and productive investments can promote sustainable and equitable outcomes. Fossil fuel subsidy removal would also reduce energy security concerns related to volatile fossil fuel supplies," the IMF said.
This is not news. The question now is how bad climate disasters and ensuing economic damage has to become before there's full popular support to remove fossil fuel subsidies.
23 Comments
Here in NZ we " subsidise " fossil fuels to the tune of $US 3.70 per person annually ...
... ummmm ... that's not much , is it ...
If Labour hadn't wrecked the country's balance sheet we should be able to up that figure considerably .... we're just not pulling our weight in helping the fossil fuel industry ... sad ... very very sad ...
My question is how....? As GBH indicate it is by US$3.70 per person, but where is this spent, and to what purpose?
There is simply not enough information here to make any reasonable conclusions.
National flew a grid/pattern search of the country, back in the early Key days.
Taxpayer funded 100%.
Free to any oil Co which wanted to use it.
It was a twin, Murray, and I watched it beating up and down. We paid for that.
I don't understand this article. Approximately 50% of the price of a litre of petrol here is derived from tax, duty, ETS or some levy - so how does the author conclude it's subsidised? I would argue fossil fuels are penalised, not subsidised.
As for linking the Mangawhai tornado to this, that's a very long bow.
Did you not read the article link?
No, does it invalidate my question?
77% "implicit subsidies" - externalities (climate change, air pollution, road use).
Mostly reckons. Like the "value of statistical life" that NZTA quietly doubled a couple of years ago to make their speed reduction argument better.
I had read the article.
Without fossil fuel, there are no houses to insure. Pricing the theoretical negative externalities into fossil fuels will result in a) collapse in standard of living, b) rise of a political party that will unwind it.
Where do we go? In the UK they are considering walking away from a 3rd runway at Heathrow to meet their targets.
I want to see an article where it's all laid bare, what we need to do to hit Net Zero and how.
https://www.telegraph.co.uk/politics/2025/01/27/no-heathrow-third-runwa…
For "what do we need to do to hit Net Zero?", there's lots of angles that one needs to consider that a single article won't capture.
A very oversimplified summary would be to break less ecosystems, rapidly downscale use of ancient carbon, sink water into landscapes to restore water cycles, enhance ecosystems, increase natural carbon sequestration and lengthen the stored life of carbon while rapidly transitioning to a circular bioeconomy powered by the sun.
Here's a collection of solutions which can be deployed at a global scale to go net zero
Drawdown Climate Solutions Library | Project Drawdown and Welcome to Regeneration | Project Regeneration
If we look at the options and their individual abatement potential vs the economic cost / value of implementing them for New Zealand version we get MFE's marginal abatement cost curve (2020)
This is great, but should be taken with a pinch of salt and renewed regularly as the economics are always evolving.
However the difficulty starts when we need to get down to the brass tacks of making choices between different options. The economic configuration and marketable channels of today will look quite different in the world outlined above.
As yourself and PDK point out, limits to growth and thermodynamics dictate a reduction in standard of living which can be dictated by our own choice or the brutal hand of physics. The Limits to Growth - Club of Rome
A political party's unwinding might defer the march towards that inevitability. Will the End of Economic Growth Come by Design — or Disaster? | Gaya Herrington | TED
Enter Charles Eisenstein and Doughnut Economics. Books | The More Beautiful World Our Hearts Know Is Possible and About Doughnut Economics | DEAL
Enter visionaries
and doers in amazing parts of the world like which are already carbon negative including entire countries as well as areas of the world e.g. the Loess Plateau, the Great Green Wall etc.
Look for good stuff, you'll find it.
Thanks for sharing.
One point to clarify is that a reduction in energy use meaning a reduction in standard of living does not necessarily mean a reduction in contentment/happiness. More energy/more stuff does not equal more happiness because of the hedonic treadmill effect.
kiwikidsnz,
That was a very curious move and I would like to know on what evidence it was based.
If this is the first time you've heard it and are wondering why ... Might I point you at how the tobacco companies handled their bad news. And the fossil fuel companies - unlike the tobacco companies before them - have figured out owning chunks of MSM helps keep this issue out of the public eye.
This isn't new. Numerous studies over the last 30 years have confirmed it. The only debate is to the scale. But all agree it's pretty big and distortionary.
The same goes on in food production & distribution ...
Free markets? Efficient markets? If you think so ... You're living in a dream world.
In Trump's America it looks more like his "free wheeling Cabinet appointees" will be generating "very efficient money-laundering markets" for taxpayer dollars thieved during their reign.
.
Going deeper, the neocons are screaming as their people get ousted. Relations with Iran are likely to change, indeed the whole ME.
Trump is probably right about Gaza too - we are too PC to use the word 'genocide', and we've been propaganda-frightened by the word 'antisemitism' - but the two-state approach was only going to work if the US got tough with Israel. Which certain folk ensured never happened.
Now, it is worthless rubble, and oddly enough, it is too late for Israel to benefit (global events override, from here on).
Too many of us have judged Trump for his obvious shortcomings, and thus biased, swallowed the neocon spin, lock, stock and grandma. There's more to this change than the single-level stuff. We are living in a most interesting time - but then, we were always going to, about now...
What price climate stability? Does it actually have a valid digital representation,devaluing daily, in a crumbling biosphere? What dollar value would you attribute to your own life and would you give life up if someone offered it?
The super organism is out of control. We could re own our future, but brainwashing with the mythology of exponential economic growth needs to end. Yes it does mean giving up material wealth, but on the other hand, regaining freedom.
Agree fully.
But Chrisonn won't. There are an echelon of empathetic folk, who allow their empathy to override that which they choose not to know.
The problem is that 'renewables' (better thought of as rebuildables - dams, windmills, PV - I've lived on them more than most) don't deliver the EROEI required to even maintain BAU, current levels, let along power 'growth'. And there is the 'energy trap' - building the next, removes energy from the present. So much so, that the present would collapse, via the displacement. Nobody is prepared to take the bigger-rap-with-the-better-outcome - so we don't do it.
"it's obvious that the climate emergency is very real" Juha - you should let the IPCC know as they are struggling to find the data to support your assertions.
"The IPCC has concluded that a signal of climate change has not yet emerged beyond natural variability for the following phenomena:
- Severe wind storms
- Drought
- etc."
The reason people in LA don't have insurance is due to State interference in the market and asleep at the wheel fire policy such as an inability to do fuel reduction burns, keep reservoirs full in fire season and attending Ghanan cocktail events during critical fire warnings.
"Analysis of charcoal records in sediments [31] and isotope-ratio records in ice cores [32] suggest that global biomass burning during the past century has been lower than at any time in the past 2000 years.
...For the Sierra Nevada region (California), which was not covered in the previous study [71], Hanson & Odion [72,73] found no general increase in fire severity within the period 1984–2010.
Considering ten national forests in California for the same period, Miller & Safford [74] found a significant increase in burn severity for yellow pine–mixed conifer forests. They attribute this largely to decades of fire suppression and other management practices rather than climate, which have led to major changes in forest composition and structure, increases in density and fuel-loading, and hence fire behaviour. Covering the much larger area of the dry forest landscapes of the western USA, including large parts of those examined in the aforementioned studies, Baker [75] found that the rate of high-severity fire in the period 1984–2012 was within or below that of historical century- to millennial-scale estimates."
Global trends in wildfire and its impacts: perceptions versus realities in a changing world
https://pubmed.ncbi.nlm.nih.gov/27216515/
https://www.ipcc.ch/report/ar6/wg1/downloads/report/IPCC_AR6_WGI_Chapte… table 12.12
🥱
Meanwhile, in financial news...
"According to a new report from Fitch, while roughly 12% of the $50 billion cat-bond market is currently exposed to wildfire risk, the rating agency said that it expects any realised cat bond losses to be small in aggregate.
“The broad-based Swiss Re Cat Bond Total Return Index has decreased 0.27% since the beginning of the wildfires.
...following both the Tubbs (2017) and Camp (2018) fires in California, a number of California utility companies sponsored wildfire cat bonds up to 2021 that have subsequently matured.
“Municipalities and corporations lacking affordable insurance coverage could potentially spur more rapid growth of the market by issuing cat bonds, as utilities have done,” Fitch added.
It’s important to note, that California lawmakers have recently advanced legislation to allow the California Infrastructure and Economic Development Bank to issue cat bonds to raise cash to offset liquidity shortfalls due to the FAIR Plan’s impending assessment."
https://www.artemis.bm/news/any-la-wildfire-cat-bond-losses-expected-to…
Well, if you can't dazzle them with brilliance,....
Well I suppose it filled some column space and generated a few comments but a pretty poor effort in presenting any evidence to support the headline.
Isn't ~50% of fuel cost just pure tax?
That's not even considering road user charges, registrations etc which is even more tax
When you spend $3000-$5000 p.a. for fuel and $1500-$2500 of it is pure taxes it sure doesn't sound like a 'subsidy'
Not to mention most people have already paid 20-25% PAYE tax before funding that cost...
Probably why our subsidy is just a few dollars , vs hundreds or thousands in other countries.
In the USa it is just a fews cents per gallon , but the highway fund is perpetually broke , and needing general fund top ups.
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