Dreckonomics

The dismal science just got a little more dismal with the latest release of figures from the Energy Policy Tracker project. Newspaper headlines bemoan the report’s conclusion that “G20 countries aim their pandemic bailout spending at fossil fuel industries”, based on figures that suggest G20 governments have pledged US$151bn to fossil fuels during the pandemic versus a measly $89bn to clean energy.

A little scrutiny of the figures reveals a different story. In keeping with the orthodoxy among many climate activists, every government dollar must be considered through a lens of whether it could, however, indirectly lead to an increase in fossil fuel consumption or production. So the categories include unconditional fossil fuel, (support with no strings), conditional fossil fuel (support with a requirement for improved environmental outcomes), conditional clean energy (supports emissions reduction, but maybe not enough or in the right way for the activists) and unconditional clean energy (supports emissions reduction in the right way). This list presumably goes from bad to good.

There is also a category of “other energy”. This turns out to be support for a range of low carbon energy sources of which the activists don’t really approve, such as nuclear, biofuels and waste-to-energy. The logic here is that these might have other, negative environmental impacts. Remarkably it doesn’t occur to them that the supply chain that results in the “holy trinity” of clean energy – solar, wind and batteries – includes a lot of mining, materials processing, logistics and manufacturing that is likely to have some environmental footprint as well.

In any case, it turns out that very few of the policies included in the totals are really about specific support for one energy source over another but are just about stopping economies collapsing under COVID-19 lockdowns. The majority of apparent fossil fuel support ($97bn) is for the airline sector. Of course, planes fly on jet fuel, which is derived from oil, but are these activists really saying they want to see this sector destroyed? How will they get to the next big climate conference?

Unsurprisingly, the clean energy total is also boosted by transport sector support, with $50bn to prop up public transport (rail and public transit systems), a similarly affected industry.

But road infrastructure investment is Bad, even though maybe buses and electric vehicles will use it.

Energy efficiency support – in many ways a very sensible option for post COVID stimulus falls across several categories. So, building efficiency is unconditional clean energy, while aircraft efficiency (both German) is fossil conditional, even though its ostensible purpose is reduced fuel use.

In fact, anything that touches the fossil fuel sector is branded accordingly, even if it has a clear environmental purpose such as Alberta’s plans for methane reduction in its oil and gas sector and clean-up of old wells.

Even more curious is the treatment of a typically Peronist policy in Argentina to prop up domestic refineries by banning imports and fixing the oil price. These will inevitably lead to higher fuel prices for Argentinians, who will presumably respond by using less. Isn’t this what the activists want, even if it is a rather cack-handed way of going about it?

In another economically questionable part of the methodology, all forms of support are treated the same, even if grants, loans, loan guarantees, equity injections and taxes or tax reductions all have very different impacts on the public purse. After all, it’s easier to just add up a bunch of large numbers.

The report is the latest in a long list of activists’ attempts to grab the headlines by claiming there is massive fossil fuel support. In the Australian context for example, there is often a claim of billions of dollars annually in fossil fuel subsidies. It usually turns out the figure is largely based on the value of the diesel tax rebate to non-road uses, such as mining and agriculture. This is not a subsidy, it’s just that Australia has a policy of taxing road use indirectly via fuel taxes.

Of course, there are still genuine fossil fuel subsidies, and some of the policies in the list look particularly ill-advised, such as Mexico’s decision to pump new money into its state-owned oil company for exploration at the very moment the oil price crashed. But all this report really tells us as that fossil fuels are still inextricably embedded in the economies of highly developed countries. This is why the Paris targets, while eminently achievable, are no walk in the park.