Governments around the world spent $550 billion on energy subsidies last year, mostly to keep down the price of dirty energy from oil and coal.  The Financial Times broke the story today based on an advance copy of an International Energy Agency study.

In fact, that number represents only half the story.  The $550 billion in direct government welfare payments for the oil and coal industries does not include all of the indirect government subsidies that these industries receive.  It does not include the cost of soldiers protecting oil fields in Iraq; or the cost of treating respiratory illnesses caused by particulate emissions; or the cost of free liability insurance for oil and coal companies (in the form of limitations on their liability for harm to third parties); or the cost to individuals who lose their livelihoods when oil gushes uncontrollably into the Gulf of Mexico or the Niger Delta.

But let's stick with the very tangible number of $550 billion in cold, hard cash for now.  What would happen if we took that $550 billion away from oil and coal, and invested that cash in clean, sustainable energy technologies instead?

Just taking the welfare payments away from the oil and coal industries would have a tremendous impact on the level of investments in clean, sustainable energy technologies.  Think about it for a moment.  You are considering an investment in a new technology.  But the existing technology that you want to compete against receives $550 billion in direct government welfare payments every year to keep its price artificially low.  So your new technology will not only have to be better than the existing technology, it will also have to be a half trillion dollars less expensive.  That is a high hurdle for anyone considering an investment in new technologies.

Take away that half trillion dollars in government welfare payments, and now you have a level playing field.  That alone removes a hurdle and provides an incentive to investors in new technologies.

And if you actually shift that half trillion dollars from the oil and coal companies to investments in clean, sustainable energy technologies, you can start a green revolution.

As an added benefit, the clean, sustainable energy technologies will not require these subsidies forever.  Give a man a welfare payment to buy oil today and he'll be back for another welfare payment tomorrow.  But give him the same payment to buy solar panels, and he'll have energy for a lifetime.

John Howley
Orlando, Florida

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