Do Fossil Fuel Subsidies Help To Create Effective Energy Systems?
The topic of technological and market development in renewable energy has been on the agenda for a significant period of time, and the use of governmental subsidies to stimulate and support that development has been a much-discussed subject. A less well interrogated issue is fossil fuel subsidies and a recent IMF survey reportedly showed that the UK’s non-renewable energy sector is currently receiving government subsidies of more than £26bn per year.
That comes in at a cost of £400 per UK resident. The picture is similar internationally and RenewableUK has argued that public sector money should be directed into technologies that are more beneficial in the long-term.
The question is perhaps bigger than whether it is better to fund fossil fuels or renewable energy, rather it is fundamentally related to the most effective way in which to design energy systems.
In particular, can a system be designed that reflects natural capital and the full cost of energy consumption in the market? And at what scale should electricity and power operate at?
The question of developing markets that reflect “true costs” has been gaining momentum as signs of natural capital degradation and its economic impact are becoming more visible.
Meanwhile, the possibilities and potential advantages of energy systems that work at different scales. The recent release of Tesla’s Powerwall technology has opened up the potential for localised energy generation and a more resilient grid that mixes local electricity storage and nationally generated power.
In the context of these questions around effective energy solutions, it’s difficult to justify the current size of fossil fuel subsidies, but the conversation clearly needs to be broader and based on the development of a positive vision for the future global economy.