Every minute of the thousand minutes of meeting time by the G20 muckety mucks costs Canadian taxpaying hosts a million dollars, critics complain. But the Return on Investment could be as high as 557 to 1 if G20 governments gathered in Toronto follow their own pledge from last year’s meet in Pittsburgh, which pledged to cancel billions in global subsidies to oil and gas companies each year. If indirect subsidies are added in, the million dollars a minute invested by Canadian taxpayers could yield a return of anywhere from 557 billion to a trillion dollars a year.
No reason to sweat the small stuff and kvetch about a million dollars a minute when the real opportunity to blow or save global taxpayers’ money is from 557 to 1000 times more, and deserves 557 to 1000 times more attention. Someone needs to build a clock that registers every minute that blows at least 557 million dollars up in hot air.
The extent of direct government welfare programs for oil and gas companies is embarrassing to some government officials for a number of reasons. It’s hard to make the case that oil and gas companies – seven of which yielded 171.2 billion in profits in 2009, according to the Financial Times – should qualify to feed at the government trough, when the same governments are making a to-do about the need to cut support for people on low incomes. Others worry that two dollars is spent to subsidize dirty fuels for every dollar spent to speed development of clean fuels, at a time when governments like to appear as if they’re trying to do something to reduce global warming.
G20 leaders concluded in Pittsburgh last year by issuing a statement to “call on all nations to adopt policies that will phase out such subsidies worldwide,” and to work instead “for a resilient, sustainable and green recovery.”
G20 leaders of 2009 also asked for financial reports from the International Energy Agency, Organization for Economic Cooperation and Development, and so on. These reports were duly completed. Although they only tell part of the story – the direct, not indirect and hidden subsidies, mostly from the Global South – both the total numbers and the pedigree of those citing them are impressive.
An International Monetary Fund report released in February estimated that if G20 countries cut their oil and gas subsidies in half, they would score two quick victories. They would cut government debt loads by 17 per cent, while cutting global warming emissions from between 14 and 17 per cent.
On June 9, the OECD and IEA came up with a $557 billion estimate for direct fossil fuel subsidies in emerging (Brazil, for example) and developing (Indonesia, for instance) countries. Good estimates are harder to come by in developed countries, the OECD and IEA regretted.
The numbers, most easily available at the U.S. website Earth Track, aren’t that hard to track down by researchers whose paychecks aren’t signed by G-20 powers.
For most of the last decade, US fossil fuel subsidies have averaged about $72 billion a year, according to the Environmental law Institute and Woodrow Wilson International Center. A few of these might cause some to blush. The Energy Policy Act of 2005 granted billions in tax relief to encourage offshore drilling in areas such as the Gulf of Mexico. Then-senator Barrack Obama voted in favor. Among indirect subsidies that also stand out are six fuel contracts valued at $2.1 billion dollars a year between the U.S. department of defence and BP, which the Nader-inspired organization Public Citizen has asked to be cancelled. The Obama administration hopes to pare back tax breaks by $36.5 billion over the next decade, about one per cent of industry annual earnings.
Canada’s tax break subsidies are estimated by a 2006 study of the Pembina Institute to be in the ballpark of $1.4 billion a year. Instead of conservation programs that save 20 dollars here and there, Ecojustice lawyer Albert Koehl has commented, “here we have a briefcase with $1.4 billion.”
Even a March 18 document signed by federal finance deputy minister Michael Horgan suggested that Canada take the lead at this year’s G20 summit by phasing out such subsidies.
Lest anyone think these subsidies tell more than half the story, it’s worth having a sense of how any of these numbers can be doubled by including indirect subsidies. Back in 1996-7 when he was chair of the federal government’s Technical Committee on Business Taxation, Jack Mintz used to argue at meetings I chaired of the Green Coalition that the dirtier the industry, the more subsidies it got. He came to this conclusion by adding up all the contributions from different departments to resource-exploiting companies – workers compensation and chronic disease care for miners, unemployment insurance for seasonal industries like fisheries and logging, roads for pulp and paper or oil and gas companies, and so on – that extra zeroes had to be added to the publically-supported cost of tax breaks. Mintz changed his political tune after his stint with the C.D. Howe Institute, but his two-volume study for former finance minister Paul Martin remains a masterpiece.
Since Mintz did his research during the 1990s, scientists have also identified the hidden costs of destroying environmental services – due to water and air pollution and global warming linked to fossil industries, for example – that quickly mount to billions a year. Yet there’s no equivalent to tobacco taxes for the harm done by oil industry second-hand smoke.
Likewise, no modern list of indirect and hidden costs of the oil industry is complete without calculating the opportunity costs of local farms bankrupted by imports that are fertilized, sprayed with pesticides and transported cheaply, all thanks to subsidized fossil fuels that drive industrial agriculture and make it artificially competitive with local and sustainably-produced food.
Oil subsidies belong to the bygone era of abundant natural resources, relatively unpolluted skies and water, and high-wage manufacturing jobs in the Global North. The idea behind incentives boosting capital- and energy-intensive industries during the 1950s was that they boosted productivity per hour of labor. That allowed high wages to go to otherwise-rebellious industrial workers in the Global North. But today, resources are fast becoming scarce, skies and waters are over-polluted,and high hourly productivity makes for swollen numbers of unemployed. In other words, oil subsidies are obsolete and dangerous, a holdover of the past at a time when we need to ramp up productivity per unit of resources, and lighten up on labor productivity. Abolishing oil and gas subsidies, much like carbon taxes, are ways of easing that transition to a resource-productive (ie conserving) and human skill-intensive, rather than capital-intensive,technologies.
The public savings from cancelling fossil fuel subsidies will be enormous, perhaps a trillion dollars a year, more than enough to end world hunger and kickstart the new economy. The clock will be ticking millions of dollars every second that G20 leaders meet. And their failure will set the real cost and define the real victims of the summit.