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Fossil fuel subsidies: a social justice perspective

Posted May. 10, 2012 / Posted by: Michelle Chan

Friends of the Earth has long been at the forefront of the effort to eliminate fossil fuel subsidies. These subsidies perpetuate our dependence on the dirty energy sources of the past, rob us of our capacity to fund energy solutions of the future, and undermine any attempts to implement smart climate policy. Friends of the Earth supports the eventual elimination of all fossil fuel subsidies. But as we point out in a new position paper, we believe that how we go about ending these subsidies is important, and that ultimately we need to provide clean energy access for all.

Principles for ending harmful handouts while protecting people

At Friends of the Earth we integrate a social and economic justice perspective into our policy positions. The following are a few key principles which guide our thinking when it comes to eliminating fossil fuel subsidies in a just and effective way:

Protect our social safety net

It is a moral imperative that we provide low income or vulnerable populations access to basic necessities, and protecting their health, livelihoods and dignity is at the heart of our social safety net. Some components of this safety net, such as providing heating, cooling and electricity, have a greenhouse gas footprint because our current energy system is still heavily dependent on fossil fuels.

Yet all people have the right, although not the obligation, to use an equal share of our earth’s natural resources -- in other words, to use their fair share of “environmental space.” This right should not be taken away from people who are poor simply because those with more wealth have consumed an unfair or unsustainable share of resources. Removing consumer subsidies that guarantee energy access would harm people while failing to strike at the root of the problem.

A systemic switch to clean energy sources is needed throughout our economy, and it is not fair to make the poorest bear the burden of this transition. This is especially true in the context of current budget debates, where billions of dollars worth of polluter subsidies can literally come at the expense of important social programs for the poor and middle class.

Look at who benefits

Most subsidies in the United States are producer subsidies, which directly benefit oil, gas and coal companies. Fossil fuel companies frequently try to misdirect the public, by conveniently claiming that what’s good for their bottom lines is good for everyone.

But often this is simply not the case; for example, even the American Petroleum Institute admits that tax breaks for oil companies do nothing help make oil more affordable. Because oil prices are set by international markets, oil subsidies do not lower prices at the pump for consumers. Rather, these handouts pad corporate bottom lines -- a waste of public funds that is particularly egregious at a time when oil companies are making record profits. Nor do oil subsidies incentivize new drilling or significantly increase supply; as President George W. Bush stated in 2005, “With $55 oil, we don’t need incentives to oil and gas companies to explore.”

The question of who benefits also plays out on the international level, where fossil fuel subsidies have been embroiled in political debates that have pitted the interests of powerful wealthy countries against poorer ones. In 2009 President Obama made an admirable challenge at the G20 summit in Pittsburgh, exhorting countries to end wasteful fossil fuel subsidies. However, in developed countries that produce fossil fuels, subsidies are primarily for producers; in developing countries, subsidies tend to be for consumers, and designed to keep energy affordable. In the interest of fairness, we cannot risk reducing energy access by eliminating consumption subsidies for impoverished households and individuals until we have replaced them with a system that provides renewable energy to those most at need.

Break the dirty energy money cycle in politics

Finally, we recognize that in the United States, the vast majority of fossil fuel subsidies are generated through a political system awash in and corrupted by corporate money. The fossil fuel industry is one of the largest financial contributors to elections, and also employs one of Washington’s most formidable lobbying forces. The political dynamic of “who gives, gets” allows big donors like Big Oil and King Coal to essentially buy deregulatory favors from politicians, and also garner billions of dollars in subsidies, tax breaks, and other handouts. Breaking the toxic cycle of money in politics is perhaps one of the most important things that public interest organizations can do to restore democracy in the United States, and stopping corporate subsidies helps end that cycle.

Friends of the Earth and fossil fuel subsidies: where we stand

We believe that those subsidies that amount to direct handouts to corporate polluters should be abolished immediately. However we also realize that, at this time, a few subsidies that support fossil fuels also are part of important social safety nets designed to protect the poorest and most marginalized people in our society, and cannot be taken away without exacerbating economic inequalities and causing significant social harm. Therefore, fossil fuel subsidies need to be phased out as part of a broader transition to clean energy.

  • Producer subsidies: For the most part, Friends of the Earth’s advocacy (in our Green Scissors report, various analyses, and through our advocacy and those of our members) to end fossil fuel handouts has focused on producer subsidies. Producer subsidies, such as the ones benefiting ExxonMobil, BP, and Arch Coal, should be redirected to help economies (both at home and abroad) transition to clean energy. In this way, we can ensure clean energy access for all.
  • Consumer subsidies for companies and the well-off: We do not support subsidies that encourage industrial or wholesale energy users to consume more fossil fuel. We have also opposed certain retail consumer subsidies when eliminating them would not unfairly impact low-income consumers. For example, our Green Scissors 2011 report argued for the expiration of the hybrid tax credit, a popular consumer subsidy that only applies to the first 60,000 cars sold by any automaker. As written, only buyers of newer, less efficient hybrids — including luxury BMWs and Porches — are eligible for the subsidy. Buyers of older, relatively efficient hybrid cars like the Toyota Prius are no longer eligible as more than 60,000 have been sold.
  • Consumer subsidies for the poor:  On the other hand, consumer subsidies designed to help the poor can be defensible, and even just. Many people in our society are not able to consume enough of life’s bare necessities because of social and economic injustices, and we have a moral obligation to help correct and compensate for these injustices.

    One example of a subsidy that currently supports fossil fuel use, but that Friends of the Earth has not targeted, is the Low-Income Home Energy Assistance Program in the U.S.  This program helps poorer households with their energy bills, and in 2010, LIHEAP helped nine million low-income households heat their homes in the winter.

    Similarly, Friends of the Earth-Nigeria resisted the efforts of Nigerian President Goodluck Johnathan to suddenly remove a consumer oil subsidy that would have doubled of the price of oil and kerosene overnight; the president’s move sparked waves of mass mobilizations across the country in early 2012. Nigeria is one of the poorest countries in the world, ranked at 156 out of 187 countries on the Human Development Index, and for the time being, this consumer subsidy is needed to ensure energy access for poor and vulnerable people in that country.

Combating and coping with climate change: a social justice perspective (Factsheet)

Position paper on addressing climate change from a social justice perspective, including fossil fuel subsidies

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