Every minute of G20 big shots 1,000 minutes of meeting time is costing Canadian taxpayers $1 million, critics complain.
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But there’s no reason to sweat the small stuff and kvetch about $1 million a minute when global taxpayers could be saved 557 to 1,000 times that. This would certainly be the result if G20 countries followed their own pledge from last year’s summit in Pittsburgh and cancelled billions in global subsidies to oil and gas companies each year.
An International Monetary Fund report released in February estimates that if the G20 cut oil and gas subsidies in half, they would cut government debt loads by 17 per cent while reducing global warming emissions by 14 to 17 per cent.
G20 leaders in 2009 also asked for financial reports from the International Energy Agency and the Organization for Economic Cooperation and Development, and these reports were duly completed. On June 9, the OECD and IEA came up with a $557 billion annual 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 regret to say.
But the numbers, most easily available at U.S. website Earth Track, aren’t that hard to track down even if you’re not paid by G20 think tanks like the OECD or IEA.
For most of the last decade, U.S. fossil fuel subsidies have averaged about $72 billion a year, according to the Environmental Law Institute and the Woodrow Wilson International Center. A few of these handouts might cause some to blush. The Energy Policy Act of 2005 granted billions in tax relief to encourage offshore drilling in places like the Gulf of Mexico. Then-senator Barack Obama voted in favour.
The Obama administration hopes to pare back tax breaks by $36.5 billion over the next decade, about 1 per cent of industry annual earnings.
Canada’s tax break subsidies are estimated by the Pembina Institute in a 2006 study to be in the ballpark of $1.4 billion a year. Instead of conservation programs that save $20 here and there, Ecojustice lawyer Albert Koehl commented, “Here we have a briefcase with $1.4 billion.”
Lest anyone think these subsidies tell the whole story, it’s worth reporting that the numbers are doubled if indirect subsidies are included.
Back in 1996-7, when he was chair of the Canadian 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.
By adding up all the contributions from different departments to resource-exploiting companies (workers’ compensation and chronic disease care for miners, roads for pulp and paper and oil and gas companies, and so on), he came to the conclusion that extra zeroes had to be added to the publicly 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 completed his research in the 1990s, scientists have also identified the hidden costs of water and air pollution and global warming linked to fossil industries, for example. These quickly add up to billions a year.
Likewise, no 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 resources and high wages. The theory was that incentives to boost capital-intensive industries increased the number of high-paid jobs. But with today’s scarce resources, pollution and high unemployment, incentives to cheap energy are an enviro and economic disaster. Industries that use cheap fuel may have workers who are productive on an hourly basis, but they are massively inefficient per unit of resources used, today’s more relevant benchmark.
The savings from cancelling fossil fuel subsidies would be enormous, perhaps $1 trillion a year – more than enough to end world hunger. Instead, millions will be spent on shoring up the status quo every second that the G20 leaders meet. And their failure will determine the real cost and the real victims of the summit.
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