Would fossil fuels survive at all without subsidies?
 | | An enthusiast dressed as a zombie takes part in the Zombie Walk event on the Place de la République in Paris in October 2019.Martin Bureau/Agence France-Presse — Getty Images |
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It’s publication day! My new book “Arguing With Zombies,” a mix of reprinted columns and a fair bit of new material, is out today. So naturally I have zombies on my mind. |
Now, I’ve coined a few economic phrases I’m proud of: “leprechaun economics” for the distortion of statistics caused by multinational corporations in search of tax havens, the “confidence fairy” for the belief that surging private investment will reward countries that impose savage austerity on their citizens. Sad to say, I didn’t invent the term “zombie idea,” which refers to a belief that should have been killed by evidence but keeps shambling along, eating people’s brains; I stole it from an old article about Canadian health care, of all things. |
But I’ve probably done as much as anyone to get the term into wider circulation. And I was gratified to see Steve Mnuchin, Trump’s treasury secretary, reaffirm what I call the ultimate zombie: the belief, in the teeth of all evidence, that tax cuts pay for themselves. |
There are, however, other zombies chomping their way through economic discourse. In particular, one fairly often finds references to “zombie firms”: companies that really should shut down, but keep going thanks to subsidies, government loans, and so on. |
What I didn’t fully appreciate until I did the research for today’s column is the extent to which fossil fuels have become a zombie sector. If producers of coal, oil and, to perhaps a lesser extent, natural gas actually had to pay the full costs they impose on society, much of the sector would shut down, replaced by renewable energy. |
In the column I mentioned the International Monetary Fund’s estimates of the effective subsidy received by the fossil fuel sector. Part of that subsidy reflects tax breaks and other on-budget items. Another part reflects the I.M.F.’s estimate of the costs of greenhouse gas emissions, which many economists suspect are on the low side. The really big costs, however, involve the health effects of local air pollution, which is, literally, a real killer. |
As I noted, the Fund put U.S. fossil fuel subsidies at more than $600 billion, or more than $3 million for each worker in the industry. Another comparison, which I didn’t make, is with the market value of fossil fuel production, which in 2017, the comparison year, was less than $300 billion. So the U.S. fossil fuel industry destroys several hundred billion dollars of value every year. |
Does this mean that fossil fuel production would totally disappear if the industry had to pay its full costs? Not necessarily. It’s crazy to burn coal to generate electricity, which should come from renewables and nuclear (yes, I’m O.K. with that), and if there’s any role for natural gas it’s to provide a limited amount of surge capacity. Realistic pricing would also cause a broad shift to electric cars and trucks. |
Other uses of fossil fuels, like air and maritime transportation, might be more resistant to change. And I’m told that there are industrial applications where it’s still very hard to avoid burning stuff. |
But it does look as if much — if not most — of the fossil fuel sector survives only because it receives outrageously large subsidies. So it is a zombie sector; except that instead of eating our brains, it may eat our civilization. |
U.S. coal consumption is plunging despite huge subsidies. |
A lot of that has to do with remarkable progress in renewable technologies, which are on a steep learning curve. |
But Trump keeps trying to force America to burn coal — in the name of national security. |
Does anyone remember the Cheney energy task force, which saw big increases in fossil fuels, especially coal, as the only realistic path forward? |
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