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Subsidies for fossil fuels?

Interesting opinion piece in Citywire this morning which goes some way to debunk the myth that only renewables receive subsidy.

It’s authors may have an axe to grind given their day jobs - Dr Benny Peiser is the director of the Global Warming Policy Foundation and Daniel Mahoney is a senior researcher at the Global Warming Policy Foundation  -   but the central thrust of this article are supported by the facts.  Government subsidies for fossil fuels are costly and are going to get costlier,  especially for western Europe.  The disruptive effect of increased renewable generation on the established energy industry will result in this declining business model demanding more subsidy.  As the article states...

In Germany, almost 20 per cent of gas power plants have become unprofitable and face shutdown as renewables flood the electricity grid with preferential energy. To avoid blackouts, the government has begun to subsidise now uneconomic gas and coal power stations so that they can be used as a back-up when renewables fail to generate sufficient electricity.

In the UK, the government has decided to introduce a Capacity Mechanism that will subsidise generators to either increase or free up capacity on the grid when required. Peter Atherton of Liberum Capital estimates that this will cost consumers an extra £20 per household, adding to at least £110 of annual subsidy per household for the costs of renewable energy.

What the article doesn’t mention is the cost of protecting overseas supplies of oil and gas.  The political and military cost of the Gulf wars,  for example,  should be considered as a direct cost of protecting our hydrocarbon interests,  unless you swallow the line that we went to war for the general good of the Iraqis and Kuwaitis.  

You can read the full article here..


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