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Countries spend huge sums on fossil fuel subsidies – why they're so hard to end

55 points by rntn 2y ago

FirmwareBurner 2y ago
In Austria (and Germany too it think) the further away you drive to work, the more money the government gives you for fuel in your tax return. But WFH? No, that's not possible, we don't do that here, so every morning the highways are full of people subsidized by the state to spend their day in an office doing what they can do from home.
- cipher_system 2y ago
  I work with some germans and they work from home all the time. On the plus side, the tax return of work commute by car increases labour supply and enables people to live further from the high density areas, not everyone can wfh. With electric vehicles, maybe they are good enough even from an environmental perspective.
  - FirmwareBurner 2y ago
    >I work with some germans and they work from home all the time. I was talking from the perspective of Austria. 100%W FH is none existent. Most is hybrid. >On the plus side, the tax return of work commute by car increases labour supply and enables people to live further from the high density areas, not everyone can wfh. Yeah of course, the issue is when you can WFH but employers would rather you burn fuel to get to the office and the state supports that waste while taking about how climate friendly they are. Well if the state would be climate friendly wouldn't they support WFH?
stavros 2y ago
For cars, fine, but why is home electricity from fossil fuels being subsidised? You can kill two birds with one stone by subsidising renewable electricity only, no?
- DangitBobby 2y ago
  So then I would get to pay more for trying to make climate friendly decisions in the form of electrical lawn equipment and EVs? You tend to subsidize in the direction of encouraged behavior.
  - stavros 2y ago
    Yes, which is what I said.
gruez 2y ago
>In the United States, oil companies can take a tax deduction for a large portion of their drilling costs. Not a tax lawyer, but based on my reading of the linked regulation, the "take a tax deduction" characterization is very misleading. The key phrase is "intangible drilling and development costs incurred by an operator [...] in the development of oil and gas properties may at his option be chargeable to capital or to expense". This doesn't mean the government refunds their development cost, or even a portion of it. It just means oil company can immediately deduct drilling expenses from their tax returns, rather than spreading it out over several years. It's similar to IRC Sec. 174 changes for software development expenses. Is it a benefit to oil companies? Yes, most definitely, due to the time value of money. However, it's misleading to call it a "tax deduction". A more accurate statement would be "oil companies can deduct their drilling costs sooner".
- ooterness 2y ago
  Money now is more valuable than money later. It's an enormous subsidy that shouldn't exist; don't quibble over semantics.
  - gruez 2y ago
    >Is it a benefit to oil companies? Yes, most definitely, due to the time value of money.
tim333 2y ago
A lot of it is due to the odd use of the word subsidy in this and similar articles. Say an oil company spends $50 producing a barrel of oil, sells it for $80 and sends half the difference, $15 to the government in tax. On the definitions in this article the government is likely subsidising the oil production because they are likely "take a tax deduction for a large portion of their drilling costs" and not billing for the pollution effects. But in everyday language they are taxing not subsidising oil production. And then what should the government do? If they ban drilling or double the tax they lose the tax revenue and jobs.
- tim333 2y ago
  >...a government fails to make an industry pay for damage it causes, such as air or water pollution, that also amounts to a subsidy. Thinking about that one, there are a lot of bacteria that break down vegetation releasing CO2 and the government fail to tax them! Stop subsidising bacteria! Actually I prefer the old fashioned definition of subsidy - money paid to industry is a subsidy, money extracted is a tax even if the tax calculation includes deductions.
belorn 2y ago
The last section in the article demonstrate the problem. Governments are held responsible for grid stability and making the energy costs economical reasonable, and when the energy crisis happened it was governments that stepped in and paid the bill. What is not mentioned is that the political movement in EU that usually fight against climate change, that being the green movement, is also the one advocating for fossil fuel subsidies. It was the German green party that pushed EU to classify natural gas as green. In Sweden, it was the green party leader that argued during 2021 that oil power plants was a natural part of grid stability (they also prioritized the construct of new fossil fueled power plant to decrease energy prices). Fossil fuel was and still is the current strategy to address periods of bad weather when renewables can not fulfill demand. The more variable the grid become, the more the government need to spend on grid stability and managing the price, and the more subsidies is needed towards fossil fuels. Fossil fuels subsidies in EU directly correlate to how weather is impacting energy supply. There is a similar bad situation with hydropower, where current environmental impact is causing extinctions. Usually the green party would be the one arguing for change, but hydropower is needed to address the same problem as power stations running on fossil fuels, and one can generally not fix the environmental impact without decreasing outputs.
- somedude895 2y ago
  If it wasn't for the European Greens fighting against nuclear power for the past 50 years, carbon emissions would be a lot lower today than they are. So much R&D that could have been done, so many CO2-neutral power plants built. Especially after they shut down the last nuclear power plants in Germany it's pretty clear to me that if you're worried about climate change (and also don't want to end up as a third world country) you just don't vote for the Greens.
  - fulafel 2y ago
    That's a oft repeated meme but not true. They haven't even been in power in cabinets, mostly in opposition, and in the exception cases haven't been the deciding faction in the coalition govenments. If you want to get into what could have been, greens have been boosting sustainable power since the 70s and we would be much further along if we had started seriously investing in those in time, 30+ years before we did. (And recent nuclear plants have 10-15 year construction times, which is way too slow, in addition to having inferior bang for the buck)

55 points by rntn 2y ago

In Austria (and Germany too it think) the further away you drive to work, the more money the government gives you for fuel in your tax return. But WFH? No, that's not possible, we don't do that here, so every morning the highways are full of people subsidized by the state to spend their day in an office doing what they can do from home.

cipher_system 2y ago
I work with some germans and they work from home all the time. On the plus side, the tax return of work commute by car increases labour supply and enables people to live further from the high density areas, not everyone can wfh. With electric vehicles, maybe they are good enough even from an environmental perspective.
- FirmwareBurner 2y ago
  >I work with some germans and they work from home all the time. I was talking from the perspective of Austria. 100%W FH is none existent. Most is hybrid. >On the plus side, the tax return of work commute by car increases labour supply and enables people to live further from the high density areas, not everyone can wfh. Yeah of course, the issue is when you can WFH but employers would rather you burn fuel to get to the office and the state supports that waste while taking about how climate friendly they are. Well if the state would be climate friendly wouldn't they support WFH?

stavros 2y ago

For cars, fine, but why is home electricity from fossil fuels being subsidised? You can kill two birds with one stone by subsidising renewable electricity only, no?

DangitBobby 2y ago
So then I would get to pay more for trying to make climate friendly decisions in the form of electrical lawn equipment and EVs? You tend to subsidize in the direction of encouraged behavior.
- stavros 2y ago
  Yes, which is what I said.

gruez 2y ago

>In the United States, oil companies can take a tax deduction for a large portion of their drilling costs. Not a tax lawyer, but based on my reading of the linked regulation, the "take a tax deduction" characterization is very misleading. The key phrase is "intangible drilling and development costs incurred by an operator [...] in the development of oil and gas properties may at his option be chargeable to capital or to expense". This doesn't mean the government refunds their development cost, or even a portion of it. It just means oil company can immediately deduct drilling expenses from their tax returns, rather than spreading it out over several years. It's similar to IRC Sec. 174 changes for software development expenses. Is it a benefit to oil companies? Yes, most definitely, due to the time value of money. However, it's misleading to call it a "tax deduction". A more accurate statement would be "oil companies can deduct their drilling costs sooner".

ooterness 2y ago
Money now is more valuable than money later. It's an enormous subsidy that shouldn't exist; don't quibble over semantics.
- gruez 2y ago
  >Is it a benefit to oil companies? Yes, most definitely, due to the time value of money.

tim333 2y ago

A lot of it is due to the odd use of the word subsidy in this and similar articles. Say an oil company spends $50 producing a barrel of oil, sells it for $80 and sends half the difference, $15 to the government in tax. On the definitions in this article the government is likely subsidising the oil production because they are likely "take a tax deduction for a large portion of their drilling costs" and not billing for the pollution effects. But in everyday language they are taxing not subsidising oil production. And then what should the government do? If they ban drilling or double the tax they lose the tax revenue and jobs.

tim333 2y ago
>...a government fails to make an industry pay for damage it causes, such as air or water pollution, that also amounts to a subsidy. Thinking about that one, there are a lot of bacteria that break down vegetation releasing CO2 and the government fail to tax them! Stop subsidising bacteria! Actually I prefer the old fashioned definition of subsidy - money paid to industry is a subsidy, money extracted is a tax even if the tax calculation includes deductions.

belorn 2y ago

The last section in the article demonstrate the problem. Governments are held responsible for grid stability and making the energy costs economical reasonable, and when the energy crisis happened it was governments that stepped in and paid the bill. What is not mentioned is that the political movement in EU that usually fight against climate change, that being the green movement, is also the one advocating for fossil fuel subsidies. It was the German green party that pushed EU to classify natural gas as green. In Sweden, it was the green party leader that argued during 2021 that oil power plants was a natural part of grid stability (they also prioritized the construct of new fossil fueled power plant to decrease energy prices). Fossil fuel was and still is the current strategy to address periods of bad weather when renewables can not fulfill demand. The more variable the grid become, the more the government need to spend on grid stability and managing the price, and the more subsidies is needed towards fossil fuels. Fossil fuels subsidies in EU directly correlate to how weather is impacting energy supply. There is a similar bad situation with hydropower, where current environmental impact is causing extinctions. Usually the green party would be the one arguing for change, but hydropower is needed to address the same problem as power stations running on fossil fuels, and one can generally not fix the environmental impact without decreasing outputs.

somedude895 2y ago
If it wasn't for the European Greens fighting against nuclear power for the past 50 years, carbon emissions would be a lot lower today than they are. So much R&D that could have been done, so many CO2-neutral power plants built. Especially after they shut down the last nuclear power plants in Germany it's pretty clear to me that if you're worried about climate change (and also don't want to end up as a third world country) you just don't vote for the Greens.
- fulafel 2y ago
  That's a oft repeated meme but not true. They haven't even been in power in cabinets, mostly in opposition, and in the exception cases haven't been the deciding faction in the coalition govenments. If you want to get into what could have been, greens have been boosting sustainable power since the 70s and we would be much further along if we had started seriously investing in those in time, 30+ years before we did. (And recent nuclear plants have 10-15 year construction times, which is way too slow, in addition to having inferior bang for the buck)