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IEA: US$1 Trillion Lost in Ineffective Subsidies on Fuels

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IEA: US$1 trillion lost in ineffective subsidies on fuels The International Energy Agency (IEA) in its annual report analyzes the current trends in utilization of energy and sets goals for future. The recent report has brought out the effects of programs implemented by various nations towards saving energy and environment. The report unlike the earlier ones has perfectly verified the projected goals of energy saving schemes such as reduction in emission of green house gases and fossil fuel subsidies. The fossil fuel subsidies are almost five times more than that allocated for subsides in renewable energy sources. The failure of IEA in achieving the environmental goals cost a whooping US $ 1 trillion approximately for the previous year alone.

The subsidies on fossil fuels for the past year were only $312 billion, much below the previous year’s budget of $558 billion. A major portion of this was issued for covering the rising prices of natural gas and oil and a portion was diverted for electric power usage.

The countries rich in fossil fuel deposits issued more subsidies. Russia topped the list followed by Iran and Saudi Arabia. Developing nations like China and India also had a significant share. The subsidies covered almost 10 percent of GDP for some of the nations. For Iran, the subsidies covered 20% of the GDP amounting to $70 billion. On the contrary, only a meager $57 billion was issued as global subsidies for alternate energy sources of biofuels and electricity.

The IEA report welcomes the idea of the G20 countries to terminate these subsidies. The report highlighted that it is possible to reduce greenhouse gas emissions as well as air pollution by removing the fossil fuel subsidies, thereby achieving energy security and economic stability. It also estimated that the emission of carbon dioxide would be reduced by a significant proportion by total eradication of the subsidies.

The report predicted the fate of energy economy by two methods for the years 2020 and 2035. The first method made calculations about energy use based on resolutions of  various countries’ at the Climate conference held at Copenhagen last year. The results were not promising when carried forward to the future. The IEA expressed its concerns about meeting the climate goals of 450 ppm of Carbon dioxide. The present commitments from the nations were not sufficient to meet this goal of keeping the temperature stable after a rise of 2°C. Instead the present laxity of the countries is driving towards a temperature rise of 3.5°C with a 650 ppm of Carbon dioxide.

The second method therefore emphasized on the measures to be taken to achieve the goal of 450 ppm of CO2.

The OECD nations, especially parts of North America and Europe have reduced the use of oil and coal. 93 percent of energy use increases occur in countries other than the OECD nations, with China on the top accounting for more than one third of the total increase in usage. The growth ensures not to hit the peak of oil usage before 2035. However only by reaching the peak oil by 2020, the 450 ppm can be a realistic target. Once the energy use has reached its summit and flattened, the reverse drive to decreased use needs to be initiated through measures such as use of electric cars, plug in hybrids along with the decarbonization of power.

The major oil producers are Saudi Arabia and Iraq followed by Brazil, Kazakhstan and Canada. A lot of major oil discoveries in Saudi Arabia and Iraq remain underdeveloped and not been utilized to their fullest potential necessitating further explorations by 2035.  The oil sands of Canada contribute a significant share. The energy economy is also largely dependent on the alternative sources of energy.

Even in the 650ppm CO2 level, coal use will be higher. The level can be declined only by the nuclear energy and renewable energy sources. But the use of these energy sources needs to be at a faster pace to achieve the target ideally accounting to more than three times their present contribution in the global energy usage. By 2035, the combo has to account for thirty eight percent of total global energy. Coal use should also be reduced to the levels of 2003. The natural gas usage will account for the current deficiency in usage and increase steadily over the coming years.

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