"Investing in renewable energy proves to be more profitable than maintaining the current system of subsidies for fossil fuels. According to the UN, a global reduction in pollution could save up to $4.2 trillion per year by 2030," explains Jean-Yves Pidoux.
In its weekly "Best of" of February 28, SwissPowerShift shared an excerpt from a reader's message repeating a recurring criticism accusing renewable energies of being parasites of the state: "Neither wind nor solar are profitable without substantial subsidies, and Switzerland has already taken considerable risks by agreeing to subsidize this inefficient, non-dispatchable, and therefore very costly energy."
This question deserves to be placed in a broader framework: that of the direct and indirect subsidies that states allocate to different energy resources. A study by the IMF, whose latest update dates from 2021, helps to shed light on this debate.
The analytical framework of the IMF economists, who are far from environmental activists, remains as mainstream as can be. Their diagnosis is in fact summarized in the very title of the study: "Still Not Getting Energy Prices Right: A Global and Country Update of Fossil Fuel Subsidies."
In other words, public authorities — that is to say taxpayers — feed the revenues of companies that do not bear the full costs associated with energy production.
According to the IMF, the most subsidized energies are fossil fuels: topping the list is coal, followed by natural gas and various petroleum products. These subsidies are divided into two categories: explicit and implicit. In 2020, fossil fuels benefited from $5.9 trillion in subsidies worldwide, an amount distributed very unevenly among the 191 countries studied.
According to the researchers, these nearly $6 trillion per year represent 6.8% of global gross domestic product and are expected to increase further. Only 8% of these subsidies are direct — or "explicit." Even modest, this percentage still amounts to nearly $500 billion per year.
Another study, published by the International Renewable Energy Agency (IRENA), highlights that direct subsidies to fossil fuels represent 70% of all state aid to the energy sector, compared with only 20% for renewable energies.
Over successive editions, the IMF researchers refined their calculations in order to assess the distribution of the 92% of so-called implicit subsidies. According to their estimates, 42% of these subsidies correspond to costs related to local air pollution, 29% to global warming, and 15% to the impacts of road traffic (congestion and accidents). A smaller share is attributed to tax reliefs.
The next step of the reasoning remains, of course, hypothetical. It suggests that an "efficient" price for fossil fuels would reduce greenhouse gas emissions to a level compatible with limiting temperature increase to 1.5 °C — in accordance with the commitments made by states at the 2015 Paris COP21. According to the authors, this would also prevent 900,000 deaths related to air pollution.
The UN says no different. Its "Climate Action" program stresses that renewable energy is an economically sound choice. Rather than subsidizing fossil fuels, the agency recommends investing $4 trillion per year until 2030 in renewable energies — including technologies and infrastructure — in order to achieve the goal of net-zero emissions by 2050.
It should be noted in passing that the amounts needed for the energy transition, although time-limited and lower than the subsidies granted to fossil fuels, will not rely solely on public aid. Indeed, the cost of producing renewable energy continues to fall and, depending on national contexts, the need for subsidies should gradually decrease.
According to IRENA, in 2010, solar photovoltaic cost seven times more than the cheapest fossil source, whereas in 2022 it is 29% cheaper than that same resource. In the long term, aid should be reserved for the regions and countries that need it most, notably those that were plundered for centuries by colonial powers and that today suffer more severely the consequences of climate change.
Investing in renewable energy proves more profitable than maintaining the current system of subsidies to fossil fuels. The UN estimates that globally, reducing pollution and the effects of climate change could save up to $4.2 trillion per year by 2030. Moreover, technologies based on renewable resources — free in the case of wind and sun — make it possible to establish a more resilient energy system that is less exposed to market fluctuations.
The SwissPowerShift reader is not wrong to point out that energy sources dependent on weather conditions pose new challenges. However, attributing to them an alleged failure of Germany and asserting that science requires abandoning them is a manifest exaggeration.
From a scientific point of view, it would be more relevant to establish the facts and to recall that tax breaks granted to fossil fuels benefit the major coal and oil companies, to the detriment of communities, by increasing their already astronomical profits. It would also be more rigorous to specify that the challenges related to renewable energies are above all technological and economic.
Indeed, the latter can only guarantee the stability of supply and power grids if large-scale, long-term storage solutions are put in place. And, to say the least, science is actively addressing these issues.
It is, of course, appropriate to acknowledge to this honorable correspondent that a portion of the externalities currently attributable to thermal infrastructures will persist even in the event of an energy transition. For example, the manufacture of electric cars will continue to weigh on the planet's carbon footprint; their tires will leave residues harmful to the health of local residents; and, in the case of traffic jams, the economic losses linked to road congestion will differ little from those caused by internal combustion vehicles.
One must also admit that it is unrealistic to abandon support for fossil fuels overnight, damaging as they are: entire national economies, whether in rich or developing countries, still largely depend on them.
However, a transition that is not reduced to a mere accumulation — to paraphrase Jean-Baptiste Fressoz in "Sans transition: A new history of energy" (Paris, 2024) — is essential for the future. Above all, the global damage caused by renewable energy sources will remain incomparably smaller than that caused by the exploitation of fossil fuels.
In short, the time has come to consider that subsidies to renewable energies are not more unjustified — and are in fact considerably less so — than those, much more substantial, granted to fossil fuels…
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