How to subsidize your own demise

If you want to stop destroying your future, stop paying companies to destroy your future.

We human beings are very simple creatures. We do what we are incentivized to do. The same goes for companies, which depending on what jurisdiction you are in, might be considered corporate people – but that is a different essay for a different day.

People, both corporate people, and real people are highly incentivized when you pay them to do things. If someone paid you to do something dangerous, like parachuting, bungee jumping, or tying your happiness to the fortunes of the New York Jets, would you do it? What about if they paid you for something that you are already doing? I bet you would do even more of that thing that you are already doing. Right?

Right. 

Subsidize the behavior you want, and you get more of that behavior.

At the World Bank’s recent annual meeting, the group’s President Ajay Banga, challenged the world to find ways to reduce the subsidies to fossil fuel, fisheries, and agriculture industries. Some subsidies in these areas might still fit a critical need, but many of them have very negative consequences.

The World Bank’s own recent report; Detox Development: Repurposing Environmentally Harmful Subsidies sheds light on the current state of subsidies. The report shows that subsidies for fossil fuels, agriculture, and fisheries exceed $7 trillion in explicit and implicit subsidies. Explicit subsidies - direct government expenditures - in agriculture, fishing, and fossil fuels total about $1.25 trillion.

Implicit subsidies are a bit of a new concept. Implicit subsidies are an attempt to measure the negative externalities, or negative impacts those subsidies have on people and the planet. These implicit subsidies are estimated to be over US$6 trillion a year. These implicit subsidies include the impacts of climate change, pollution, destruction of water resources, land degradation, and the loss of biodiversity and natural capital.

Global oil, gas, and coal subsidies total about $577 billion per year according to the World Bank. Of course, oil, gas, and coal are still used and needed in most parts of the world. But most of these assets are long-lived ones. In a world that desperately needs to move away from fossil fuel use, this level of subsidies makes little sense; that is if you are not into not living in a hothouse hellscape – which I’m going to assume is the case.

Agricultural subsidies total about $635 billion per year. We all need to eat, but when you take into account that about 14 percent of forest loss each year is the result of agricultural subsidies, I think we could get by with fewer agriculture subsidies. The majority of these agriculture subsidies go to the production of beef and dairy cattle, which produce the most greenhouse gases per kilogram of food.

Source: United Nations 

Subsidies to fisheries only come in at about $35 billion, but they can cause dwindling fish stocks from overfishing as well as a decrease in the profitability of fishing which mainly hurts smaller fishing businesses. Subsidies for fishing can mask the costs of production so that fishing operations continue when they would otherwise not make economic sense. Today’s worldwide fishing fleet is estimated to be up to two-and-a-half times the capacity needed. 

These subsidies may be tax breaks, loans, or caps on gas/petrol prices. Often the argument for subsidies is that they help the poor afford the necessities of life. Low gas prices and lower food prices benefit these folks more because they spend more of their disposable income on food and fuel.

The opposing argument is that the wealthy spend more on these items than the poor, it is just a lower percentage of their income.

The main hurdle that stops us from getting rid of harmful subsidies is political. Subsidies are popular. But guaranteeing lower fuel prices isn’t sustainable in the long term. Investing in mass transit is a better idea and ends up being cheaper in the long term, and better for the environment in the long term.

Green energy isn’t the answer, but we should still subsidize it.

As a good degrowther, I don’t want to overemphasize the need for green energy, but it is much better than what we have. However, if we were to take away $1 trillion from fossil fuels, agriculture, and fisheries, we shouldn’t put it all into green energy.

We should also spend it on making our cities less reliant on cars, so we need less green energy. You can use those funds to fund things like redesigning cities to be more walkable, bikeable, and accessible by public transit. You can then use those funds for things like a universal basic income, job guarantees, and universal public services.

Fossil fuel subsidies are back on the rise.

The International Energy Agency (IEA), finds that after a noticeable dip in 2020 due to the Covid pandemic, energy subsidies have been rising again since 2021. Global investment in green energy caught up to investment in fossil fuels in 2016 and has started pulling away. But look at those dark blue bars representing fossil fuel investment. 

Global energy investment in clean energy and in fossil fuels, 2015-2023, billion USD (2022) IEA, Global energy investment in clean energy and in fossil fuels, 2015-2023, IEA, Paris

These dark blue bars need to be moving in the other direction. Subsidies are helping prop up these fossil fuel numbers. Would banks and investors invest as heavily in future fossil fuel projects if governments took away the subsidies? I don’t think so.

Wind down those subsidies. Wind down those investments in fossil fuels. You can keep those investments in green energy. But replace those investments in fossil fuels with investments in the other aspects of degrowth we need to invest in, such as redesigning our cities, public transportation, universal basic income, job guarantees, universal public services, and others that I will be writing about in the coming weeks and months.

In the meantime; call, e-mail, or write to your local representative. Ask them to stop subsidizing your destruction and suggest that they spend that money on some top degrowth priorities. I’m sure they’ll be glad to hear from you.