A startling new report from the International Energy Agency
(IEA) reveals a free-market way to thwart climate change: Create a
free market in energy. Fatih Birol, chief economist at the IEA,
estimates that 37 nations spent $409 billion on fossil fuel

subsidies in 2010. (By comparison, renewables received $66
billion in that same year.) Impressively, if fossil fuel subsidies
were eliminated, this would avoid 750 million tons of
CO₂ by 2015, and could potentially save over 2.5
gigatons of carbon by 2035. The latter is 70 percent of what the
European Union currently emits. In total, by ending these
distortions in the energy market, the world could reduce half of
the carbon emissions necessary to stop a 2°C
(3.6°F) rise in global temperatures.

Writing in
Slate, Matthew Yglesias expands on what this means for
climate policy:

If roughly half of what needs to be done can be achieved simply
by eliminating economic distortions—economic distortions that would
be unwise even if there were no concern about pollution—then the
whole framework of a trade-off between prosperity and
sustainability is largely misguided.

With that in mind, here’s a simple proposal to fix those UN
climate
confabs that meet every year and do precious little. Rather
than focus on vague, trumped-up emission targets, how about
international agreements to phase out energy subsidies? The other
half of carbon reductions could be attained by more market-based
approaches, like cap-and-dividend
or a
carbon tax that was guaranteed to be
revenue-neutral.
In addition, switching from dirtier fuels (e.g. coal) to energy
sources with a low-carbon footprint, like renewables, nuclear, and

natural gas, would also slow emissions.

Unfortunately, ending these subsidies would be quite difficult.
According to the IEA report, most of these fossil fuel subsidies
are in non-Western nations,
and thus are less inclined to care about global warming. The top
energy subsidizer is
Iran, which spends over $80 billion each year, half for oil.
Meanwhile, Saudi Arabia, Russia, India, and China round out the
rest of the
top five.

The most common justification for maintaining these subsidies is
that they reduce energy costs for the poor. But like so many other
government programs, fossil fuel subsidies are socialism for the
rich. Only 8
percent of these subsidies actually goes to the poorest 20
percent, with the vast majority benefiting the middle and upper
classes. Even if global warming isn’t a super
serial problem (as this recent Wall Street Journal
op/ed
argues), ending these subsidies would restore some fairness and
fiscal sanity for these nations’ budgets.

However, the main, unspoken reason for these subsidies is that
artificially cheap energy pacifies the masses. This allows regimes
to entrench their power. It’s unsurprising that dictatorships like
Venezuela and Saudi Arabia have some of the
lowest gas prices in the world. Unfortunately, market-minded
reformers who try to eliminate subsidies usually must face an angry
public. For example, Nigeria was recently racked with nationwide
riots after Nigerian President Goodluck Jonathan ended fuel
subsidies. While prices doubled for Nigerians, this move is
expected to save $8 billion
and significantly reduce corruption and cronyism within the
Nigerian government.

Reason on global
warming.