Quiz: What You Don't Know About Energy Subsidies
Photograph by Noah Seelam, AFP/Getty Images
You know that governments often take steps to support fuel production and power consumption, but how much do you really know about energy subsidies and their impact on the environment and the global economy?
What fuel receives the highest energy subsidies?
Oil received at least $193 billion in subsidies in 2010 from governments around the world, the International Energy Agency (IEA) calculates. All forms of renewable electricity together received $44 billion, while coal got $3 billion in government support.
What country has had the lowest gasoline prices in the world for many years, thanks to its government’s generous oil consumption subsidies?
- Saudi Arabia
- United Arab Emirates
In Venezuela, where the state-run oil company controls what OPEC reckons as the world’s largest oil reserves, gasoline costs about 8 cents per gallon (2 cents per liter), by far the lowest in the world.
Governments often argue that fuel subsidies are needed to help the poor. What percentage of the $409 billion in fossil fuel consumption subsidies in 2010 was spent on the poorest 20 percent of the population worldwide?
- 8 percent
- 18 percent
- 28 percent
- 38 percent
Only 8 percent of fossil fuel subsidies reached the world’s poorest populations, according to IEA. The biggest fossil fuel consumers, who benefit the most, tend to be wealthier. IEA argues that direct spending on health and welfare programs would target the poor more efficiently.
Which countries have higher fossil fuel subsidies?
- Oil- and gas-importing countries
- Oil- and gas-exporting countries
Since 2007 about 80 percent of the estimated subsidies, on average, have occurred in countries that are net exporters of oil and gas: $331 billion in 2010 compared to $78 billion in net-importing countries.
Which of these oil-importing countries is paying the most for fossil fuel subsidies, according to IEA?
- The United States
- South Korea
India spent $22 billion on fossil fuel subsidies in 2010, the highest of any oil-importing country, IEA’s analysis shows.
Who was president when the United States enacted its first fossil fuel subsidy?
- George Washington
- Woodrow Wilson
- Dwight D. Eisenhower
- Jimmy Carter
Soon after it was established, the U.S. Congress enacted a 10 percent tariff on imported coal to give a cost advantage to the domestic coal industry over British producers. In the late 1970s, President Jimmy Carter presided over the first minor subsidies to non-hydro renewable energy, although the sector didn't see major federal support until after 1992.
Which one of the following policies in developed countries is NOT counted as a fossil fuel subsidy by the Organization for Economic Co-operation and Development (OECD)?
- Fuel tax rebates to trucking businesses that meet environmental standards
- Home heating assistance to low-income families
- Tax deductions that allow oil companies to account for depletion in their reserves
- Leases for offshore drilling in national waters
In the first effort to inventory the fossil fuel subsidies in developed nations, the OECD counted a wide variety of tax breaks and fuel consumption supports. But industry-government deals like drilling in national waters in return for lease payments and royalties weren’t counted as subsidies.
How do fossil fuel subsidies compare to renewable energy subsidies?
- They are half as large
- They are twice as large
- They are four times as large
- They are six times as large
Fossil fuel subsidies around the world totaled at least $409 billion in 2010, compared to $66 billion in global renewable energy subsidies, according to IEA.
How much of a reduction in carbon dioxide (CO2) emissions would the world see by 2020 if governments phased out fossil fuel subsidies by that year, according to IEA’s calculations?
- 5 percent
- 10 percent
- 20 percent
- No immediate impact
Energy-related CO2 emissions would fall by 1.7 gigatons, about 5 percent, below the 36.1 gigatons now projected for 2020. That would be the equivalent of eliminating all of the CO2 emissions of Russia, and similar to the anticipated savings from all climate change policy plans now being weighed by governments worldwide.
Libya’s fossil fuel subsidies have encouraged what development in neighboring Tunisia since the revolt and slaying of longtime ruler Muammar Qaddafi?
- Anti-government uprising
- A move for joint refinery operations
- Oil smuggling
- Oil exploration
When border controls weakened after Qaddafi’s overthrow and Tunisia’s own uprising, smuggling became rampant as thieves sought to take advantage of Libya’s highly subsidized gasoline prices. In 2010, gas in Libya sold for 67 cents per gallon (17 cents per liter), compared to $3.55 per gallon (94 cents a liter) in Tunisia.
Why are countries phasing out or trying to end fossil fuel subsidies?
- To encourage energy efficiency
- The cost of subsidies is rising with higher global oil prices, sapping government finances
- Subsidies are eroding the amount of fossil fuels available for sale overseas, reducing potential earnings
- All of the above
Some governments have sought to end subsidies in recent years due to a variety of financial and resource strains. But doing so is politically difficult, and the global economic downturn and higher oil prices have made the transition harder, even as they have increased costs.
If countries enact planned policies on climate and renewable energy, the International Energy Agency projects the cost of wind energy subsidies will fall over the next 25 years. Why?
- Wind power will become competitive with other forms of electricity
- Wind power will be reduced
- Wind power subsidies will be eliminated
Wind power will become competitive with other forms of electricity in most countries, in effect reducing the cost of the subsidies. But in the United States, due to competition from cheap natural gas and the lack of a carbon price, wind still will not be competitive and will require subsidization to encourage deployment by 2035, says IEA.
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