Ending the Subsidies Is Urgent

On the afternoon of May19, 2015, the accident of oil spill occurred in Santa Barbara Country, California again. The similar accident ever occurred in 1969. This accident has already aroused public debate about the oil drilling and evoked public anxiety for how to ensure the oil drilling safety and how to protect the environment again. The oil spill has brought out the huge environmental damage including the death of a large number of the marine lives and the pollution of a large volume of the nearby sea water. From this accident, we can see the spill of fossil fuels does harm to the environment to a large extent. What’s more, the consumption of the fossil fuels also brings the climate change and air pollution. However, the fossil fuels provide us with the energy we use in daily life, and it is very important for the economic development of a nation, so many countries adopt the positive policy of subsiding the fuel companies to encourage them to mine the fossil fuels. At present, the environmental damages fossil fuels bring out are dramatically increasing while the amount of the fossil fuels is decreasing. I think the policy of ending the subsidies is urgent in the current circumstance.

According to the estimate of IMP, fossil fuel companies can get the global subsidies of $5.3tn a year equivalent to $10m a minute every day (Coady et al.14). This value occupies 6.5 percent of the global GDP and is much greater than other investments of the government such as health spending, infrastructure spending, education spending and so on (Coady et al.6). The vast post-tax energy subsidies contain the expensive environmental cost. I think it is quite inappropriate to invest the vast sum of subsidies to the fuel companies, for this behavior of many governments disturbs the market principle and does not conform to the trend of controlling the global warming. Therefore, ending the subsidies gradually will be beneficial to the improvement of environment and economic growth.

The ending of energy subsidies is firstly good for reducing the carbon dioxide emission. “ending subsidies for fossil fuels would cut global carbon emissions by 20%” (Fossil fuels subsidised by $10m a minute, says IMF). If the governments cancel the subsidies, the fuel price must go up, leading to the reduction of consumption of the fossil fuels. The carbon emission can be reduced consequently, and this strategy will have a great impact on dealing with the extreme climate change. In addition, the strategy can lower the death rate because of the air pollution.

The ending of energy subsidies is also good for the renewable energy sources. All the governments excessively depend on fossil fuels and pay little attention to the clean energy sources. This view must be changed. The potential of clean energy is great and can bring great economic and environmental benefits in the future. If the governments can increase investment in the clean energies, the cost of production can gradually become lower. Compared with the fossil fuels which are not renewable, the clean energy sources may be more attractive in price and environmental protection. The ending of fuels subsidies will provide all the government with better economic growth in the long run.

Most of the energy subsidies originates from the fiscal subsidies of the governments, and these fiscal subsidies originates from the taxes paid by the taxpayers (US taxpayers subsidising world's biggest fossil fuel companies). If the government reduces the fiscal budget of the subsidies of the fossil fuels, the government can have more flexible money to invest in the public fields such as medical field, the field of social service, the educational field, and so on. Meanwhile, the government can reduce the tax revenues to ease the burden of the taxpayers. This is also a positive benefit of ending the subsidies of fossil fuels. By this subsidies reform, the economic growth can be driven and the poverty situation can be improved.

For some new economic entities and the poor countries, the subsidies reform will not damage their interests and arouse social instability. Instead, it will facilitate economic development in a long run. For example, India initiates the gradual subsidies reform campaign and limits the subsidies of the fossil fuels for some time, and then completely free the prices of fossil fuels. This campaign does not influence the economic development. Some people are worried that the ending of the energy subsidies may increase the burden of the poor people. However, most of the fuel subsidies benefit the rich and the middle-class people while the shares of the fuel subsidies for the poor are relatively few. Hence, the influence on the poor is little. For the developed and developing countries, I think the more important thing is to use the fiscal resources to lower the taxes and increase the productive public spending instead of increasing the energy subsidies continuously.

We have the only one earth. When facing the global warming, all the governments, the fuel companies and the individuals should be responsible for the environmental damage caused by the fossil fuels. The governments can adjust and control the economic development from the macroscopic perspective. For all the governments, long-term policy of energy subsidies has not been feasible any longer in today’s world. Ending the subsidies is urgent, for it is good for improving the energy safety, dealing with the climate change, and bringing the economic benefits. On the one hand, the governments should gradually cancel the fuels subsidies and increase the investment of clean energy resources and widely apply them to all kinds of the public fields, so as to reduce the dependence on fossil fuels and protect the environment. On the other hand, the government should use the fiscal resources to strive to increase the public spending such as infrastructure spending, health spending, education spending, etc. The public welfare can bring the country economic growth and bring the people the real happiness.

Works Cited

David Coady, Ian W.H. Parry, Louis Sears, and Baoping Shang. How Large Are Global Energy Subsidies? IBM Working Paper 15 (May), 2015.

Fossil fuels subsidised by $10m a minute, says IMF. The Guardian. 2015. Web. 6 June. 2015.

US taxpayers subsidising world's biggest fossil fuel companies. The Guardian. 2015. Web. 6 June. 2015.