Despite the rhetoric and political posturing about open markets and the benefits of dropping trade barriers, most industrialized countries subsidize local and established energy industries (like coal) at the expense of foreign (oil) and innovative (wind) industries. This is partly because of perceived low-cost under old-style economics that disregards the costs of pollution and the impacts on the health of citizens, and partly because of the political inertia associated with the energy ecosystem tied to industries like coal: the workers, and the myriad companies reliant on the industry for revenue:
Elisabeth Rosenthal, As Europe Kicks Coal, Hungarian Town Feels Pangs
Though the European Union generally prohibits national subsidies, coal, considered a vital source of energy, had long been an exception. But that logic has shifted as concerns over global warming have grown and better sources of renewable energy have become available.
In 2007, the European Union committed to reducing greenhouse gas emissions by 20 percent below 1990 levels by 2020, producing 20 percent of its electricity from renewable energy sources.
“If we want to lower our carbon emissions, why on earth — of all industries — does the coal industry get this preferential treatment?” asked Connie Hedegaard, the European Union’s commissioner for climate action. Coal is often referred to as a “cheap” fuel, but that designation is not always accurate, energy analysts say. In some places where coal is used, cheaper resources are now available, and the label does not take into account the pollution caused by burning coal.
The European Union’s emissions trading system effectively forces power companies to pay for some of coal’s excessive emissions. But even in the United States, where no such penalty exists, generating electricity from wind turbines, which draw on local resources, may be cheaper than importing coal in some places.
In many parts of the world, coal-fired plants and mines rely on government assistance for some of their profits, if not their survival. In the United States, the coal industry benefits from federal tax breaks and gets indirect support through the availability of tax-exempt bonds, loan guarantees and lien accommodations to support investment in coal plants. The European Union’s goal is not to completely eliminate coal but to replace it, where it is not economical, with cleaner forms of power. But ending coal subsidies is not easy.
In Europe, Germany and Spain objected vigorously to the proposed Dec. 31 deadline, arguing that the recession made revoking subsidies this year impractical. Coal accounts for 30 percent of electricity production and 17 percent of energy consumption in the European Union.
In fact, Europe passed the first law phasing out operating subsidies to the coal industry in 2002 — and the deadline had been moved back repeatedly. Some countries, like France and Italy, have ended subsidies. Some subsidies, like those intended to retrain former miners or to clean up mining sites, were not prohibited.
Of course, the US and China are burning massive amounts of coal, and with the same context.
And as the economy continues to sputter, and trade barriers start to rise as countries become more protectionist, don’t expect coal subsidies to end quickly.