US Fossil Fuel Hypocrisy
|
US Fossil Fuel Hypocrisy President Bush claims it is 'unfair' for the world to expect the United States to join the international effort toward climate protection unless or until developing countries make similar efforts. But, aside from being the worlds biggest polluter - generating about a quarter of world carbon emissions - the US is effectively promoting emissions growth in low-income countries and discouraging efforts to pursue cleaner economic growth. For the sake of comparison, India, which is one of the countries that President Bush insists must reduce its carbon emissions, has an energy consumption of just 276 kg of coal equivalent per capita. By contrast, the US, Japan and France rate at 7951kg, 3962kg and 4222kg respectively. (1) Even if the US won't reduce emissions and has withdrawn support for the Kyoto Protocol, the head of the United Nations climate change negotiations has asked that it at least not "block the agreement if other countries want to agree". (2) For the President to even seek US permission for Parties to complete the work they've already invested ten years in demonstrates the influence of the US and that fair play has not been an important factor so far. But this plea also overlooks the fact that the US already blocks action on climate change outside the negotiations. Through domestic subsidies to fossil fuels and major contributions to the World Bank, the American Export-Import Bank (Ex-IM), the Overseas Private Investment Corporation and several regional development banks, the US is initiating, in low-income countries, the very projects that cause a significant part of those countries' emissions. Aid for fossil fuel projects All up, US domestic subsidies to the energy sector start at around $10 billion and expand to around $35 billion depending on how many of the implicit subsidies that are involved in getting oil out of the ground and to the consumer are counted. Hundreds of millions of dollars are also channelled yearly into department of energy research and development programs for the production, recovery, exploration, and refinement of oil and coal. If you factor in any of the externalised costs of defending oil fields, surety of supply or human health from the effects of burning oil-products, then the estimate increases by at least another $10-20 billion per year. (3) Direct or indirect, oil subsidies offset industry costs and free-up capital for foreign investment and expanded operations throughout the world, thereby sustaining a whole new round of carbon intensive industry. Projects of this type, one of which is described in the section below, are often free from US-standard environmental regulation, belching pollution into local environments and ultimately the global atmosphere, but profiting US corporations directly. Tax dollars for carbon don't end there. Last year, America's Ex-Im Bank, a government agency that provides loans and guarantees for companies investing abroad, devoted close to one-fifth of its portfolio, or $2 billion to funding power plants, fossil-fuel extraction and pipelines. As with calculating the sum of domestic subsidies, its difficult to calculate precisely how many tonnes of carbon are emitted that are directly attributable to US tax dollars, but 'between 1992 and 2000, OPIC and Ex-Im have invested $28 billion toward opening up coal, oil and gas mines and power plants around the world'. In this way, 'the US is financing plants in developing countries that contribute to global warming at an additional 75 % of the US rate', (4) The US is also the largest shareholder of the world's largest multilateral development bank, providing 17% of its budget. In addition to the majority energy spending it allocates for fossil fuel investments, the World Bank also paves the way policy-wise for shareholder countries to expand into the energy sectors of low-income countries. For a decade, the World Bank has diligently promoted deregulation and privatisation in low-income countries in a style that promotes foreign investment into large-scale fossil fuel projects (5) - with the same being true for US contributions to the regional development banks. Since energy infrastructure is for the long-term, together all these institutions are helping to lock low-income countries into fossil fuel technologies. During the next decade, two-thirds of all projected infrastructure spending in emerging markets, or around $4.5 trillion will likely be spent in Asia. The character of the investment decisions to be made is in the hands of host country governments to varying degrees, but the big lenders will set the tone. Complain less, do more According to President Bush, the US now opposes the Kyoto Protocol because it will cause serious harm to its economy - a position which disregards the savings to be made through efficiency gains and the cost of inaction, which is expected to exceed $300 billion annually. (6) Worse still the US position ignores the very serious implications of climate change for less wealthy nations and alleges that low-income countries occupy a privileged position policy-wise. Coping with the forecast impacts of climate change is the immediate concern for many low-income countries, particularly low-lying islands and countries that lack adequate infrastructure to minimise or deal with the impacts of extreme weather events. Inseparable from these is the perennial need for affordable and sustainable development in low-income countries - a need that has prompted several governments to initiate reforms that favour smaller-scale and less greenhouse-gas intensive energy and transport provision - initiatives that the US rhetoric is inclined to dismiss. For example, well before Kyoto, in the early 1980s, the Government of India 'took the farsighted decision to have an exclusive institutional mechanism for promoting renewable energy sources- namely the Ministry of Non-Conventional Energy Sources', (7) which was charged with the task of developing a variety of renewable energy technologies. In a recent draft renewable energy policy the government of India plans to meet 10% of increased capacity to 2012 with renewable energy. A regional effort in Africa was begun in 1996 to reduce greenhouse gas emissions through improved energy efficiency in buildings. These and other low-income countries are reigning in their inefficient use of energy where they can even while the US and other shareholders of multilateral financing institutions effectively undermine their efforts to do so. Despite the established feasibility and diverse benefits of small to medium scale renewable energy projects in many areas, especially in rural or off-grid applications, many government initiatives have failed to make a significant dent in the bulk of conventional spending. Scarce technical support, technology transfer and host-country training have not helped, but neither have the donor-driven policies of the World Bank and other IFIs which help carve up the energy sectors of countries like India and Indonesia - countries that stand to lose access to loans if they don't comply with the prescribed reforms. Sending conflicting messages In 1993, the World Bank made power sector restructuring an explicit condition of its continued lending for the power sector, the rationale being that privatisation would enhance competition, and lower production costs, thereby ridding the state-run companies of their gross inefficiencies. With foreign capital instinctively seeking out large-scale projects using conventional technologies, the inappropriate and unsustainable mega-projects that result are nearly a foregone conclusion of the prescribed reforms. Despite the stated preference of the US that developing countries reduce greenhouse gas emissions, and the dominance of the US and other wealthy nations as the board and shareholders of the Bank, sustainable development priorities have remained an afterthought to the priority of business-as-usual. Even so, the World Bank's formula often proves irresistible to host countries that see much-needed remedies to political and economic problems in the one-off cash surplus that the sale of public assets will temporarily bring. Unfortunately for the people of Indonesia, the Bank's biggest borrower of power sector loans through the 80s, this was an opening for the wealthy families, cronies of government, and a few large foreign firms to dominate the bidding and selection processes of 'opening' the market. In this way they captured much of the investment without forfeiting their oligarchy of power production or access to government subsidies. It is apparent with the benefit of hindsight that this approach to necessary reform neither increased healthy competition nor improved efficiency in the energy sector. Had adequate regulatory structures been in place ahead of time, these aims may well have been realised. Instead, today in Indonesia, the areas that generate abundant, lucrative oil exports are also the poorest in the country and 40 % of Indonesians still lack access to electricity. These people are hardly in a position to heed the US call to cut fossil-fuel consumption. Foresight might have spared cause for hindsight had the World Bank given timely consideration to the effects of its engagement with policy and investment in low-income countries. More recent attention by the Bank to its role in global financial liberalisation, (8) combined with technological change, has resulted 'in a disproportionately fast increase in the number of households at the extreme rich end without shrinking the distribution at the poor end.' (9) Having helped to reduce the relative standing of 'low-end' earning countries in a global economy, the Bank has also reduced the ability of low-end earners within those countries to participate in liberalised markets or contribute to energy, development and environment policy decisions. Another money-go-round Take the example of the Indian state of Maharashtra which has opened its power sector to Houston-based fossil giant, Enron Corporation in keeping with World Bank prescriptions to solve the financial problems of the state electricity board, or MSEB. A thermal power project at Dhabol was to rely on distillate oil for power production until facilities were ready for utilizing liquefied natural gas to be imported from nearby gas fields. Low on resources and eager to secure a large investment, the MSEB based its plans on grossly inflated energy consumption forecasts which were kept from public scrutiny - until January this year. Hoping it could realise its forecasts by attracting new energy intensive industries to Maharashtra, the MSEB guaranteed the Enron project by promising to pay Enron monthly for every kilowatt of power 'under-consumed' by the people of the state thereafter. This 'take-or-pay' agreement was a coup for Enron, a company far less interested in the Dhabol plant than in developing India's natural gas fields using state subsidies and guaranteed revenue as a spring-board. (10) By late 2000 the bills from Enron exceeded what the state could pay. With current debts running to over $100 million, the MSEB now says it must increase tariffs by an average of 30% across the board and by a crippling 400% in the agricultural sector. A government-appointed committee has recently found that Enron should be the one to reduce its tariffs by 50 % or around $600 million per year in order to reflect a fair market price. (11) Unsurprisingly, the people of Maharashtra have taken to the streets in protest at price hikes they can ill afford and never agreed to. After all, it's their taxes that are being used to subsidise Enron's costly power. Maharashtra may not have played its hand very well, but the US interests in the project have diverted funds away from areas of need and instead into Enron's bank account. A perverse side effect is that in an attempt to keep power demand up, MSEB won't permit the installation of new co-generation plants and is trying to discourage renewable energy investment. Furthermore, because some environmental laws were relaxed to accommodate the Enron project, rather than being clean, the LNG plant - due to its excessive size and high cost - is turning out to be as severe on the local environment as it is on the people. Even while the US rejects the weight of scientific and public opinion on climate change, its own spending works at cross purposes to the Bush administration's call for developing countries to reduce their emissions. Meanwhile back in Houston, Enron, a well-known opponent of the Kyoto Protocol, gave the Republican Party over $1 million last year toward its presidential election campaign. Since Enron is reported, through its use of government rebates, to have actually paid 'less than zero in federal income taxes', (12) political contributions wouldappear to be Enron's priority and privilege. Last January, Enron announced its stock had increased by 89 % in a year. (13) Described as "the President's biggest lifetime campaign contributor", it looks unlikely that Enron's contribution to the Bush administration policy - and, in turn, the reluctant contributions to Enron by the people of Maharashtra - will end anytime soon. So, as President Bush blames low-income countries for behaving unfairly, and as US inaction on climate change enters its tenth year, the financial loop of US tax dollars comes full circle. References 1. Update collective: development and alternatives - Energy issue no. 1. 31, March 28 2001. |
Support TNI
Subscribe
Upcoming events
-
Het vrijhandelsverdrag met Colombia
May 2012
Amsterdam, Netherlands
-
EU crisis: Another way is possible
June 2012
Amsterdam, Netherlands
-
Global Land Grabbing Colloquium
June 2012
Den Haag, Netherlands
