Debunking Another Misleading Green Energy Study

A popular talking point among green energy evangelists is that gas, oil, and coal are, in large part, successful because they are highly subsidized. Wind and solar, so the argument goes, would win in a fair fight, but, alas, the playing field is far from fair. But the supposed data they are drawing on to come to such a conclusion is misleading and geared more toward generating headlines than good policy.

A primary source used to back this claim up is a working paper presented by a group of International Monetary Fund authors titled “Still Not Getting Energy Prices Right: A Global and Country Update of Fossil Fuel Subsidies.”

The paper claims that hydrocarbon-based fuels—like gas, oil, and coal—enjoy $5.9 trillion in subsidies annually. Though often presented in the media as an IMF paper, it is specifically not an official publication of the organization but rather a working paper that is meant to, according to the IMF, “elicit comments and to encourage debate.”

Well, here is your debate, IMF.

As is often the case with so-called academic studies, the top-line number here makes for a much better headline than it does a basis for public policy. Indeed, even a cursory look into how the study came to its fanciful conclusions shows how misleading it ultimately is in general and how trivial it is for the United States.

There are three basic problems with the study.

First, it so broadly defines “subsidy” as to be completely meaningless. In fact, the study states that only 8% of its reported costs reflect actual, direct subsidies. The rest predominantly comes from the amorphous “undercharging for environmental costs” that supposedly occur from the extraction, refining, transportation, and use of fossil fuels.

Second, the study presents its overall findings in global terms when the numbers only have meaning at local and regional levels. For example, the largest contributor to its bottom-line number is local air pollution. Putting aside the fact, as my colleague Travis Fisher points out, how easy it is to cook the books and exaggerate the assumed costs of things like small particulate matter in the air, the other problem is that regional variances for local air pollution are so immense that any broad policy conclusion, such as “tighten local air pollution standards,” would be irrelevant.

And third, the study provides no accounting for the massive contribution to human flourishing that has resulted directly from the use of hydrocarbons. This is perhaps the biggest problem with this study specifically, and the modern environmental movement more broadly.

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