A study just published in the journal Nature Climate Change suggests that fossil fuel subsidies in some developing nations stand most in the way of clean energy. For a livable climate, developing nations must bypass the fossil age as they grow their 21st century economies.
The paper, Assessing the costs of photovoltaic and wind power in six developing countries, attempts to do a cost/benefit comparison of investing in PV or wind in different regions that have different levels of fossil fuels subsidies. The researchers looked at six countries reflecting differences in size, development status and fossil energy mix.
As we reported earlier, the researchers found that wind is currently cheaper than solar PV (though by 2017 solar PV will have reduced the most by percentage). This is why it has been more cost effective to build wind power in Honduras, and to develop the world-class wind in the Suez region of Egypt.
Wind power is further along (and thus cheaper) in the developed world too. But they considered another factor too.
In their study of the six developing nations, lead authors Tobias Schmidt, Robin Born and Malte Schneider found that it is the wide variation in high levels of fossil fuel subsidies that most prevent the development of clean energy.
For example, as the above chart from their paper shows, since Nicaragua has the highest fossil energy cost of the six, clean energy investment is better able to compete with fossil energy there from a cost-effective investment point of view.
But money would be best invested in helping India, from a climate point of view. India has the most subsidized fossil energy and the most emissions from the use of fossil energy. This is one reason the U.S. Import-Export Bank is investing in clean energy for India.
Phasing out fossil energy subsidies will better level the playing field for clean energy development, the researchers say.
But phasing out fossil fuel subsidies is easier said than done, of course. An extreme example is Saudi Arabia. Easily the laggard in the Middle East North Africa region, the Kingdom subsidizes gasoline, electricity and water — all desalinated — which is completely dependent on fossil fuels.
It now has the highest oil use per capita in the world. But with neighbors toppling governments, it would be unrealistic to try to persuade Saudi rulers to chop these safety valves.