Coal subsidies are costing US and Australian taxpayers billions of dollars a year, according to a new report.



The research examined the subsidies given to coal production in the US’s largest coal field, the Powder River Basin, and found they totalled $2.9bn (£1.9bn) a year. This equates to $8 per tonne, almost 25% of the sale price.

Ending the subsidies would lead to cuts in coal use equivalent to shutting up to 32 coal-fired power stations, the researchers found, leading to a large reduction in carbon emissions.

The report also analysed Australia’s exporting of coal for power stations in Asia and found these came to $1.3bn a year, or $4 a tonne. Ending these subsidies would cut demand by up to 7%, a smaller impact than in the US because coal users could buy supplies from other countries.

“The fossil fuel industry has gamed energy market consumers, with numerous subsidies evident over the long term,” said Tim Buckley, at the Institute for Energy Economics and Financial Analysis, who worked on the report. “Any discussion of cost competitiveness of renewable energy and energy efficiency needs to take into account the decades of extensive subsidies evident for the coal industry and that, in many cases, remain in place today.”

Luke Sussams, senior researcher at Carbon Tracker Initiative, also part of the research team, said: “Policy makers concerned about climate change and a level playing field in energy markets should look to take coordinated action to remove the distortions to production these subsidies create.”

The subsidies given to coal companies included tax breaks, cheap leases, government-funded infrastructure including railways and ports and allowing inadequate funding of clean-up operation after mining ends.

The G20 nations pledged to end fossil fuel subsidies in 2009, but little action has been taken. However, falling oil and coal prices in the last year have seen some countries starting to reduce subsidies.

A recent study by the International Monetary Fund (IMF) took into account not just direct subsidies but also the cost to nations of the damage caused by air pollution and global warming. It estimated coal, oil and gas were being subsidised by $5.3trn a year, more than the total health spending of all the world’s governments. Much of the cost is due to the illness and death caused by air pollution.

“Eliminating coal subsidies in the Powder River Basin and throughout the world, is an obvious, no-regrets climate strategy,” said Doug Koplow, of Earth Track and another member of the research team.

The new report, called Assessing Thermal Coal Production Subsidies, was produced by the Carbon Tracker Initiative, Energy Transition Advisors, the Institute for Energy Economics and Financial Analysis and Earth Track.