Pictures: Eleven Nations With Large Fossil-Fuel Subsidies

Saudi Arabia: Cloud Over Exports

Photograph by Amr Nabil, AP

Buses jam an intersection near Arafat outside Mecca during the annual pilgrimage that is a sacred duty of the Muslim faith. Not just at the hajj, but throughout the year, fuel is burning in Saudi Arabia at a growing rate.

While in all other parts of the world, energy consumption per unit of GDP has declined over the past 30 years, Saudi Arabia's energy intensity growth rate has tripled since 1980-its economy is growing less efficient.

(Quiz: "What You Don't Know About World Energy")

And it's no wonder, because—as in many high-subsidy countries—a gallon of gasoline costs less than a bottle of water here. Of course, Saudi Arabia, as the world's largest oil exporter, sees state revenue soar when the global price of oil rises. But so, too, does the amount of foreign income it forgoes as it provides cut-rate fuel for its citizens; its subsidy bill was about $44 billion in 2010, says IEA.

Because oil is so cheap, it is used in large volume for electricity here-an inefficient and polluting practice that most countries have tried to abandon.

Saudi Arabia also sells electricity at less than a third of international prices. Electricity demand soars during summer months, when citizens turn on air conditioners to fight temperatures upwards of 120°F (49°C). Electricity demand is also high for drinking water, as the kingdom depends more than any other nation on energy-intensive desalination.

Khaled Al-Falih, chief executive of national oil company Saudi Aramco, acknowledges that rising domestic energy consumption could threaten exports volumes, which is more than a domestic concern. Saudi Arabia holds most of the world's spare oil production capacity, and it has ramped up output to make up for global shortfalls during the Iraq war, the Libyan crisis, and the tightening oil embargo on Iran. A study by the London-based think tank Chatham House warns that Saudi Arabia's growing appetite for energy could jeopardize its ability to stabilize world oil markets.

(Related Photos: "Oil States: Are They Stable? Why it Matters.")

Published June 18, 2012

Russia: An Economic Chill

Photograph by Steve Raymer, National Geographic

Apartment buildings huddle on permafrost amid a huge natural gas field in Siberia, where Russia's subsidies drive both production and waste.

(Related Blog: "Reducing (Massive) Fossil Fuel Subsidies as Keyas Carbon Price in Global Warming Fight")

Subsidies cost Russia $39.3 billion in 2010, says IEA, but that understates the economic impact. Russia's spending to heat homes is double that of its Arctic neighbor, Canada, in terms of energy "intensity" (heat consumed per unit of GDP), even though Canada has colder average temperatures. Russia has more people living in colder regions, a relic of Soviet planning that forced large numbers of people into frigid frontiers that the government sought to industrialize, especially for extraction of natural resources.

The payoff of that investment is Russia's rank as the world's largest natural gas producer and exporter, but there has been a price.   Some 60 percent of the natural gas it produces is sold at cheap subsidized rates to Russian businesses and private consumers, and fires inefficient district heating systems. It's not uncommon for apartment dwellers in winter to open their windows to vent unwanted warm air. At least one quarter of the heat generated in these distribution systems is lost, and Russia's energy waste is reckoned to be equal to all the energy consumed in France.

Not only is Russia losing export revenue due to its subsidy system, but its Siberian fields are being depleted. The International Energy Agency now projects that both the United States and China will overtake Russia in natural gas production over the next 25 years.

The Russian government announced a plan in 2006 to reform its subsidy system, and achieve parity between the price for natural gas sold domestically and the fuel sold for export to Europe. As a result, fuel prices have risen, but are still far from parity. Global market volatility has made the government's goal a moving target.

Published June 18, 2012

India: Drumbeat of Demand

Photograph by Divyakant Solanki, European Pressphoto Agency

A worker heaves a liquefied petroleum gas (LPG) cylinder onto a truck in Mumbai, India, where fossil-fuel subsidies weigh heavily on the nation's finances. Without a large network of piped natural gas for cooking, city-dwelling Indians rely on canisters of LPG, which the government provides at deeply subsidized rates.  

Fossil-fuel subsides are more prevalent in countries that export fuel, but India, followed closely by China, has the highest subsidies among importers, totaling $22 billion in 2010.

A quarter of India's 1.2 billion people live below the poverty line, but here, as in other high-subsidy countries, the government supports are more likely to benefit the rich. An International Institute for Sustainable Development study catalogued how the overwhelming majority of Indians who use LPG as a cooking fuel live in urban areas, with most gas consumed by the well-off. Indian's rural dwellers tend to cook over coal, wood, or dung fires.

Globally, only 8 percent of fossil-fuel subsidies reached the world's poorest populations, according to the International Energy Agency, which has urged nations to move to direct spending on health and welfare programs that would target the poor more efficiently.

In 2010, India deregulated the price of gasoline, but public protests over that shift stymied reform. Fearing a public backlash, the government has not raised prices for cooking fuel or diesel since 2011, even though its central bank has urged fuel price increases to improve India's finances and slow energy imports.

(Related: "Delhi Offers Cleaner Auto Rickshaws, But Residents Choose Cars")

Published June 18, 2012

China: Coal-Fired Consumption

Photograph by Greg Girard, National Geographic

Day laborers pound coal in Shizuishan, China part of the sprawling fossil-fuel complex that powers the economy of the world's largest energy consumer.

(Photos: "A Rare Look Inside China's Energy Machine")

Although China is adding solar and wind energy rapidly, renewables cannot keep pace with coal, which generates 80 percent of the nation's electricity. China, one of the few countries that subsidizes the black rock, consumes more coal than the United States, the European Union, and Japan combined.

Although the size of China's subsidies, $21.3 billion in 2010, ranks among the largest in the world, they are low compared to the size of the nation's economy and population, totaling about 0.4 percent of GDP and $16 per person.

Still, China is driving world demand for fossil fuel, especially oil, due to skyrocketing automobile ownership that will surpass the United States by 2030, when it is estimated China will have more than 390 million cars.

(Related Quiz: What You Don't Know About Cars And Fuel)

The IEA calculates that a phase-out of fossil-fuel subsidies would trim global oil demand by 3.7 million barrels per day by 2020, and by 4.4 million barrels per day, or 4 percent, by 2035. "Higher prices (and expectations of such) contribute to greater conservation and the uptake of more efficient vehicles long after the phase-out of subsidies has been completed," IEA said.

Also, natural gas demand could be cut by nearly 10 percent, and coal demand by more than 5 percent by 2035, just by removing subsidies, IEA says. Energy-related carbon dioxide (CO2) emissions would fall 1.7 gigatons, about 5 percent, below the 36.1 gigatons now projected for 2020. That would be the equivalent of eliminating all of the CO2 emissions of Russia, and similar to the anticipated savings from all climate change policy plans now being weighed by governments worldwide.

(Related Blog Post: "Ending Fossil-Fuel Subsidies May Be the Way to Jumpstart Climate Finance")

Published June 18, 2012

Egypt: Subsidized Shortages

Photograph from Washington Post/Getty Images

Motorists are seen here converging on a gas station in Cairo, Egypt, as shortages spread in the uprising that led to the ouster of longtime President Hosni Mubarak. More than a year later, fuel shortages continue to plague Egypt. Officials have offered numerous explanations, but most reports agree the country is short on credit to pay for imports to meet domestic demand for highly subsidized fuel. Egypt's fossil-fuel subsidy burden was $20.3 billion in 2010.

(Related: "Oil Markets Churn Over Egypt's Potential as a Gateway for Revolt")

Its gasoline prices are among the lowest in the world, and although Egypt is a large oil producer, the country consumes 90 percent domestically, leaving little to export for revenue.

Egypt's Minister of Petroleum recently said he sees no reason to raise prices. The government, however, does plan to attempt to switch its industries from oil to cheaper natural gas, to cut its subsidy bill without raising fuel prices. Egypt also aims to ration subsidized liquid petroleum gas to one or two canisters per family per month, but both plans have not been fully implemented, according to Reuters.

(Related Blog Post: "Egypt's Chaos Stirs Energy Fear in Israel")

Published June 18, 2012

Venezuela: Prices Subdued

Photograph by Paulo Fridman, Corbis

Oil wells rise from the placid waters of Lake Maracaibo, the center of Venezuela's petroleum industry and heart of the world's largest proven oil reserves, by OPEC's reckoning.

Venezuela's government has long used its oil wealth to buy popular support. At 8 cents per gallon (2 cents per liter), the price of gasoline in the South American nation is by far the cheapest in the world, according to data collected by GIZ, the German Society for International Cooperation.

The costs of Venezuela's massive domestic subsidies, $20 billion in 2010, have hindered economic growth. Venezuela spends more money on fuel subsidies than on education, and consumes the highest rate of energy per capita in Latin America. President Hugo Chávez has called for slowing domestic fuel consumption, but with elections approaching, popular subsidies are unlikely to fall.

Published June 18, 2012

United Arab Emirates: Emissions Driver

Photograph by Beth Wald, Aurora Photos/Alamy

Four-wheel-drive vehicles careen over sand dunes in the United Arab Emirates, a nation that burns some of the cheapest gasoline in the world.

The UAE is a major producer of both natural gas and oil, yet rising domestic demand has required the country to import natural gas and cut the volume of liquid fuel available for export.   

At nearly $2,500 per person, the country's 2010 subsidies, totaling $18.2 billion, were second only to Kuwait's on a per capita basis, according to the IEA.

Much of the natural gas used domestically is burned in power plants to generate electricity. Demand for power is rising due to population and economic growth. In addition to sapping oil reserves and possible export revenue, domestic demand for fossil fuel has turned the country into a large-scale polluter. In 2007, the UAE produced nearly five times the world average of carbon dioxide per capita.

The UAE has in the past considered phasing out fossil fuel subsidies, but the Federal National Council in May recommended the government further cut gasoline prices.

An irony for UAE is that foreigners, who make up 89 percent of the population, are the biggest beneficiaries of the nation's cheap fuel.

Published June 18, 2012

Indonesia: Protests Quash Reform

Photograph by Binsar Bakkara, AP

Smoke from burning tires billows around an Indonesian man protesting the government's effort at fossil-fuel subsidy reform earlier this year. More than 80,000 Indonesians took to the streets in sometimes violent demonstrations that ultimately forced the government to back off its plan to raise fuel prices by 33 percent.

Gasoline prices here are among the cheapest in Asia, but the costs—$16 billion in 2010—have ballooned the nation's budget deficit. Indonesia once was a net exporter of oil, but now it is heavily dependent upon imports to meet demand, and high global oil prices have taken a toll.

Like Egypt, Indonesia sees some hope for reducing its subsidy costs by switching consumers from oil to cheaper natural gas. It already has significantly reduced its kerosene subsidies with a program to convert households to LPG as a cooking fuel, according to a report by the International Institute for Sustainable Development.

In a program that initially will be focused in the Java-Bali area, the government now has plans to convert large numbers of vehicles to run on compressed natural gas and liquid natural gas, and to develop the infrastructure—including filling stations—to support the switch. If successful, the program would be rolled out nationwide.

Published June 18, 2012

Uzbekistan: Tanked Energy

Photograph by Denis Sinyakov, AFP/Getty Images

A fuel tanker operated by the state gas company stops near Tashkent, in the mountains of Uzbekistan. The country is a major producer of natural gas, but only a small amount of the fuel makes it to foreign markets.

(Related Blog Post: "A Cold War Over Resources in Central Asia")

Almost 80 percent of the gas Uzbekistan produces is sold at cut-rate price on the domestic market, where it used for electricity and heat.  Uzbekistan is a world leader in fossil-fuel subsidies, spending $12 billion in 2010, almost one-third of its gross domestic product. That's a higher share compared to national economic output than for any other country.

Money is spent on subsidies instead of badly needed infrastructure upgrades that could aid in economic expansion. In addition to natural gas, Uzbekistan has large oil reserves, yet it pumps and refines a relatively small amount due to antiquated facilities.  

The country has been searching for new markets for its natural gas, and recently announced plans to export to China. But Uzbekistan is landlocked and currently lacks the pipelines and other infrastructure needed to expand exports.

Published June 18, 2012

United States: Fossil Tax Breaks

Photograph by George Steinmetz, National Geographic

Drilling rigs are seen here lying in wait in Cheyenne, Wyoming, in 2001, but they've had little time to idle in recent years. The United States is amid an oil and natural gas boom, and its dependence on foreign energy imports is the lowest in 16 years.

(Related: "U.S. Oil Fields Stage "Great Revival," But No Easing Oil Prices")

Economists and historians will likely debate for years the reasons for this revival: How much was due to favorable free market conditions—and how much due to a helping hand from government?

Case in point: Texas, birthplace of the shale gas boom, bestowed more than $1 billion in state severance tax exemptions on the natural gas industry in 2010, according to a survey of fossil-fuel subsidies in OECD member countries.

Although most developed countries do not have the kind of direct and universal consumption subsidies seen in the big oil-exporting nations, tax breaks and other supports lessen the cost of production and consumption. In 2009, the G20 ("the group of 20" nations including the largest economies in the world), committed to phasing out these subsides. But no one had ever catalogued just how large this burden was. So OECD embarked on a first-of-its-kind inventory, and last fall produced its first reports. Although the OECD cautioned that the value and budget impact of subsidies varies widely from state to state (and did not even total the figures), the United States had the largest supports, totaling about $15 billion in 2010.

With G20 leaders meeting today in Los Cabos, Mexico, environmentalists around the world plan demonstrations and a "twitterstorm" to raise awareness of fossil fuel subsidies. But global economic woes are likely to dominate the summit agenda.

U.S. tax breaks, such as the expensing of exploration and development costs, make up about $5 billion of U.S. fossil fuel subsidies. President Barack Obama's proposed 2013 budget would eliminate many of these, yet the proposed cuts are likely to be met with resistance in Congress. Measures that favor home-grown fossil fuel are a tradition as old as the American Republic. Soon after Congress was established and George Washington was sworn in as the first president in 1789, lawmakers enacted a 10 percent tariff on imported coal to give the domestic industry a leg up over British producers; it was the first U.S. fossil-fuel subsidy, but far from the last.

Published June 18, 2012

Next: What You Don't Know About Energy Subsidies

Photograph by Noah Seelam, AFP/Getty Images

Published June 18, 2012