Guest essay by Eric Worrall
Forbes has set a new benchmark in green attempts to somehow demonstrate fossil fuels are subsidised, by suggesting that shipping companies buying heavy fuel oil of their own free will is a form of fossil fuel subsidy.
‘Climate-Farce’: Japan And The UN Shipping Agency’s Attitude To Climate Change
Shipping’s dirty little secret
Global shipping has a dirty little secret. It subsidizes the entire oil industry.
The oil that is burnt on ships is the stuff that the oil industry does not know what to do with. It is the sludge at the end of the refining process. There are many fancy names for it, but it is highly polluting, carbon-intensive and can cause serious human and environmental health conditions (one study estimates 40,000 deaths a year due to ship engine oil pollution alone).
If shipping did not take this thick oil residue, the oil industry would have to pay to dispose of it safely. Right now, the ship fuel industry is worth around $150 billion a year.
It essentially acts as a subsidy for the entire oil industry, by giving oil refineries a revenue stream and customer base who would pay to dispose of this material. By having lax environmental controls, the global shipping industry is allowed to just burn this waste product oil into the atmosphere – it is as bad as having coal power stations on the oceans. Actually, 60,000 of them, which is the size of the global ocean shipping fleet.
So assuming the cost of disposing of oil safely on land was double that of burning this off at sea for free, the true impact of lax environmental standards in global shipping could be as high as a $450 billion a year subsidy on the entire oil industry.
Why is this being allowed? That’s a good question for the G20.
Forbes describes Nishan Degnarain as a “Developmental Economist”, but it is clear Nishan has a few things to learn about the oil industry.
There is no need to “dispose of” the residue left after lighter hydrocarbons have been removed from crude oil. If shipping companies were not interested in heavy fuel oil, it would be reprocessed, either turned into tarmac, or converted into gasoline through catalytic cracking.