New cars, new energy solutions

Yet it is within this framework that the International Energy Agency (IEA) reports that fossil fuel consumption is currently subsidised by governments globally to the tune of over $300 billion per year. This, to repeat, is the amount that subsidizes what consumers pay at the pump.

This must be placed in the context of governments also subsidizing the production of renewable energy, as well as subsidizing the purchase of cars like the Leaf and the Tesla.

For once economists and environmentalists in agreement: fossil fuel subsidies should cease.

Environmentalists argue that to abolish subsidies would be reduce global fossil fuel consumption by 5%, or the market demand of New Zealand, Japan and Korea combined.

The IEA report suggests that a 5% reduction here equates to a roughly 1.5 billion tonne reduction in CO2 emissions, which significantly reduces the risk of catastrophic climate change i.e the earth warming by more than two degrees Celsius.

Russia, Saudi Arabia and Iran are the biggest subsidizers. Economists argue that, with these countries sheltering their domestic oil prices artificially, the volatility of prices on the open market only increases.

To understand how subsidies work 'on the ground floor', subsidies serve to keep consumption high in countries where a truer reflection of market prices would mean less people bought the fuel. In a country like Iran, which invests $166 billion or $895 per person each year in subsidies, fuel is in theory available to even the very poorest. Petrol prices can be as low as 7 pence per litre.

And yet in reality means consumption is kept high amongst the middle and upper classes who have the cars to use the fuel.

It is not only that cheap fuel encourages inefficient energy use. It also fails to provide people with an incentive to look to renewable energy sources, whereas a (realistically) higher pump price would encourage people - and governments - to consider alternative fuel options.

Subsidies are clearly politically useful, whether your interests are in controlling a poor population or encouraging the development of new technologies. And with both economists and environmentalists lobbying for the abolition of fossil fuel subsidies, it seems only a matter of time before concerted pressure comes to bear on fossil fuel and its subsidizers.