One often hears opponents of clean energy say that renewable sources are too expensive; they can’t get by without subsidies; they can’t compete in a “free market.” One of the many reasons this is a daffy argument is that there is no such thing as a free market, certainly not in energy. Existing energy sources, fossil fuels, have benefited from a century of subsidies and supporting infrastructure—and are still subsidized lavishly relative to their scrappy little competitors.
This is a point enviros often make, but a new report from the Environmental Law Institute and the Woodrow Wilson International Center for Scholars puts some teeth in it. “Estimating U.S. Government Subsidies to Energy Sources: 2002-2008” makes a fairly simple point, captured in this graphic:
Publicly funding climate change.Environmental Law Institute
As you can see, fossil fuels received the vast bulk of federal subsidies during 2002-2008. This is true in terms of direct spending, but especially true in terms of tax breaks. Conservatives, of course, don’t want to acknowledge that tax breaks are subsidies. They want to call them “incentives” and accuse anyone who proposes repealing them of “raising taxes.” It happened during the debates over the 2007 energy bill—a version that would have rolled back some oil industry tax breaks was filibustered to death by Republicans under the guise of fighting “new taxes.”
Industry takes the same line. Jack Gerard, head of the American Petroleum Institute, is outraged anyone would call into question his precious subsidies incentives. Based on his statement, his defense is that, well, taxpayers get a good bargain for all those subsidies!
Expect that battle to heat up soon. As Steve Kretzmann reported on Grist last week, a leaked letter (PDF) from an Obama advisor to the other members of the G20 reveals that the administration plans to push for elimination of fossil fuel subsidies. Says the letter: “The G-20 should commit to take the lead in eliminating non-needs based fossil fuel and electricity subsidies and to provide technical assistance to non-G20 countries taking steps to reduce fossil fuel and electricity subsidies.” Obama reinforced the point yesterday in his speech before the UN, in which he said, “Later this week, I will work with my colleagues at the G20 to phase out fossil fuel subsidies so that we can better address our climate challenge.”
We’ll see how that goes.
A few stray notes
- This report is actually quite conservative. It did not include any number of things that could be considered indirect or implicit subsidies. It didn’t include military spending to defend oil in the Middle East, spending on the electricity grid, or transportation spending. Those things don’t go exclusively to fossil fuels, but if there was a way of including the share that goes to fossil fuels, the fossil subsidy number would go way, way up. Infrastructure spending has more or less exclusively supported fossil fuels for decades now.
- While the main thrust of the report is the predominance of fossil fuel subsidies, obviously another lesson is that corn ethanol receives subsidies wildly out of proportion to its usefulness. But we already knew that.
- The report also didn’t include nuclear power—would be very curious to see where it ended up.
- In his speech Obama touted his work with the World Bank to finance clean energy, but it’s worth noting that the World Bank is still heavily funding dirty energy projects. Obama needs to lean on them.
The hidden costs and benefits of things we take for granted
Comments
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mwildfire Posted 6:02 am
23 Sep 2009
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EarthFire08 Posted 8:18 am
23 Sep 2009
Despite the publics clear desire for more domestic energy development and the industrys years of experience operating offshore in an environmentally sensitive way, this administration repeatedly has slow-pedaled this plan which would benefit all Americans, especially in these tough economic times, he said. New oil and gas development could create thousands of jobs, add over a trillion dollars to government coffers, strengthen Americas energy security and encourage our economic recovery. Its time to end the delays.
http://www.ogj.com/index/blogs/washington-pulse/s-blogs/s-OGJ/s-washington-pulse/s-post987_5311474413428470551.html
My question is -- would Jack and his oil/gas companies be willing to do all of this drilling MINUS all of the subsidies that make it profitable -- and perhaps even to factor in the externalities associated with GHG emissions / climate change? Does he know that federal dollars are being expended right now to improve hurricane forecasting so that operators of oil rigs along the Gulf Coast might have a few extra hours to hunker down and protect the rigs from fiercer and more damaging hurricanes, a result of burning the oil these rigs produce?
It's time for the fossil fuel industry and its mouthpieces to come clean and admit that it has had a long, free ride on the back of the taxpayer, and the real delay has been in letting it go on much too long for the health of the energy economy and the health of the planet.
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veritone Posted 9:36 am
23 Sep 2009
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Sean Casten Posted 9:45 am
23 Sep 2009
Re: your question on nuke, the 2 year old GAO analysis here:
http://www.grist.org/article/you-know-what-they-say-about-a-guy-with-a-big-footprint
(which also errs on the heavily conservative side) gives a directional sense. They show $6.2B in R&D credits, far in excess of $ going to any other source, but leave out the big benefits that nuke has historically received in the form of rate payer guarantees to regulated utilities, insurance, waste disposal, etc. But it's a start... and corroboration of your larger point.
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amazingdrx Posted 9:48 am
23 Sep 2009
It's a tax and revenue neutral path to national energy security and economic revival. And energy security and economic recovery is THE way to avoid anymore oil or energy/resource caused wars.
Here's another thought, maybe if we didn't import oil from regions that support and harbor terrorists, we could remain a free society, where extraordinary restrictions are no longer needed. No more multi-faceted long national emergency for anti-constitutional forces to justify their push for official state kidnapping, torture, and murder.
That's got to be a good thing.
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biscuits Posted 11:39 am
23 Sep 2009
But also to be fair, as David stated, this doesn't account for externalized costs -- how much does the state absorb in environmental disasters and clean up? Health care issues? Flooding from mountaintop removal?
In Kentucky alone, an amazing study by MACED shows that mining and burning coal is costing KY about $115 million per year -- http://www.maced.org/coal/exe-summary.htm
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Duckhorn Posted 6:26 pm
23 Sep 2009
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ajdeem Posted 12:00 pm
23 Sep 2009
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Charles Komanoff Posted 11:42 am
24 Sep 2009
By comparison, FF prices in that period averaged around $8 per million Btu for crude oil, $6 for natural gas (at wellheads) and $1.50 for coal delivered to power plants. Mash that together to $5 or more per million Btu and you see that the subsidies figure is a paltry 2-3% of FF prices.
Dave's point that the ELI figure is too conservative is well taken, but even doubling it gets you to just 5% (that is, FF subsidies equate to just 5% of fossil prices).
Fossil fuel subsidies are loathsome, stupid and wrong. But it's fantasy to think that eliminating them would make renewables and efficiency considerably more competitive.
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JD_Williams Posted 8:36 am
25 Sep 2009
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GRLCowan Posted 9:04 am
25 Sep 2009
Not acknowledging that fossil fuel subsidies plus fossil fuel taxes net out to a large subsidy from the citizenry, to the government, is loathesome, stupid, and undignified.
Government subsidizes certain clean energies out of its fossil fuel income. Those that can readily grow to cancel that income get no subsidy.
(How fire can be domesticated)
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frantique1 Posted 6:14 am
29 Sep 2009
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cdehaes Posted 7:15 am
06 Oct 2009
Would you be able to let me know if this includes the subsidies to the international travel/transport industries? As far as I understand no fuel duty is charged on any fuel used for air/sea travel/transport. Given their disproportionate damage to the environment (air travel because the level at which it happens, sea travel because of the type of oil they use) it would be interesting to know what the level of their 'incentive' is.
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