Fuel subsidies by US government exposed
In September Obama confirmed that he wanted 'worldwide' end to subsidies as reported in US News.
There has been considerable publicity recently for the report prepared by the ELI (Environmental Law Institute) on US subsidies for fossil fuels & renewable energy. This shows that fossil fuel subsidies are roughly 10x those of renewables, as reported in Bloomberg on 29th July & The Guardian on 3rd August.
Oil Change International pose the question "On So how do we transform oil companies into energy companies and jumpstart the new energy economy?" & suggest that "The first step is a Separation of Oil & State – including an end to governmental subsidies to Big Oil and an investment in renewable energy alternatives and energy efficiency instead".
The (info)graphic cited in the report is attached here;
US fuel subsidies
Image by EFI / Tommy McCall
Now, much as I love infographics, I do find this quite difficult to decipher, as the data is not directly comparable - my eyes don't read currency as circle quarters too well..... so I took the raw data & put it into a simpler bar graph. I think this gives an even more stark and clear view of the shocking situation;
US fuel subsidies graphed
Image by Katy Duke
The executive summary of the ELI report is attached below for info.
Estimating U.S. Government Subsidies to Energy Sources: 2002-2008
Environmental Law Institute
EXECUTIVE SUMMARY
The current energy and climate debate would benefit from a broader understanding of the
explicit and hidden government subsidies that affect energy use throughout the economy. In an
effort to examine this issue, the Environmental Law Institute (ELI) conducted a review of fossil fuel
and renewable energy subsidies for Fiscal Years 2002-2008. This paper and Appendix describe the
approach used to identify and quantify the subsidies presented in the accompanying graphic. ELI
researchers used a standardized methodology to calculate government expenditures. Where this
methodology was lacking or did not apply, ELI researchers calculated subsidy values on a case-by-
case basis.
Applying a conservative approach, explained in further detail below, ELI found that
• The vast majority of federal subsidies for fossil fuels and renewable energy supported
energy sources that emit high levels of greenhouse gases when used as fuel.
• The federal government provided substantially larger subsidies to fossil fuels than to
renewables. Subsidies to fossil fuels—a mature, developed industry that has enjoyed
government support for many years—totaled approximately $72 billion over the study
period, representing a direct cost to taxpayers.
• Subsidies for renewable fuels, a relatively young and developing industry, totaled $29
billion over the same period.
• Subsidies to fossil fuels generally increased over the study period (though they decreased
in 2008), while funding for renewables increased but saw a precipitous drop in 2006-07
(though they increased in 2008).
• Most of the largest subsidies to fossil fuels were written into the U.S. Tax Code as
permanent provisions. By comparison, many subsidies for renewables are time-limited
initiatives implemented through energy bills, with expiration dates that limit their
usefulness to the renewables industry.
• The vast majority of subsidy dollars to fossil fuels can be attributed to just a handful of
tax breaks, such as the Foreign Tax Credit ($15.3 billion) and the Credit for Production
of Nonconventional Fuels ($14.1 billion). The largest of these, the Foreign Tax Credit,
applies to the overseas production of oil through an obscure provision of the Tax Code,
which allows energy companies to claim a tax credit for payments that would normally
receive less-beneficial tax treatment.
• Almost half of the subsidies for renewables are attributable to corn-based ethanol, the
use of which, while decreasing American reliance on foreign oil, raises considerable
questions about effects on climate.
The subsidies examined fall roughly into two categories: (1) foregone revenues, mostly in the
form of tax expenditures (provisions in the U.S. Tax Code to reduce the tax liabilities of particular
entities), and lost government revenue from offshore leasing (through the under-collection of royalty
payments); and (2) direct spending, in the form of expenditures on research and development and
other programs.
ELI applied the conventional definitions of fossil fuels and renewable energy: fossil fuels
include petroleum and its byproducts, natural gas, and coal products, while renewable fuels include
wind, solar, biofuels and biomass, hydropower, and geothermal energy production. Nuclear energy,
which also falls outside the operating definition of fossil and renewable fuels, was not included.
Although the graphic draws a general conclusion about the overall emissions profile of fossil fuels
(high) versus renewables other than corn-derived ethanol (low), the study did not identify the precise
greenhouse gas emission profile of these fuels. Nor did it analyze other environmental effects of
fossil fuel and renewable energy subsidies. ELI examined only fuel-specific subsidies, not those that
are available to all industries.
As explained in further detail in this paper, the analysis does not include
• energy efficiency measures;
• non-fuel-specific transportation spending (on either roads or vehicles);
• non-fuel-specific subsidies to the electricity sector;
• the subsidizing effects of regulatory or procurement standards; and
• other measures that either are not fuel-specific or do not affect the federal budget.
Several limitations should be noted. The study, which calculates subsidies in aggregate fiscal
terms, does not seek to determine how these subsidies affect energy production or consumption, or
whether they ultimately benefit consumers or industry. Such an assessment requires a considerably
more complex level of analysis, one that exceeds the scope of this study.
The study also does not offer normative judgments about these subsidies. That is, the
identification of fuel-specific subsidies does not constitute a recommendation that each one of these
subsidies be phased out, but is simply intended to show how federal tax dollars support fossil fuel
and renewable energy production and use. For example (and as explained further below), the value
of fossil fuel subsidies generated by the Low-Income Home Energy Assistance Program (LIHEAP)
was calculated, although providing heating assistance for low-income households may be a
worthwhile policy goal. Similarly, the study counts funds used to support carbon capture and storage
programs [1] as a fossil fuel subsidy, despite their potential to reduce the emissions associated with
burning coal. This is because carbon capture and storage expenditures, consistent with the definition
above, are directed at the fossil fuel sector. On the renewable side, subsidies to corn ethanol were
tallied as a renewable fuel subsidy, although whether the production of corn-based ethanol
constitutes a net subtraction of greenhouse gas emissions has been subject to significant debate. [2]
The paper describes in further detail the methods used to identify and quantify the subsidies
presented in the accompanying graphic.
[1]
Carbon capture and storage is a developing technology that would allow coal-burning utilities to capture and store their carbon dioxide emissions. While decreasing a plant’s efficiency, this technology would also reduce greenhouse gas emissions compared to coal plants that do not use the technology, or those using oil or natural gas to generate electricity.
[2]
Recognizing that the production and use of corn-based ethanol may generate significant greenhouse gas
emissions, the data depict renewable subsidies both with and without ethanol subsidies.
