Clothesline in Winter

Clothesline in Winter

Saturday, December 4, 2010

True or False: America Subsidizes Oil & Coal Companies?

 (Special thanks to Brad Burns for directing my attention to this study.)
Remember the beautiful wind turbines and the stirring background music?  During the last Presidential primary and general election campaign, almost every political TV commercial featured a bunch of windmills on picturesque hillsides, with the promise that so-and-so would nurture home-grown alternative power with tax breaks or direct investment.  We figured that the government must be pouring money into this sector.

Source: Environmental Law Institute
But a new study has painted a very different picture.  Over the seven years from 2002 through 2008, the Federal government gave $72.5 billion to subsidize fossil fuels (oil, gas & coal).  Less than half that amount - $29 billion – went to support emerging renewable energy.  But of that smaller amount, more than half went to subsidize corn ethanol, a fuel which almost certainly is worse for the environment than traditional fossil fuels.  In the end, only $12.2 billion – or 12% of the total – went to support things like solar, wind, geothermal and biomass.

I know what you’re thinking:  Do we really subsidize oil and coal companies?  After all, $72.5 billion is more than $200 from every man, woman and child in America.  Really?

Well, I read the report and it’s pretty compelling.  It’s written by the Environmental Law Institute, but relies heavily for its figures on the Government Accounting Office (GAO) and the Office of Management & Budget (OMB).  I hunted for sloppy logic or selective use of data, but found none.  But if you like, look for yourself.  Here’s the link:

Here's the story in a nutshell

 §      Government subsidies come in two flavors: special tax loopholes given to one sector, but not another; and direct payments or concessions.  As promised, the renewable sector got some real money over the seven-year period: $12.2 billion for renewable energy like solar and wind, and $16.8 billion for corn ethanol.  But oil, gas and coal raked in the lion’s share of Federal outlays, with $70.2 billion in subsidies for normal production, and $2.3 billion for carbon capture & storage development, the illusory poster child of the “clean coal” advertising campaign.
§      Most of the subsidies to fossil fuels are written into the U.S. Tax Code.  They’re permanent.  By contrast, most of the subsidies for renewable energy are time-limited.  They expire on a short string, and this makes them much less useful to green-energy developers.
§      The majority of subsidies for fossil fuels come from just a few tax breaks.  The Foreign Tax Credit provided $15.3 billion, and benefits oil & gas companies.  The Credit for Non-Conventional Fuels benefited coal companies to the tune of $14.1 billion.  Below-market offshore oil & gas leases chipped in another $7.0 billion for oil companies.
§      The ethanol subsidies transferred more than $16.8 billion to grain farms through the Alcohol Credit for Fuel Excise Tax and direct per-gallon subsidies, to produce corn-not-for-food.  The debate rages whether ethanol produces zero net fuel (i.e. uses more than a gallon of gas and diesel to produce a gallon of ethanol), or whether it produces a little bit more ethanol than it uses in fossil fuels to make it.  In either case, every gallon of ethanol burned equals between 1.5 and 2 gallons of fuel emissions in the atmosphere.  (But the U.S. Senate has about 12 corn-belt members who get very touchy when these facts are mentioned, so we expect the subsidies to remain.)

And what about all those telegenic wind turbines and solar panels?  Well, for the most part, they’re being made now in Europe and China.  Despite brave talk, the American taxpayer is subsidizing the old fossil fuels, including those produced overseas and shipped to our shores.  Our most effective global competitors are doing the exact opposite.  Hard to believe, I know. 

Do you wonder if the newly-frugal U.S. Congress will take notice? 

Thanks for reading, and may God bless you.
J. Elwood

Whoever oppresses the poor to increase his own wealth, or gives to the rich, will only come to poverty. Prov. 22:16

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