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Page added on October 24, 2017
Let’s End Subsidies For Fossil Fuels, Not Renewables
Environmental Protection Agency Administrator Scott Pruitt recently proposed eliminating federal tax credits for wind and solar power, arguing that they should “stand on their own and compete against coal and natural gas and other sources” as opposed to “being propped up by tax incentives and other types of credits….”
Stand on their own?
Pruitt surely must be aware that fossil fuels have been feasting at the government trough for at least 100 years. Renewables, by comparison, have received support only since the mid-1990s and, until recently, have had to subsist on scraps.
Perhaps a review of the facts can set Administrator Pruitt straight. There’s a strong case to be made that Congress should terminate subsidies for fossil fuels and extend them for renewables, not the other way around.
A Century (or Two) of Subsidies
To promote domestic energy production, the federal government has been serving the oil and gas industry a smorgasbord of subsidies since the early days of the 20th Century. Companies can deduct the cost of drilling wells, for example, as well as the cost of exploring for and developing oil shale deposits. They even get a domestic manufacturing deduction, which is intended to keep U.S. industries from moving abroad, even though — by the very nature of their business — they can’t move overseas. All told, from 1918 through 2009, the industry’s tax breaks and other subsidies amounted to an average of $4.86 billion annually (in 2010 dollars), according to a 2011 study by DBL Investors, a venture capital firm. Accounting for inflation, that would be $5.53 billion a year today.
The DBL study didn’t include coal due to the lack of data for subsidies going back to the early 1800s, but the federal government has lavished considerably more on the coal industry than on renewables. In 2008 alone, coal received between $3.2 billion and $5.4 billion in subsidies, according to a 2011 Harvard Medical School study in the Annals of the New York Academy of Sciences.
Meanwhile, wind and other renewable energy technologies, DBL found, averaged only $370 million a year in subsidies between 1994 and 2009, the equivalent of $421 million a year today. The 2009 economic stimulus package did provide $21 billion for renewables, but that support barely began to level the playing field that has tilted in favor of oil and gas for 100 years and coal for more than 200.
A 2009 study by the Environmental Law Institute looked at U.S. energy subsidies since the turn of this century. It found that between 2002 and 2008, the federal government gave fossil fuels six times more than what it gave solar, wind and other renewables. Coal, natural gas and oil benefited from $72.5 billion in subsidies (in 2007 dollars) over that seven-year period, while “traditional” renewable energy sources — mainly wind and solar — received only $12.2 billion. A pie chart from the report shows that 71 percent of federal subsidies went to coal, natural gas and oil, 17 percent — $16.8 billion — went to corn ethanol, and the remaining 12 percent went to traditional renewables.
A new study by Oil Change International brings us up to date. Published earlier this month, it found that federal subsidies in 2015 and 2016 averaged $10.9 billion a year for the oil and gas industry and $3.8 billion for the coal industry. By contrast, the wind industry’s so-called production tax credit, renewed by Congress in December 2015, amounted to $3.3 billion last year, according to a Congress Joint Committee on Taxation (JCT) estimate. Unlike the fossil fuel industry’s permanent subsidies, Congress has allowed the wind tax credit to expire six times in the last 20 years, and it is now set to decline incrementally until ending in 2020. Similarly, Congress fixed the solar industry’s investment tax credit at 30 percent of a project’s cost through 2019, but reduced it to 10 percent for commercial projects and zeroed it out for residences by the end of 2021. The JCT estimates that the solar credit amounted to a $2.4-billion tax break last year. Totaling it up, fossil fuels — at $14.7 billion — still received two-and-a-half times more in federal support than solar and wind in 2016.
The Costs of Pollution
Subsidy numbers tell only part of the story. Besides a century or two of support, the federal government has allowed fossil fuel companies and electric utilities to “externalize” their costs of production and foist them on the public.
Although coal now only generates 30 percent of U.S. electricity, down from 50 percent in 2008, it is still responsible for two-thirds of the electric utility sector’s carbon emissions and is a leading source of toxic pollutants linked to cancer; cardiovascular, respiratory and neurological diseases; and premature death. The 2011 Harvard Medical School study cited above estimated coal’s “life cycle” cost to the country — including its impact on miners, public health, the environment and the climate — at $345 billion a year.
In July 2016, the federal government finally began regulating the more than 1,400 coal ash ponds across the country containing billions of gallons of heavy metals and other byproducts from burning coal. Coal ash, which has been leaching and spilling into local groundwater, wetlands, creeks and rivers, can cause cancer, heart and lung disease, birth defects and neurological damage in humans, and can devastate bird, fish and frog populations.
But that was last year. Since taking office, the Trump administration has been working overtime to bolster coal, which can no longer compete economically with natural gas or renewables. Earlier this year, it rescinded a rule that would have protected waterways from mining waste, and a few months ago it filed a repeal of another Obama-era measure that would have increased mineral royalties on federal lands. More recently, Energy Secretary Rick Perry asked the Federal Energy Regulatory Commission to ensure that coal plants can recover all of their costs, whether those plants are needed or not.
Natural gas burns more cleanly than coal, but its drilling sites, processing plants and pipelines leak methane, and its production technique — hydraulic fracturing — can contaminate water supplies and trigger earthquakes. Currently the fuel is responsible for nearly a third of the electric utility sector’s carbon emissions. Meanwhile, the U.S. transportation sector — whose oil-powered engine exhaust exacerbates asthma and likely causes other respiratory problems and heart disease — is now the nation’s largest carbon polluter, edging out the electric utility sector last year for the first time since the late 1970s.
Like the coal industry, the oil and gas industry has friends in high places. Thanks to friendly lawmakers and administrations, natural gas developers are exempt from key provisions of seven major environmental laws that protect air and water from toxic chemicals. Permitting them to flout these critical safeguards forces taxpayers to shoulder the cost of monitoring, remediation and cleanup — if they happen at all.
The Benefits of Clean Energy
Unlike fossil fuels, wind and solar energy do not emit toxic pollutants or greenhouse gases. They also are not subject to price volatility: wind gusts and solar rays are free, so more renewables would help stabilize energy prices. And they are becoming less expensive, more productive, and more reliable every year. According to a recent Department of Energy (DOE) report, power from new wind farms last year cost a third of wind’s price in 2010 and was cheaper than electricity from natural gas plants.
Perhaps the biggest bonus of transitioning to a clean energy system, however, is the fact that the benefits of improved air quality and climate change mitigation far outweigh the cost of implementation, according to a January 2016 DOE study. Conducted by researchers at the DOE’s Lawrence Berkeley National Laboratory and National Renewable Energy Laboratory, the study assessed the impact of standards in 29 states and the District of Columbia that require utilities to increase their use of renewables by a certain percentage by a specific year. Called renewable electricity (or portfolio) standards, they range from California and New York’s ambitious goals of 50 percent by 2030 to Wisconsin’s modest target of 10 percent by 2015.
It turns out that it cost utilities nationwide approximately $1 billion a year between 2010 and 2013 — generally the equivalent of less than 2 percent of average statewide retail electricity rates — to comply with the state standards. On the benefit side of the equation, however, standards-spawned renewable technologies in 2013 alone generated $7.4 billion in public health and other societal benefits by reducing carbon dioxide, sulfur dioxide, nitrogen oxide and particulate matter emissions. They also saved consumers as much as $1.2 billion by lowering wholesale electricity prices and as much as $3.7 billion by reducing natural gas prices, because more renewable energy on the grid cuts demand — and lowers the price — of natural gas and other power sources that have higher operating costs.
Take Fossil Fuels Off the Dole
If the initial rationale for subsidizing fossil fuels was to encourage their growth, that time has long since passed. The Center for American Progress (CAP), a liberal think tank, published a fact sheet in May 2016 identifying nine unnecessary oil and gas tax breaks that should be terminated. Repealing the subsidies, according to CAP, would save the U.S. Treasury a minimum of $37.7 billion over the next 10 years.
An August 2016 report for the Council on Foreign Relations by Gilbert Metcalf, an economics professor at Tufts University, concluded that eliminating the three major federal tax incentives for oil and gas production would have a relatively small impact on production and consumption. The three provisions — deductions for “intangible” drilling costs, deductions for oil and gas deposit depletion, and deductions for domestic manufacturing — account for 90 percent of the cost of the subsidies. Ending these tax breaks, Metcalf says, would save the Treasury roughly $4 billion a year and would not appreciably raise oil and gas prices.
At the same time, the relatively new, burgeoning clean energy sector deserves federal support as it gains a foothold in the marketplace. Steve Clemmer, energy research director at the Union of Concerned Scientists, made the case in testimony before a House subcommittee last March that Congress should preserve wind and solar tax incentives beyond 2020.
“Until we can transition to national policies that provide more stable, long-term support for clean, low-carbon energy,” he said, “Congress should extend federal tax credits by at least five more years to maintain the sustained orderly growth of the industry and provide more parity and predictability for renewables in the tax code.” Clemmer also recommended new tax credits for investments in low- and zero-carbon technologies and energy storage technologies.
Despite the steady barrage of through-the-looking-glass statements by Trump administration officials, scientific and economic facts still matter. Administrator Pruitt would do well to examine them. Congress should, too, when it considers its tax overhaul bill, which is now being drafted behind closed doors. If they did, perhaps they would recognize that — economically and environmentally — it would be far better for the future of the planet to phase out fossil fuel subsidies and provide more incentives for clean energy.
22 Comments on "Let’s End Subsidies For Fossil Fuels, Not Renewables"
tahoe1780 on Tue, 24th Oct 2017 6:45 pm
As probably noted here before, subsidized oil is used to source, form, transport, erect, and maintain wind and solar; true trickle down economics. Double the cost of oil and what have you done to the price of capturing renewables?
Seaharvester on Tue, 24th Oct 2017 7:05 pm
Oil drilling, exploration and production are write offs – I know – but I don’t know how these write offs are any different than any business expense write off. If they are, please tell me how, if they are not, isn’t it misleading to present them as though renewables do not receive similar write offs upon all the natural resources that go into renewable production, as well as manufacturing expense write offs for said renewables?
makati1 on Tue, 24th Oct 2017 7:06 pm
“America in Worse Financial Shape than Russia or China”
“America’s 2017 fiscal gap will come in near $6 trillion, nine times higher than the $666 billion deficit announced by the US Department of the Treasury last week, says Laurence Kotlikoff, an economics professor at Boston University.
“Our country is broke,” says Kotlikoff, who estimates total US government debts at more than $200 trillion, when unfunded liabilities are included. “We are in worse shape than Russia, China or any developed nation.””
“The upshot is that on a net basis, the US government has no money to pay all the benefits that have been promised. Politicians know that defaults will occur, they just haven’t figured out how to finesse this.”
“America is unable to meet its obligations as they become due. That is the definition of bankruptcy.”
https://www.sprottmoney.com/Blog/kotlikoff-america-in-worse-financial-shape-than-russia-or-china-peter-diekmeyer.html
If you expect a pension, or SS, to continue, or even be there when you ‘retire’, you are in for a shock, Americans. BAU is about to come to a very painful end. The Fedvprinting press is making loud noises and smoke is rising from it’s innards. Prepare.
Davy on Tue, 24th Oct 2017 7:34 pm
mad katter is too blind to see this guy is selling something.
Go Speed Racer on Tue, 24th Oct 2017 7:40 pm
Let’s keep subsidizing fossil fuel and
not windmills. I can’t use your windmill
to power my 1978 Ford LTD Royal
Brougham with the 460 cubic inch V8
and moon roof and power everything and
Freon A/C and the 8-tracks and the tilt wheel.
If we wanna make America Great Again
we gotta bite the bullet and start making
the big battle barges again.
http://www.magazine-advertisements.com/uploads/2/1/8/4/21844100/ford-ltd-landau-full-size-1.jpg
And lets increase military spending
so we can take the oil that is rightfully
ours. And drive our big cars with it.
makati1 on Tue, 24th Oct 2017 7:49 pm
Missouri Mule, I see it. Every article is “selling something” or else they would nit be posted. I ALWAYS check the author so I know the spin. Especially if it is US oriented.
My comment has more validity than the one posted here on PO. Subsidies are nothing more than welfare for the wealthy and come from the Fed printing press, not direct taxes.
Davy on Tue, 24th Oct 2017 7:54 pm
You got snowed mad katter. You ALWAYS check the headline to see if it fits your emotional agenda. You don’t care if it is true or not.
MASTERMIND on Tue, 24th Oct 2017 8:04 pm
Madkat1 once those oil shortages come in a year or two..Your ass is freaking grass! That dictator of yours will make you his slave…or you will be thrown into a cannibals pot…The word barbecue actually comes from a cannibal tribe believe it or not. It happens every great famine…i would come back to america if I were you. Before its too late.
makati1 on Tue, 24th Oct 2017 8:27 pm
Davy/MM, twin delusionalists. LOL
Reality is not in your dictionary is it? Both of you like to project a world that does not exist. You prefer fantasy.
Neither of you have any firsthand experience here. None. Nor do you even begin to understand most of the people that post comments here, although you like to say you do.
You like to live in your pretend world called “Amerika”. So be it. Reality is a rabid bitch and she is coming to America. Be patient.
Mick on Tue, 24th Oct 2017 8:39 pm
Gsr those cars must of been popular with hitmen back in the day you could fit at least 2 full sized body’s in the trunk
MASTERMIND on Tue, 24th Oct 2017 8:58 pm
Madkat1
Ad hom attacks are ‘Not an argument’…And you didn’t dispute my reasoning at all…And you are the one who is ignoring four academic peer reviewed studies that conclude a collapse of GLOBAL civilization. Sorry Mak but facts matter and you have none. Just FAITH in the Asian authorities. Like you said you love your dictator with 100 percent of your heart. Accepting the truth of our predicament would likely destroy your existence.
Cloggie on Tue, 24th Oct 2017 11:37 pm
“mad katter is too blind to see this guy is selling something.”
And what in your estimation is Kotlikof selling, Davy?
The truth? Here he is:
https://usawatchdog.com/usa-actually-bankrupt-now-laurence-kotlikoff/
https://en.wikipedia.org/wiki/Laurence_Kotlikoff
There is no reason to assume he has an “anti-American agenda”.
Go Speed Racer on Tue, 24th Oct 2017 11:42 pm
Looks like you’re onto something Mick
bet the 1970’s movies would do stuff
like that. Probly room in the trunk
for the two dead guys, the spare tire,
and all the extra guns and ammo drums.
Don’t forget the 460 cubic inch could be
factory ordered with an auxiliary gas
tank that held another 20 gallons.
I know cause that’s what
my grandpa drove. When he
factory ordered in 1977, said “gotta get
that now before they downsize em”.
Wow wasn’t grandpa right on target.
I don’t think he would want a Toyota
Prius. What sane person would.
Go Speed Racer on Tue, 24th Oct 2017 11:46 pm
The bad news is the auxiliary gas
tank took up some trunk space.
Was a big carpeted cube over on left side.
Hey Mick I heard back from NASA on
burning up couches in low earth orbit.
They said no way inside the ISS because
the air filters can’t handle the smoke.
It’s OK to burn couches in orbit except
there isn’t any air. I think we could
get around that issue by strapping a
liquid oxygen tank onto the sofa, then it
will burn even in the vacuum of space.
I got Space X looking into hauling the
hardware for us.
Cloggie on Wed, 25th Oct 2017 3:40 am
Forbes posted Kotlikofs warning last year:
https://www.forbes.com/sites/kotlikoff/2016/07/17/social-security-just-ran-a-6-trillion-deficit-and-no-one-noticed/#6cd4a0503c14
Try to imagine what a federal default would mean for the stability of the country, if all of a sudden tens of millions would be deprived of any basic form of income. Total chaos. As somebody here once said: “the country is three meals away from anarchy”; expect looted supermarkets and richer neighborhoods, total breakdown of authority. In such a situation wannabee secessionists would grab their chance to finally break away from Washington and failed state USA.
America is living way beyond its means and can’t “police the world” and dominate the rest. But America still prefers to live in the illusion of past greatness, like in the fifties. The road towards becoming a normal country, or rather three or more normal countries, is going to be a painful one.
This is the real drama of the coming decade, not depletion or climate change.
Davy on Wed, 25th Oct 2017 3:58 am
“This is the real drama of the coming decade, not depletion or climate change.”
Your Euroland destruction is just as much a part of that drama clogged mind. You have little to crow about and your fantasy Paris Berlin Moscow empire is a nasty dream of world domination. You talk about the destruction of the US into several countries well Europe could be heading into worse. Who are you to know anyway? You are a conspiracy addict who revises history to support your racist white agenda.
BTW, clogged mind in my book this kind of referencing you do evidenced in this comment and many others is intellectually lame. If you are going to reference something with a link show the actual words you are using to prove a point. Don’t summarize in your words then use your multiple links to add authority to it. Geeze man you attach so many links to some comments it is a Christmas tree of dubious content. Your opinion and personal content cannot be trusted per the link you post. You are an extremist pandering an agenda masking the dubious honesty of it with what is supposed to be a factual link.
Cloggie on Wed, 25th Oct 2017 5:20 am
You have little to crow about and your fantasy Paris Berlin Moscow empire is a nasty dream of world domination.
In the coming multi-polar world there is no room for one “pole” dominating the rest. That said, I have repeatedly said that China is going to be the #1. During the last communist party congress Xi openly said as much that by 2050 China is going to be the #1 power (I think it will be much earlier). That is not bragging, that is simply adding 1 + 1 (1300 million people with an IQ100).
From that the rest follows. Europe and Russia will be FORCED to get together to balance the coming Chinese super power. This is not a drive for world domination (what do you think we are, Americans? lol) but geopolitical common sense. Putin was suggesting as much this week during some youth festival:
https://twitter.com/EnglishRussia1/status/922157937958772736/video/1
Russia = “European Space” (not Asian/Chinese)
You are a conspiracy addict who revises history to support your racist white agenda.
Everybody on this planet is a “racist”, meaning having a preference for your own kind, except for “nation of immigrants” America, that never had the time to form a real identity of its own, like everybody else on this planet has.
But 1%-wannabees like you reject this “racism”, because it stands in the way of “integrating” everybody into that big whopper world empire of yours, that is going to fail majestically, like the USSR.LMAO
$6 trillion dollar social security deficit per year!! Do you know what that means? Can you provide me with a link that Europe is anywhere near these kind of deficits? Some friendly advice: put your goats in a crate and move to Northern Italy while you still can, before tens of thousands of gang-members from St. Louis will roam the country-side for prey and pay you a visit.
Mick on Wed, 25th Oct 2017 7:31 am
Good stuff Gsr keep up the research on burning sofas in out of space . Then you can sell the plans to NASA make some good money that way.
tahoe1780 on Wed, 25th Oct 2017 10:19 am
Speaking of space, what would it take to boost the ISS to moon orbit when its decommissioned? Wouldn’t have to get there quickly. Could be useful there, no? Like an old RV at a campsite. https://www.popsci.com/this-is-where-international-space-station-will-go-to-die
jawagord on Wed, 25th Oct 2017 3:33 pm
These pseudo analyses fail to account for the tax revenue collected by governments on fossil fuels. While some subsidies for fossil fuels exist (many $$$ go to help low income consumers pay for fuel and not to the oil companies) there are much larger taxes levied on these fuels. The US state and federal governments will collect nearly $45 Billion dollars in gas and diesel taxes in 2017 and the US is one of the lowest taxed OECD nations.
https://www.acf.hhs.gov/ocs/resource/fy-2018-funding-release
http://www.taxpolicycenter.org/statistics/motor-fuel-tax-revenue
https://taxfoundation.org/how-high-are-other-nations-gas-taxes/
https://www.forbes.com/sites/energysource/2012/04/25/the-surprising-reason-that-oil-subsidies-persist-even-liberals-love-them/#6e9fc6673279
https://www.wsj.com/articles/does-the-oil-and-gas-industry-still-need-tax-breaks-1479092522
TheNationalist on Thu, 26th Oct 2017 8:18 am
Is there a guide somewhere for post SHTF sofa burning in the backwoods? I have a couple of old ones here that would support my new anti-hipster lifestyle.
I can burn a couple o’ good ‘ole sofas and rub my red neck.
Afterwards I will enjoy my cafe frappe with cream and snapchat my old friends who will be slowly dying in city.
dave thompson on Fri, 27th Oct 2017 6:53 am
My next door neighbor just put an old couch out, boy am I great full. Now I have fuel for my backyard furnace/incinerator. It is starting to get cold in the Midwest.