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Study Finds that US Subsidies for Fossil Fuels Are Almost 2.5x Those for Renewables

18 September 2009

Eli
US subsidies for fuels and renewable energy, 2002-2008. Nuclear was not included in the analysis. Source: Adeyeye et al. 2009. Click to enlarge.

The vast majority of US federal subsidies for fossil fuels and renewable energy from 2002-2008 supported fossil energy sources that emit high levels of greenhouse gases when used as fuel, according to research released on Friday by the Environmental Law Institute (ELI) in partnership with the Woodrow Wilson International Center for Scholars.

The study, “Estimating US Government Subsidies to Energy Sources: 2002-2008”, found that fossil fuels benefited from approximately $72 billion over the seven-year period, while subsidies for renewable fuels totaled $29 billion.

These figures raise the pressing question of whether scarce government funds might be better allocated to move the United States towards a low-carbon economy.

—Adeyeye et al. 2009

More than half the subsidies for renewables—$16.8 billion—are attributable to corn-based ethanol, the climate effects of which are disputed. Of the fossil fuel subsidies, $70.2 billion went to traditional sources—such as coal and oil—and $2.3 billion went to carbon capture and storage, which is designed to reduce greenhouse gas emissions from coal-fired power plants.

Other finds from the study include:

  • 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 US 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.

The US energy market is shaped by a number of national and state policies that encourage the use of traditional energy sources. These policies range from royalty relief to the provision of tax incentives, direct payments, and other forms of support to the non-renewable energy industry.

The subsidies examined fall roughly into two categories:

  1. foregone revenues (changes to the tax code to reduce the tax liabilities of particular entities), mostly in the form of tax breaks, and including reported lost government take from offshore leasing of oil and gas fields; and

  2. direct spending, in the form of expenditures on research and development and other programs.

The combination of subsidies—or ‘perverse incentives’—to develop fossil fuel energy sources, and a lack of sufficient incentives to develop renewable energy and promote energy efficiency, distorts energy policy in ways that have helped cause, and continue to exacerbate, our climate change problem. With climate change and energy legislation pending on Capitol Hill, our research suggests that more attention needs to be given to the existing perverse incentives for ‘dirty’ fuels in the US Tax Code.

—ELI Senior Attorney John Pendergrass

ELI researchers 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.

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.

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September 18, 2009 in Climate Change, Fuels, Policy | Permalink | Comments (27) | TrackBack (0)

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why am I NOT suprised

No surprize here, they're just confirming something I've long suspected. If it weren't for the subsidies Americans would be paying $10-15 dollars for a gallon of gas.

Big oil have very powerful lobbies. Even when they make $$$B a year in profit they want more subsidies and tax breaks. They are addicted to gifts for governments.

It is time to electrify all transportation means and use all those Oil subsidies to transition away from ICE vehicles.

Corn based ethanol subsidies should also be phased out because it is not a sustainable source of replacement energy. Edible grains should be used as food not as feed for gas guzzling ICE oversized inefficient monsters.

ai_vin:

Aren't you exagerating a bit? I doubt if gas would go up by a single dollar if all those subsidies were removed. One more dollar per gallon could be very positive to accellerate the transition to electrified vehicles.

This study is measuring the "seen" subsidies. Under-the-table expenditures by big oil and coal are not measured. Payoffs and kickbacks that ensure the present system stays in place are out of sight.

Why are we subsiding something that has been profitable for centuries?

ai_vin wrote:
"No surprize here, they're just confirming something I've long suspected. If it weren't for the subsidies Americans would be paying $10-15 dollars for a gallon of gas."

Yes and then most Americans couldn't afford to get to work.

The outline sounds rather objective although there is no doubt where the ELI stands. The report might be worth reading in detail.

The Foreign Tax Credit is not as simple as one might wish. It isn't easy to tax fuel and energy production activities done overseas in sovereign nations. And if you try the corporate forms will be modified to evade your efforts.

US recyclable producers would be getting tax credits if they did their work overseas. But recyclable fuel -mostly ethanol- is a domestic industry protected by tariff. The tariff is a subsidy, whether it is considered in the report isn't mentioned.

And alternative energies such as wind and solar and geothermal are domestic almost by definition. At least with our present technology.

I would prefer that they would keep hydropower out of these studies as they exclude nuclear. Hydropower produces a lot of electricity. But it is the outputs of the growing alternatives we really are interested in.

In the US hydropower is old, the big dams were built decades ago and there will be little added hydropower in the future. Others will differ but I would remove it from studies.

The study is done in absolute terms. When adjusted for the relative sizes of the sectors, the subsidies for the renewable sector are larger in percentage terms.

"Yes and then most Americans couldn't afford to get to work."

There are these things called "electric cars". They were invented 100 years ago. If gasoline never even existed then the R&D efforts would have instead been devoted to developing them rather than ICE's. Then today, we'd instead all be able to buy electric cars with 1000 km range for $18,000, paying $20 a month to charge them, and we'd all be better off for it. It's interesting how a supply of relatively cheap, but unsustainable and environmentally destructive, energy source can destroy a nation. I guess it's like heroine. You get addicted to it and think it's good for you but in short order it will kill you.

its also funny how people think switching from one fossil fuel (gasoline powered ICEs) to another less efficient one (i.e. electricity from coal power plants) is better for the environment.

Ben wrote "Why are we subsiding something that has been profitable for centuries?"

Why? Because the purpose of government has always been to enrich the oligarchy at the expense of the poor. The modern form of which is to enrich mega-corporations and the small group of people who often run them into the ground - but get rich doing so.

A larger group that gamed the system was the pirates - just as long as the thievery occured elsewhere, and some payment was made to the host government. The modern form of which is small business, who rob their suppliers, customers and employees, and then go bust - but not before paying some taxes.

Imagine what science could have done with photovoltaics and batteries with three trillion dollars in subsidies. Imagine what people could do with their hard earned money if only they weren't robbed of it.

"Yes and then most Americans couldn't afford to get to work."

Sure they could -- just use the money saved in taxes and other hidden costs -- like wars (which were not counted in the oil subsidies).

"its also funny how people think switching from one fossil fuel (gasoline powered ICEs) to another less efficient one (i.e. electricity from coal power plants) is better for the environment."

Step one is the electrification of the drivetrain. It is impossible to get an environmentally sustainable method of propulsion using the ICE as the energy conversion device. Theoretically, biofuels could be sustainable but we all know how that works out.

Step 2, after transportation is electrified, is to produce that electricity sustainably. Options are: wind, wave, tidal, hydro, geothermal, yes even nuclear, and most significantly, solar.

There are hundreds of millions of buildings in North America with roofs on them that aren't doing anything useful. These could be covered with solar panels and at 15% efficiency they would provide about 15% of our TOTAL energy use from all sources. If they were 25% efficient, that is 25% of total energy use.

Also of interest is that if solar panels were incorporated into the bodywork of your car you could drive 10 km a day for free in the sun, using today's commercially available solar panels. Assuming future innovations in panel technology bring affordable ones up to 50% efficient, you're looking at like 30 km or more per day of free driving.

The funny / sad part about this is that in the absence of oil all this technology would have developed 50 years ago and we wouldn't be in any of our current mess.

What Mark BC said, but also, well-to-wheels analysis shows that even when driven on coal electrons, electric cars are far, far more efficient than gasoline ones, even given the same mass.

RFH, you have no idea what you're talking about.

From treehugger:

"Because electric vehicles have no internal combustion engine and no conventional transmission, their efficiency is almost 1.5 miles per MJ. For comparison, the hybrid Prius is 0.42 miles per MJ, and a conventional Honda Civic is 0.39 miles per MJ. When you combine the well-to-tank efficiency with the vehicle's efficiency, the electric vehicle has a well-to-wheel efficiency of 0.7 miles per MJ, compared with 0.35 miles per MJ for the Prius.

If the well-to-wheel efficiency of an electric vehicle is about twice as good as an internal combustion vehicle, and the energy source is up to 15 times cheaper, it is easy to understand why an electric vehicle can travel 100 miles for a dollar, while the Prius does the same for about six dollars."

This study doesn't include the $30 to $70 billion dollars spent-- annually-- by the US military to protect the Persian Gulf oil routes!

@harvey
Aren't you exagerating a bit? I doubt if gas would go up by a single dollar if all those subsidies were removed.
It's not my number: Google "the real price of gas"
http://www.icta.org/press/release.cfm?news_id=12
http://www.icta.org/doc/Real%20Price%20of%20Gasoline.pdf

And those are only the subsidies for the fuel, roads, highways, etc. are mostly payed for through property taxes.

I am quite certain that "big oil" would give up any modest subsidy, if the government would remove the tremendous tax burden. Federal and State governments get a higher percentage of the profits from a gallon of gas than do the oil companies by far. I doubt any industry pays more in taxes than the oil industry. They pay income tax and then have an additional tax placed on their product at the pump. If "big oil" is subsidized, then why do we worry about how to replace lost gas tax revenue when cars go electric.

Only in the land of the looney left can companies that are net tax payers (by huge margins) be accused of being subsidized, while people who don't pay any taxes are always clamoring for their next stimulus check, or "refundable tax credit"

"Only in the land of the looney left can companies that are net tax payers (by huge margins) be accused of being subsidized,"

Oil companies and such were not broken up because they were net taxpayers "(by huge margins)". Oil/auto lobbies illegally buy the laws that hinder/dismantle alternatives (rail, urban mass transit, EV's, batteries, etc.) and much more.

The US armed forces are the oil police. No one believes the first 1991 Gulf Oil War was because of our love for the Kuwaiti people's freedom. The permanent military presence since isn't for their safety.

The present oil wars aren't because of terrorists. Otherwise, we could catch an Arab on dialysis - "Dead or Alive".

And typically if America fights, the retaliation is roughly ten for one. That was achieved by February 2002: http://en.wikipedia.org/wiki/Civilian_casualties_of_the_War_in_Afghanistan_(2001%E2%80%93present)

The world doesn't believe the 100,000 killed in Iraq since the 2003 "Mission Accomplished" US invasion are because of our love for the Iraqi people's freedom. http://www.iraqbodycount.org/

And there's that thing about pollution and global warming..

There really is a great deal to factor into the subsidized cost of oil.

.

And, similar to this example, some people actually WANT our corrupt, incompetent, federal government to ration health care based on campaign contributions. What a bunch of mind-numbed dolts they are!

Praise be to Algore!!!

.

What's a nation for, if not the health and protection of it's citizens - even you.

This is an elegant GCC comment:

Roger

Comparing health insurance to owning a car is ludicrous. I own two cars, a 1983 Toyota pickup and a 1991 Honda Civic hatchback. They're reliable, economical
and of course have little value but they get me around. Insurance on them costs me about $20 per month. I have no health insurance. Full coverage health
insurance would cost me more than $1000 per month. I don't make $1000 a month so having health insurance isn't really a choice for many(50,000,000) of us.

sascatcher
--------------------------------

Our government is the only entity big enough to stop corporate profiteering from 'Life and Death' healthcare.

..and Al Gore had nothing to do with this..

ai_win:

A + $1/gal would put about $146 B/year into Big Oil coffers. I doubt if more subsidies would be required. At + $10/gal they could buy the whole continent in a few years.

"Federal and State governments get a higher percentage of the profits from a gallon of gas than do the oil companies by far. I doubt any industry pays more in taxes than the oil industry. They pay income tax and then have an additional tax placed on their product at the pump."

Everyone pays income tax, although I bet the oil companies have some good ways of avoiding lots of it. Also, the oil industry does not pay the tax at the pump -- YOU THE CONSUMER pay that tax. And this tax does little to diminish the demand for gasoline because it's an inelastic demand curve -- people need energy, no way around that --- and the only way they can currently get energy for mobility is through gasoline, since the other alternatives have been kept off the market by patent manipulation by the oil industry. Additionally, because of the way GM and the oil industry colluded over the last 50 years, they have ensured that to live a somewhat productive life in North America (less so in Canada or in the middle of big American cities), you pretty much have to have a car. GM destroyed the electric trolley systems.

"Yes and then most Americans couldn't afford to get to work."
In 2007, gasoline was around $10/g in Europe and they were still driving 100mph on the Autobahn.

It seems that none of the major Oil Cos operating in Canada have paid Income Tax for years. Their (very generous) accumulated tax credits are always more than the Income Tax on their declared income.

If we all had the equivalent priviledges/tax credits, Income taxes paid nationwide would be about zero.

The charts should show the fossil fuel inputs to ethanol and solar as negative. The main point is that most of the oil profits go out of the country and are earned by speculators not even many of the oil producers.

It is true that oil pumped in the US earns a big profit for local owner when the price is high so there is no reason to use it until the world price goes higher. Rising oil prices do not stimulate local production much except by small producers who need money. Large integrated oil companies can bring in foreign oil and sell at high prices to force the world market to go to higher prices and withold their own local oil.

Everybody in the US would eat the last Mountain sheep in the world if they had gone without food for a week.

Local production of coal is the only industry which has saved the US economy from total collapse, but nuclear power plants support this to the tune of %20.

All the solar electricity and all the wind electricity and all the geothermal electricity and all the corn ethanol does not even contribute ten percent of nuclear electricity's CO2 savings and it will never be able to do it at an affordable expense. ..HG..

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