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What would happen if the government eliminated all subsidies for the energy industry?
It's a radical notion, but an overwhelming vote by the Senate last week to eliminate billions of dollars in support for the U.S. ethanol industry sent a strong message that the era of big taxpayer support for biofuels is ending, Reuters reported.
Given that about $1.3 trillion of this year's $3.5 billion federal budget is being borrowed -- and must ultimately be paid by future taxpayers -- Congress may take a hard look at the vast array of tax breaks, tax credits, loan guarantees and liability protections that flow to virtually every segment of the energy industry.
As well it should.
Energy industry leaders howl every time anyone wants to take any of their subsidies away. But as Adam Smith once wrote (and I love this quote)…
The proposal of any new law or regulation which comes from [businessmen], ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.
Figuring just how much energy subsidies are costing taxpayers, and who's getting them, isn't easy. Some subsidies are obvious. Buyers of electric cars -- even a $100,000 Tesla -- get a $7,500 tax credit.
Others are less visible. In a recent report, the Union of Concerned Scientists tallied up the costs of government support for nuclear power from uranium mining to waste disposal concluded that
subsidies to the nuclear fuel cycle have often exceeded the value of the power produced. This means that buying power on the open market and giving it away for free would have been less costly than subsidizing the construction and operation of nuclear power plants.
Shocking, if true.
Along with nuclear power, well-established energy sources like coal and natural gas enjoy subsidies, as this table shows. I came across it in a report from the Hamilton Project, called A Strategy for America's Energy Future: Illuminating Energy's Full Costs.
Do some simple long division, and you see that refined coal -- which apparently means coal-based synthetic fuels -- wind, solar and nuclear power get very generous subsidies per unit of energy generation. For every per billion KWH of generation, coal gets $30 million in subsidies, wind gets $23 million, solar gets $14 million and nuclear gets $1.5 million.
Good content in this article,
Good content in this article, I like seeing the numbers here.
However, please proofread your work! This is poorly written, and until it's cleaned up I'll avoid posting/tweeting/etc. See "We're surely better on the wrong horses" and an extra "e" in the early first page. There are other areas here that could be cleaned up as well.
Sorry to nitpick, but people love punching holes in these arguments, before we're sending it out, let's make sure it looks professional. I would love to be able to use this article as a resource in my discussion of energy policy.
Thanks!
Blame me, not GreenBiz! I
Blame me, not GreenBiz! I rely on spellcheck do proofread as but (obviously) don't catch all mistakes. Your point is well taken.
I've gone through and
I've gone through and re-proofed -- I think I caught the couple of typos. Please correct me if I'm wrong and I'll fix, and will then delete this thread.
Not to worry, guys. Just
Not to worry, guys. Just some pointers from someone working in the field; it's hard enough getting people on board, might as well make our writing bulletproof so it's one less weak point.
Looks like the first typo was caught. The second "better on the wrong horse" appears to still be there (top of 2nd page).
Thanks for your responsiveness!
So why did these subsidies
So why did these subsidies get set up in the first place? How about:
JOBS, JOBS, JOBS - especially for coal and oil industries. (Now it's biobased fuels and solar green jobs.)
Support for cool new technology - nuclear. (Hydrogen fuel cells, electric cars now.)
Benefits to society of cheap energy - standard of living, economic growth, innovation and development, freedom.
Are energy subsidies due for review? Of course. We now are aware of more costs associated with some of these technologies than when they were originally started. And there may be better investment opportunities.
Do you just cut them off all at once? No. The US economy is addicted to cheap energy and without these subsidies it could get really, really sick if we go cold turkey. Real benefits would be lost.
We should reevaluate the current subsidies and gradually reduce them. Maybe look for reallocating them to other higher benefit products. But given the budget hole we are in, there may not be real money available. We've got to be smart about executing the transitions.
We need to look at all costs and benefits, short-term and long-term. And be willing to work through the inevitable political fights. Good luck with that.
Marc - Great article. It's
Marc - Great article. It's refreshing to see someone look at environmental issues from a practical point of view. We are so busy fighting (green vs business, environmental vs polluter) that we miss the big picture. Also, at the end of the day, it doesn't make sense to push technology that isn't financially viable.