Energy’s Dirty Little Secret

Opponents of renewable energy are quick to point out with disdain that renewable energy sources wouldn’t be viable without subsidies.

As one who tends to hate subsidies because of their tendency to create perverse market distortions, as well as their spurious on-again/off-again nature (e.g., wind PTC circa 1999-2004), I am sympathetic to arguments that employ a dislike of subsidies.

But, what bothers me even more than subsidies is hypocracy and disingenuousness. And, those who rant against renewable subsidies are guilty as charged.

The dirty little secret in the energy industry is how vastly subsidized conventional forms of energy are. I recall estimates from the late 1990’s suggesting that the U.S. subsidizes fossil fuel to the tune of about $30 billion per year, through various mechanisms but mainly relating to military activities/presence in the Middle East whose costs do not get reflected in energy prices. In case you missed it, these estimates were from the late 1990’s; if they were accurate, the magnitude of fossil fuel energy subsidies must surely be higher now.

Another way of considering the subsidy issue is to examine Federal R&D spending on energy, as CRS has done. By their reckoning, between 1948 and 1998, the U.S. government spent $74 billion on nuclear programs, $31 billion on fossil programs, and $15 billion on renewables. In other words, R&D funding on more mature energy forms outweighed R&D spending on immature renewables technologies by a factor of 7 to 1. By another measure indicating the tilt against renewable energy — federal tax breaks between 1998-2003 — fossil energy received $10.2 billion, nuclear $1.5 billion, and renewables $0.4 billion.

This last estimate was provided by Alexandra Teitz (Minority Counsel, Committee on Government Reform, U.S. House of Representatives) last week in her presentation to the monthly ABA Renewable Energy teleconference, provocatively titled:

“Renewable Energy in the Energy Policy Act: Business As Usual = Failure”.

One can argue about how to properly quantify the estimates, but the directional implication is without doubt: conventional energy forms receive gluttonous quantities of subsidies. Could someone explain to me why fossil energy interests, who have had a century to build a solid market position, should receive any government subsidies at all? Anyone at the Cato Institute listening?

I would be delighted if the subsidies on renewable energy were removed, if the subsidies on conventional energy were also removed. Let’s play on a fair playing field. I argue that would be a far better situation for those of us who care about energy security and the environment.

Until then, as much as I dislike subsidies of all forms, and think that undue reliance on them is a danger for renewable energy industries, I would seriously prefer those who rail loudly against renewable energy subsidies to simply shut up and get wise to the facts. Or better yet, to turn their venom to all energy subsidies, not just those accruing to renewables.

2 replies
  1. Anonymous
    Anonymous says:

    I am not against your point of view, but I believe that the impact subsides has on renewable resources is encouraging people to get out and understand what is going on without subsides our nation wouldn’t be going anywhere toward exploiting renewable resources. Sure, subsides are bad in how they “create perverse markets distortions” (Stuebi), but in how much subsides supports renewable energy subsidies can become very useful. Those against renewable energy subsides are people who are afraid to see how our world is constantly changing as global warming progresses. Aiming at renewable power plant subsides are individuals who are quick to point out employment problems that renewable energy power plants will produce for working class individuals employed in nonrenewable power plants. The working class understands supporting their family must come first without thinking about the world their children and grandchildren will live in. The amount of investment of subsidies the government invests into establishing nonrenewable power plants, compared to undeveloped renewable power plants are unnoticed by parents. Yet with information provided to workers on how their work contributes to the release of chemicals, which produce pollutants contributing to global warming these individuals remain unconvinced or powerless to do anything about the situation due to problems in life they have to deal with that are greater than the concerned issue. In your blog, you point out that “Opponents of renewable energy are quick to point out with disdain that renewable energy sources wouldn’t be viable without subsidies.” (Stuebi) I believe that opponents you speak of do not consider that they live in a nation full of families who would support renewable energy. Renewable energy can benefit a father and mother’s priority of making sure their child lives a happy fulfill life, seeks with the best of their abilities to make sure their child is safe, turns to local news sees in small detail of how nonrenewable power plants’ pollution gives their child trouble breathing and illness that can lead to death. Who knows how much care the media has for such an issue? A nation as big as ours can not turn away from the opportunities given to us to change our environment, especially people who live in polluted cities. If these people knew about the type “gluttonous quantities of subsidies”, the government spends on conventional energy or the H.R. 4, a bill that will give “energy companies – many of them very – polluting – more than $38 billion in new or expanded taxpayer handouts”, they would either rise to the occasion or sit back down knowing they are provided with electricity produced by damaging the environment paid by them in more than one way. The “gluttonous quantities of subsidies” stated in your blog says that “between 1948 and 1998, the U.S. government spent $74 billion on nuclear programs, $31 billion on fossil programs, and $15 billion on renewables. In other words, R&D funding on more mature energy forms outweighed R&D spending on immature renewables technologies by a factor of 7 to 1. By another measure indicating the tilt against renewable energy — federal tax breaks between 1998-2003 — fossil energy received $10.2 billion, nuclear $1.5 billion, and renewables $0.4 billion. (Stuebi)” is clear to me why the government would spend such a large amount on nonrenewable power plant such as fossil energy and not just on “immature renewable technologies (Stuebi)” that haven’t even yet reached the point to where it would be reliable enough to take over half the rate of the demand electricity that’s being provided to us by nonrenewable resource. If the U.S. government truly wanted a nation that’s environmentally safe and free from pollution, they would’ve invested more into the development of harnessing renewable energy resources. Instead of fossil fuel energy, as you pointed out in your blog that have been invested into for a century just like any other nonrenewable energy, shouldn’t get any subsides. Through H.R. 4, the government has shown how much subsidies they are willing to invest into mature energy over renewable energy without considering developing “immature renewable technologies” for the future demands of electricity. The odds of nonrenewable resources for conventional energy power plants running out might happen sooner than predicted due an estimate that “By 2030, China is expected to have more cars than the US and to be importing as much oil as the US does today. (Heinberg 82)”I believe you’re right in suggesting that a fair game is needed among power plants where subsidies do not play a role. In order for us all to see how the old and mature nonrenewable power plants will faired against each other. Immature renewable power plants is constantly being research and improve by groups of college students and companies that care about keeping our environment pollution free. The people’s government should not play a role in deciding, which power plants succeed or fails, but rather the million of people in our country should decide how our country will deal with environmental issues (global warming) that are constantly facing our nation and the world. Global warming is quickly becoming realistic as “climate scientists say that cuts of up to 80 percent by mid-century will be needed in order to avert catastrophic climate change (Heinberg 96)”, can be address by the power plants we elected to provide us with electric power. We shall see if we have done enough to avoid facing a crisis that’s being depicted as a depression like no other in years to come in the future. “Global warming will contribute to conditions that will shut down the global economy (Kunstler 9)”, is what I believe those against renewable energy should be looking at. Global warming will impact those against renewable resources family a lot more than the subsidies on renewable energy especially how “Climate change can result in a range of negative impacts on plants and animals” (Smith 10). The way you reply back to those “against renewable energy subsidies to simply shut up and get wise to the facts” in “turn their venom to all energy subsidies, not just those accruing to renewables. (Stuebi)” is how our nation should be looking at people and government bills that oppose renewable energy.

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