The national conversation about wasteful welfare for highly profitable dirty energy corporations has gone from the dramatic statement by the Chief Economist of the International Energy Agency that fossil fuel subsidies are one of the biggest impediments to global economic recovery (“the appendicitis of the global energy system which needs to be removed for a healthy, sustainable development future”), to a speech by Solar Energy Industries Association President Rhone Resch (in which he called the fossil fuel industry “grotesquely oversubsidized”), to a call by President Obama to cut oil company welfare by $4 billion.
Dirty energy welfare defenders have, predictably, responded with ridiculous, Palin-esque denials of reality, but the voter demands that wasteful spending be cut begs the question: just how much of our tax money is going to ExxonMobil, Massey, etc.? With the new deficit hawks in Congress going after insignificant items like bottled water expenses, you’d think they’d want to know the size of the really wasteful stuff, right?
The problem is, we’ve long suspected that no one really knows how much of our money goes to dirty oil executives like Rex Tillerson and Gregory Boyce. There have been counts, ranging from $10 billion a year by the Environmental Law Institute, to the more comprehensive, $52 billion a year by Doug Koplow of EarthTrack. But, do taxpayers even have a widely accepted, comprehensive inventory of how of our money is being handed to the dirty energy lobby by politicians? That includes state-level subsidies, by the way, such as the $45 million that Virginia gives to the coal industry.
Energy trends analyst Chris Namovicz of the U.S. Energy Information Administration (EIA) was the latest speaker in our “Communicating Energy” lecture series. We took the opportunity to ask one of the top, neutral energy trends analysts in the country the question, “Do you know if someone has actually done a credible, comprehensive, definitive count of how much taxpayers underwrite fossil fuels in this country?” We added the thought that “there's no one really widely available number whereaverage citizens can say, yeah, this much of my money goes to pay ExxonMobil.
According to Namovicz, there really isn’t such a widely available, definitive, comprehensive number.
Right…we're not accounting for the nuclear insurance subsidy, we're not accounting for military oil shipping, we're not even accounting for the tax depreciation benefits that some resources get over others...
The fact is, there is a wide array of government subsidies, both implicit and explicit, that are doled out every year to fossil fuel companies. One estimate, by the Environmental Law Institute, finds that dirty energy companies in the United States alone have run up a $72 billion tab at the taxpayer’s bar from 2002 to 2008. Worldwide, it’s far worse; as this study by the OECD explains:
The [International Energy Agency] estimates that direct subsidies that encourage wasteful consumption by artificially lowering end-user prices for fossil fuels amounted to $312 billion in 2009. In addition, a number of mechanisms can be identified, also in advanced economies, which effectively support fossil-fuel production or consumption, such as tax expenditures, under-priced access to scarce resources under government control (e.g., land) and the transfer of risks to governments (e.g., via concessional loans or guarantees). These subsidies are more difficult to identify and estimate compared with direct consumer subsidies.
As we pointed out in a recent post, these subsidies aren’t just reckless and stupid, they aren’t even what people want. In fact, only 8 percent of Americans prefer their tax money be given to highly profitable, mature industries such as ExxonMobil and Massey Energy.
Shouldn’t there be a definitive count of energy subsidies? As we’re looking at cutting waste from our federal (and states’) budgets, shouldn’t there be a credible accounting of all the ways we pay to grease the way for these mature, highly profitable industries? We’re not talking about one done by dirty energy lobbyists or their hired “experts,” by the way, but a real inventory done by those who wouldn’t profit by a lower or incomplete count. Such an accounting should include:
Tax breaks
Dirty subsidies
The costs of government agencies that are set up to perform functions that these industries should pay full cost for doing – such as figuring out how to stuff their pollution underground instead of wasting it on exorbitant, fantasy projects like “FutureGen.”
Military expenditures to protect oil shipping lanes.
Pollution forgiveness or remediation
Rock-bottom priced access to public property – mountains, subsurface property, aquifers, ocean waters -- which fossil energy companies routinely wreck and pay comparatively little to fix.
We need to force politicians to be aggressively honest about how much of our money is going to Tillerson, Boyce., Blankenship, O’Reilly, Lesar, etc. Until they do, the anti-clean energy bigmouths in Congress who are bashing clean energy policy support need to back way off. And, the dirty energy lobby mouthpieces who propagandize how “cheap” dirty energy is, should do the same. Directly or indirectly, we’re paying their salaries.
The information and views expressed in this blog post are solely those of the author and not necessarily those of RenewableEnergyWorld.com or
the companies that advertise on this Web site and other publications. This blog was posted directly by the author and was not reviewed for accuracy,
spelling or grammar.
72 billion dollar in subsidies between 2002 and 2008....
Hmmm...
In 2002, the U.S. generated 2.73 BILLION MWhs of fossil-sourced electricity.
2003: 2.76 Billion MWhs
2004: 2.82 Billion MWhs
2005: 2.91 Billion MWhs
2006: 2.89 Billion MWhs
2007: 2.99 Billion MWhs
2008: 2.93 Billion MWhs
2002-2008 total: 17.3 billion MWhs.
72 billion in subsidies for an industry that generates 17.3 billion MWhs totals $4.16/MWh.
Note that is only tracking fossil-sourced electricity. If the environmental law institute includes subsidies for nuclear power in that 72 billion then an additional 5.51 billion MWhs needs to be factored in, for an average subsidy of $3.16/MWh.
It is doubtful that the Environmental Law firm also counted subsidies for liquid fuels in this study, as the Iraq war could legitimately be called an oil supply subsidy, but during the 2002-2008 timeframe in question the US consumed over 50 billion bbls of oil! So even if the cost of the war was included, along with other subsidies, we're still looking at less than $0.75/gallon in subsidies.
The renewable subsidies, by comparison, are far greater for any renewable source.
I personally defend the subsidies for renewables. Any jobs that are created offset unemployment and welfare payouts, while CO2, SO2, and NOX emissions reductions offset considerable societal accommodation costs.
But renewable advocacy needs to think carefully about challenging congress to cut ALL subsidies. They just might get what they're asking for... and if solar looses its 30% PTC + $24/MWh federal subsidy (totaling more than $50/MWh), it will hurt them much more than coal losing their sum total of ~$3/MWh.
We need to be smart about our advocacy lest it come back to haunt us.
Rather than gripe about the minuscule subsidies earned by fossil fuels, attempt to show a real world accommodation cost of the externalities of fossil fuels, and show how that compares with the subsidies taken in by renewables.
In this case, Harvard Medical argues the externalities of coal cost our society between $90/MWh and $270/MWh. When you show THAT, you can then ask people to consider carefully whether it's worth paying an additional $22/MWh for wind power instead of using more coal.
Glen: As Mike pointed out in his post, it's hard to get a grip on what the total level of subsidies are, but I don't think that framing the question in terms of a particular unit of energy does much to address the true issue.
If you were to take your logic to the next level, you make the subsidies to the fossil fuel industry appear even less significant. I don't have my calculator handy, but what would the subsidy be if you were to look at them in terms of simple watts instead of megawatts? Something like 3 millionths of a penny per watt or something equally absurd?
No, the point is that a mature, profitable industry is feeding at the government tit and by doing so, better, cleaner energy sources aren't able to compete.
If the subsidies really aren't that big a deal, then what do you say that we take the Twinkie away from the overgrown spoiled kid and give it to the more deserving industry that does needs a leg up? An extra 72 billion dollars to renewables would go a long way towards making them a reality and by your own figures, it would only cost the fossil fuel industry 3 or 4 dollars a mega watt?
I do agree wholeheartedly that the "externalities" such as increased public health costs and deaths from pollution should be made a much larger part of this debate.
Didn't mean to hop your case, but I really don't agree with your analysis!
Glen and Bob, very glad to hear you both agree on the significant and all too often unaccounted for "external costs" for hydrocarbon fuels.
These factors match and often outweigh any subsidies recieved by emerging renewables. Standard engineering economic analysis MUST taken into account the obvious detrimental effects that coal/oil/gas exploration and utilization has on our environment and societal health.
Not everyone (certainly not me) agrees with the inexplicable philosophy that since some industries cannot compete they deserve greater support from government to force them through anyway. That's essentially what you are saying when you say that "they don't need them, so we should take that money and give it to the renewables".
Most people believe that government shouldn't be in the business of choosing winners and losers (they are terrible at doing so), and have an intrinsic belief that a technology should be able to stand up on its own merits. If your technology requires MUCH more support than opposing technology, you've basically told everyone that your technology is a failure and that it should perish in the marketplace.
That's why it's critical to focus on the unpriced externalities... because you have to give a viable story as to why your failed technology deserves support and subsidies when it clearly cannot compete without them.
That's what makes the argument outlined in this (dumb) article so frustrating. Concentrating on the $3-$4/MWh the fossil companies are getting as a means to defend your $22-$100+/MWh paints you (renewables) as a completely non-competitive failed product.
I believe that the unpriced external cost of fossil energy exceeds SOME of the subsidies renewable energy platforms receive - which is why I support those subsidies. THAT must be the argument that we focus on. Every other argument is a sure loss.
Certainly saying "they can compete without it, so you should drop that subsidy and give it to my team because we don't have a chance without it..." is a bad direction.
One thing that should be clear, regardless of EVERYTHING else, is that there is one bare and obvious fact from all discussion of this topic: Our energy sources HAVE NEVER existed in a "free market" or a truely competitive one -- the market has ALWAYS been distorted by government control, intervention, and aid. In this byzantine world, the idea of a "transparent" or "clear" market is the sheerest fantasy.
Another is that PUBLIC money, land, etc. have, in our system, always been handed over to PRIVATE interests. That is, private corporations (or other entities) PROFIT immensely -- they don't just survive or cover costs -- from the public at large. So called "natural" monopolies, like say, The Southern Company, have always paid their CEOs enormous salaries, as well paying dividends to stockholders, yet have the benefit of NO COMPETITION by government decree.
So when someone -- no matter who they are or what they claim as their political affilation -- and no matter what points they have that are valid -- call our system "capitalist" or "free market" they are grossly distorting the reality. What our system should be called is an "incoherent mess" that is caused by great confusion and endless, pointless chatter! :)
I believe the point of the article is that mature companies making billions in profits simply should not qualify for government subsidies. The purpose of subsidies is to encourage a better way to do things – and in the case of energy, better means creating electricity without polluting and causing death, destruction, and illness, which, unquestionably, all fossil fuels do.
Clean, renewable energy is a superior way to create energy and needs the help of government subsidies to gain technical improvements and market penetration to benefit from economies-of-scale and reach a competitive level. However, you could easily argue that renewables are already competitive when you factor in the costs to the environment and human health. These hidden costs are conveniently forgotten by those arguing that renewable energy is unaffordable and can not compete with fossil fuels.
Nice comments Glenn. You have taken most of the words right out of my mouth.
Nobody is against removing wasteful subsidies to fossil fuels. So have fun but don't kid yourself that the money will be transferred to renewable energy research or that it will make renewable energy cheaper than fossil fuels. Only a carbon tax or other tax on external costs can do that.
Let's hope these rantings don't end up removing subsidies for everyone because we will be left with only fossil fuels, but at least we will be rid of corn ethanol ; )
You ask the question:
"...Do you know if someone has actually done a credible, comprehensive, definitive count of how much taxpayers underwrite fossil fuels in this country?..."
The expert answers:
"...Right…we're not accounting for the nuclear insurance subsidy..."
Ah, that's an affordable, zero carbon, zero emission, source of electricity for 20 percent of our power ...not a fossil fuel.
"...we're not accounting for military oil shipping..."
One could easily argue that our military expenditures to stabilize the Middle East (other than Bush's invasion of Iraq) pays for itself many times over. If oil were to suddenly stop flowing from that region it would be disastrous, even fatal, for tens of millions of people. The whole world depends on a stable source of energy, not just us. And the world is flat now. What hurts our trading partners hurts us. We need a replacement for oil before we stop using it. Replacing oil has to be done gradually.
It seems it has become inheirant in our culture over time, to support the burning of stuff for energy, and to accept the great costs of externalities. The government pays to protect the status quo of established "burn" and "nuc" tec and yet fails to pay our medical costs, so many of which could be traced to pollution. Yet, in the last election cycle, much was trumped about our wonderfully needed capitalist system and the value of keeping government out of business.
It must be said that there is nothing inheirent in our national constitution that explicitly embraces capitalism; it merely tolerates it- "if" the government rides close watch over its penchant for corruption and the financial systems it will call to attend. This corruption is firmly and visciously in place and getting worse each election cycle. The little god of wealth is given great homage at the altar where lives and sanity are sacrificed each day, tho in the end, the peace and safety is all we really want and need to advance as a free society. We must learn that those who pander to fear and lack in all advices are insane and must be turned away to heal. It is so easy to do the right things if we learn to see with our peacefully given mind, rather that the bodies eyes of perception and "thinking."
It could also be said that an amount equall to what was paid to our banksters bailout or the wars in the mid-east would have granted energy autonomy to our country if it were willed and, in the process, made them largely uneccessary.
Yet, we must always be aware that attack, like peace, extends like itself from the mind that embraces and teaches it.
According to a presentation we attended by Lynn Hinkle with MnSEIA, for every $1M invested in Renewable Energy, 14.1 jobs are created. For every $1M invested in fossil fuel energy, 5.3 jobs are created. Solar is about economic development, not just energy policy.
The Solar Energy industry will see grid parity soon (2015 according to some resources) and we have done it with a fraction of the subsidies the fossil fuel industry has been awarded. Our subsidies are clear and transparent, whereas the fossil fuel subsidies are hidden from us.
I don't think we are asking too much when we request that all the dollars are accounted for.
For any argument against Big Oil/Coal subsidies and tax breaks, we need to back off from the angry language of "dirty subsidies" and stating "...which fossil energy companies routinely wreck and pay comparatively little to fix."
Although understandable, as many of these debates become emotional, we need to restrict such commentary to simple facts, especially when start talking about money. When you start shouting about "dirty oil" and "dirty subsidies", a person comes off as another "hippie treehugger" and their comments will be thrown to the wind as overblown rhetoric.
Stick to the facts, keep the point on the money, and the Big Oil/Coal boys won't be able to dismiss such arguments so easily.
Once again, the classic statement still stands: "When renewable energy generation technology becomes cost competitive without subsidies, it will be the only energy generation technology without subsidies".
Let's not kid ourselves about fossil fuel and nuclear subsidies going away. There's an election coming up in 2012 and lobbyist dollars will be funding the candidates all the way to Capitol Hill. Once they're indebted they'll know how to vote. Democracy to the highest bidder IS the root cause problem in the US of A.
what is it costing taxpayers to rebuild new orleans? what will it cost to move the city of new york when the sea level rises? and all other major port cities???
The costs will be unfathomable.
It would be far cheaper to finance renewables now to avoid those bankrupting fossil costs that are upon us and just around the corner.
what about the human costs of fossil fuels? 35,000 us soldiers and 100's of thousands of iraqi's?
what about the cost of species loss like polar bears and narwhals?
Renewables dont have these costs.
Subsidies serve a purpose and governments legitimate purpose is to serve the public good. In order to do that they have to be able to access a situation, then take steps to serve the common good.
In terms of energy, it's not about "picking winners and losers" it's about accessing the costs to society then setting policy in such a manner that the public good is served in the most efficient manner.
Fossil fuels, as you pointed out, come with a host of externalities such as environmental and health costs, not to mention the fact that the supply of fossil fuels is finite.
Now sometimes, situations arise where an existing industry has such a leg up through economies of scale and in-place infrastructure that it is difficult, if not impossible for an emerging technology to compete. This is the case with renewable energy. In such a case, the use of subsidies is a legitimate use of public funds.
I also want to point out here that there is no law that states that companies in the fossil fuel industry can't partisipate in these subsidies and as a matter of fact, many of them are.
My point about "taking the subsidies from fossil fuels and giving them to renewables" was made in response to your point that the subsidies to fossil fuels were minimal; which they're not!
As far as renewable energy being a "completely non-competitive, failed product", I beg to differ. As pointed out in the comments above, solar is close to having grid parity and in some cases, wind is already there. Also, technological progress is moving at an extremely fast pace and there is no reason to suspect that in a few years that renewables will be close to if not cheaper than fossil fuels - even without the externalities included.
Jajabor: You are 100% on target when you point out that we don't live and have never in modern times have lived in a "free market". Excellent point!
Russ: The only way that subsidies will be removed from the fossil fuels and maybe even transferred to renewables is if the public does an Egypt type of noise making and demands it. Not likely, but possible! ;-)
I agree wholeheartedly with you about the carbon tax.
Allenergy: I agree with you too, it's not too much to ask that our dollars be accounted for!
Douglas: I see where you're coming from, but dirty is dirty and sometimes a spade needs to be called a spade. The fossil fuel industry doesn't play nice and sometimes it's necessary to get dirty too, if you expect to win.
Think of it this way, imagine listening to NPR talk about our energy situation and then listen to Rush Limbaugh talk about it...not taking sides as to who is right, but who do you think will get people more motivated?
"President Obama [proposes cutting] oil company welfare by $4 billion. Not to be outdone, House Democrats are now calling for a $40 billion cut."
He is mixing units. President Obama's cuts are $4 billion PER YEAR. Multiply that by 10 years and one gets $40 billion. The House Democrats proposal is a multi-year total.
He also writes, "... as this study by the OECD explains". Actually, as can be seen very clearly on the front page, this was a JOINT study of the International Energy Agency, the OECD and the World Bank.
Regarding the comments, while I sympathize with Jajagabor, who writes "What our system should be called is an "incoherent mess" that is caused by great confusion and endless, pointless chatter!", I disagree that one can generalize and say that "PUBLIC money, land, etc. have, in our system, always been handed over to PRIVATE interests" -- or, at least, one cannot claim that all private interests have benefited from public resources. I know plenty of companies, and inventions, that haven't received a penny. That is part of the problem: politicians play favorites.
While I agree with Bob Mitchell that subsidies SHOULD serve a purpose related to the public good, I think we can all agree that very often subsidies are used more to reward campaign contributors. Politicians are also prone to subsidizing what they know and understand (and that happens in the renewable-energy business as well as in fossil fuels).
Subsidizing the installation of renewable energy facilities is not sustainable in the long run, as it directs money to energy production and use (and away from other sectors), and hides the true cost of energy from consumers. Rather than trying to argue for the redistribution of some mythical "energy-sector entitlement" towards our favorite energy sources, we should be: working to eliminate fossil-fuel subsidies, and encouraging technology-neutral policies, such as support for basic R&D, and taxes on carbon and other externalities.
Comment
18 of 66
Anonymous
February 18, 2011
The author writes: "Not to be outdone, House Democrats are now calling for a $40 billion cut."
The implication of this remark is that $40 Billion worth of subsidies exists, which is false. First, this number refers to totals over 5 years, it is not an annual figure as the author would lead us to believe. Second, most of the total is obtained by excluding oil companies from using tax rules open to every form of business. If an energy company reduces it taxes by using regulations available to ALL types of business this isn't a subsidy. Do we really want the government creating special tax laws based on whether or not they like the way a person or business earns its income? If so, I suggest that lobbyists and PR firms be taxed at 90% of earnings.
If we are concerned about pollution we can institute additional regulations or new taxes (such as a carbon tax) to control it but all companies should be held to the same standards.
Steven
Comment
19 of 66
Anonymous
February 18, 2011
The author writes: "One estimate, by the Environmental Law Institute, finds that dirty energy companies in the United States alone have run up a $72 billion tab at the taxpayer's bar from 2002 to 2008."
This is another distortion. The ELI certainly didn't claim that "dirty energy companies" had "run up a $72 billion tab at the taxpayer's bar". The ELI survey included funds such as LIHEAP ($6.4 Billion) which is a government program to subsidize energy expenses (of ANY kind) for the poor--the money does not go to fossil fuel companies. This survey also included $6.2 Billion for the Strategic Petroleum reserve, which is also money that does not flow into the hands of fossil fuel cartels and which would almost certainly enjoy broad public support. The author has a tendency towards exaggeration and obfuscation whenever he writes on this subject. Why not name SPECIFIC subsidies that he wants eliminated? The almost inescapable conclusion is that specifics would not leave the same impression that vague generalities and exaggerations do.
Steven
Comment
20 of 66
Anonymous
February 18, 2011
The author writes: "In fact, only 8 percent of Americans prefer their tax money be given to highly profitable, mature industries such as ExxonMobil and Massey Energy."
A survey got an 8 % response to some carefully worded question that Casey does not accurately quote for us. Why isn't the specific questioned stated here? And why is the fact that Mr. Casey's company commissioned the survey not disclosed? This is the sort of practice that gives PR firms a bad name.
Steven
If an existing industry has a "leg up", that means they are more competitive. That does not justify a new industry to be subsidized so they can falsely compete.
The only compelling argument for renewable subsidies is the fact that they offset some of the unpriced external costs of fossil fuels.
THAT is the only compelling argument. Trying to claim some nobility in the idea that "they have ADVANTAGES so we need HELP to compete" won't get you anywhere. Say there are costs associated with their process that they don't have to pay the bill for, and those costs are not present with your technology. That's a real argument, and that's where renewables advocates need to focus.
But in order to maintain this, we need to have a collective agreement on the exact costs, and accept subsidies that equal those costs plus the PER MWh subsidies that are enjoyed and defended by the fossil industry.
That means some renewable technologies will see lower subsidies and they won't make the cut... But that also - by definition - means that those renewable technologies don't deserve to make the cut. That will also result in higher subsidies and faster growth for other more competitive renewable technologies, and far greater offsets of harmful emissions at large as the fossil industry seeks ways of abating some of their emissions to enjoy some of those subsidies.
What kind of disincentive is created to pollute by subsidizing firms or technologies that pollute less? All it does is create a larger amount of supply at the given energy cost, enabling consumption to expand.
The standard environmental economic prescription in the face of a negative environmental externality is to tax it (levy a charge on it).
Subsidizing firms for being less polluting than the worst firms is a recipe for bankrupting government.
Glenn - I don't know if it's been brought up, but the fossil industry has been HEAVILY subsidised, globally, throughout it's life, but particularly in its infancy (where renewables are now). The fact that most UK oil/gas/coal was originally fully taxpayer funded due to being state owned is one of the main reasons they have been as successful as they currently are. They weren't so much 'subsidised' as 'fully funded'.
I largely agree with Mike Casey when he says that rather than subsidising renewables, they should simply strip all subsidies away from fossil fuels. However, in my opinion, the fact that the taxpayer bore the burden of ensuring that the fossil companies were able to get through the early, developmental years to grow into profit making titans (who still demand taxpayer funds) means that renewables should be given the same treatment.
Saying that subsidising renewables shows that they are not cost effective is disingenuous, it implies that fossils didn't require a similar (or higher) level of subsidy in their infancy.
Equally, the financial cost of the environmental burden should be calculated in some way and charged to the fossil companies to reflect their true cost. If climate change mitigation is going to cost $/£X billion to implement, lets start charging those who are largely responsible. Fossil companies, rainforest logging companies, fertilizer/pesticide/herbicide producers etc. Yes, the cost will be passed onto the consumer, but it will make people more aware of the true cost of their consumption and hopefully engender a more responsible attitude.
Comment 1 " Any (renewable energy) jobs that are created offset unemployment and welfare payouts"
Comment 11 " for every $1M invested in Renewable Energy, 14.1 jobs are created. For every $1M invested in fossil fuel energy, 5.3 jobs are created."
A narrow definition for jobs only has merit in Washington.
A dollar used to drill for oil in Iraq, Saudi Arabia, Kuwait, or Iran produces about $20-30 of product value per month. Each million dollars spent drilling might produce only 5 oil service jobs but the $20-30 million per month pouring out that well creates lots of jobs, including military ones. A dollar invested to produce oil/gas in the US might now make only $0.20-0.30 per month while a dollar invested in renewables should make $0.002-0.02 of value in the same period. When environmentalists fly around the world to attend conferences and talk turkey about global climate change, they are not doing that with profits generated from renewable energy. They will only do that by tapping into the economic profit from exploiting limited resources.
I'm all for creating sustainable jobs but when we do that as we each gorge annually on 9 tons of fossil fuels, we are shooting ourselves (our credibility) in the foot. It is not about the number of jobs created but more about creating a single job that is actually meaningful to someone addicted to fossil fuels who wants to seriously mitigate that addiction.
"[T]he fossil industry has been HEAVILY subsidised, globally, throughout it's life, but particularly in its infancy (where renewables are now). The fact that most UK oil/gas/coal was originally fully taxpayer funded due to being state owned is one of the main reasons they have been as successful as they currently are."
Natasha, WHAT ARE you talking about? In many developing and emerging countries, state-owned enterprises dominate the energy sector, that is true. But your definition of "successful" must be different from mine. Many of those companies are basically bloated bureaucracies.
As for developed countries like the United States and the UK, all their fossil-fuel industries were started by private entrepreneurs, including BP's antecedent, Anglo-Persian Oil. The British Government did take an equity stake in the company in 1914 (thirteen years after it was established) -- for strategic reasons, not because the industry was an "infant" one -- but sold its last share in 1987:
From its inception, Britain's coal was also produced by private companies, from the dawn of the 19th century up until the nationalization of the industry in 1946:
http://en.wikipedia.org/wiki/British_Coal
With the de-nationalization of the industry in the mid-1990s, coal in Britain was once again only produced by private companies.
The United States has never had a nationally owned oil, coal or gas company.
Both of you seem to be implying that there is no benefit to society that is provided by low priced energy.
I disagree, and I believe that the majority of Americans would also disagree. The availability of low-costs power has served as one of the largest income redistribution projects in the history of the U.S., and has been one of the most crucial underpinnings of the rise of the middle class. It has also been the greatest welfare service to the poor in U.S. history.
Yes, there are unpriced burdens within that production, which will justify significant subsidies for renewable energy... but the current actual subsidies for fossil fuels are trivial, and won't serve to allow renewables to compete - as has been demonstrated in the more informed responses to Mike Casey's idiotic post.
But if you are suggesting that fossil industries should carry the full burden of their unpriced externalities, you should be aware of what you are asking for:
What would happen to the poor and middle class (and the economy at large) if electricity costs ~$50/MWh more than it does now, and gasoline costs ~$1.00/gallon more than it does now?
You should seriously consider that before continuing your advocacy in its current vein.
"Both of you seem to be implying that there is no benefit to society that is provided by low priced energy."
You are putting words in my mouth. I never said or implied any such thing. But the benefit comes from competition (or some other force) that reduces costs, not from artificially lowering the cost of energy.
"Yes, there are unpriced burdens within that production, which will justify significant subsidies for renewable energy ... "
Again, see my remarks: the standard economic prescription to the presence of a negative externality is to add a charge that is equal to the marginal social cost. And if you want to talk distributive effects, which segments of society usually bear the brunt of pollution? Clue: it ain't the rich neighborhoods.
" ... but the current actual subsidies for fossil fuels are trivial, and won't serve to allow renewables to compete."
I agree, if you mean "eliminating them will not be sufficient to allow all renewables to compete", and I have said so on a number of other occasions.
"What would happen to the poor and middle class (and the economy at large) if electricity costs ~$50/MWh more than it does now, and gasoline costs ~$1.00/gallon more than it does now?"
I have no idea from where you derived your ~$50/MWh figure, but people in the rest of the developed world have been paying gasoline prices far in excess of ~$1.00/gallon more than it does now. Typical after-tax prices for gasoline in Europe are currently between $6 and $7 per gallon. Even Turkey, not a rich country, charges an excise tax on gasoline that is in the neighborhood of $4 per gallon.
The European Union has a population density of ~114 people/km2.
The U.S. has a population density of ~32 people/km2.
I think one region would be far more accommodating for public transportation than the other.
Consider it.
The $50/MWh is an extremely low-end estimate. The new Harvard study projects between $90/MWh and $260/MWh according to summaries, but I haven't read the actual document yet and I assume there's going to be a lot of padding in those projections.
*shrug*
Nonetheless, the listed cost/gallon in Europe has been offset by extraordinary income normalizing policies such as single-payer health care. If we used their energy pricing and our health care system with no public transportation options... we're going to destroy 30% of the wage earners in this country.
I'd prefer to offer subsidies to incentivize the reduction of negative externalities rather than offer taxes to reflect those costs.
National population density figures don't tell us very much. If you looked at the average population density of Canada, you would guess that the average person never encountered any neighbors.
Many U.S. states have population densities equivalent to or exceeding those of European countries:
And it is in these states -- mainly along the eastern and western coats -- where most of the U.S. population lives, commutes, consumes energy.
"If we used their energy pricing and our health care system with no public transportation options... we're going to destroy 30% of the wage earners in this country."
Citation, please? If you cannot provide one, then we have to assume you just made up that figure.
"I'd prefer to offer subsidies to incentivize the reduction of negative externalities rather than offer taxes to reflect those costs."
There is no accounting for opinion, but consider the economics of what you are arguing. Clearly you must have a relatively low level of pollution abatement in mind. Because, for a given level of pollution abatement, by subsidizing pollution control not only do you have to pay for the added investment and operating costs, but you have to do it for MORE pollution. When pollution is taxed, you also encourage conservation -- i.e., the avoidance of activities that create pollution (like carpooling, or riding a bicycle for a short trip).
"Those rotten folks in the fossil industry get massive subsidies!" How much? "We don't know but it's not fair and we want more public money!"
"The planets going to heat up in 30 or 40 years and kill us all!" So how hot is it going to get? "We don't know but we want more public money!"
Will renewable energy actually make any difference? Nope, but we the tax payer and consumer are suppose to pour vast amounts of our money into fundamentally poor solutions to a distant problem that may or may not exist.
Try using energy wisely through better efficiency, conservation and technologies that are cost effective. Greenhouse gases automatically get reduced, folks have more money in their pockets and that directly leads to more jobs.
Comment
31 of 66
Anonymous
February 18, 2011
Interesting debate on this issue. Just to put some more numbers out there, I would add that the FY2012 budget released this week from OMB notes on Table 17-2 that the cost of the specific tax expenditures going to oil and gas corporations amounts to $6.1 billion for 2012-2016 (though one can quibble with the alt fuel production credit). This does not include the cost for individuals but the focus of many commentors seems to be on executives and corporations. By contrast the cost of specific tax expenditures going to corporations for renewables or conservation for the same period appears to amount to around $13 billion. I would also note that the majority of the O&G costs is associated with percentage depletion which is not applicable to "Big Oil" but is available to many other extractive industries other than oil. Further, the other major expenditure is associated with cost recovery of drilling expenses - a timing issue rather than a outright credit or grant - and similar to recovery allowed for other capital investments throughout the Code.
Some commenters raised the issue of additional taxes or carbon taxes as a way to make price more meaningful and individuals aware of choices. How about recinding the mortgage and property tax deductions in the US for houses over 2,000 sq/ft?
Ronald: I agree with you that subsidies tend to get disconnected from their original purpose as time goes on and politics gets involved (more involved??), but let's not let the perfect be the enemy of the good.
For the government to subsidize a particular industry for the public good is a good thing and in terms of renewable energy, the importance of making the switch to clean fuels in as short a period of time as possible justifies their use in this situation, at least in my humble opinion!
As to your other points about getting rid of subsidies to fossil fuel and levying taxes on them so that they reflect their "true" costs, I couldn't agree with you more. If it were a one or the other situation, I'd willingly give up renewable subsidies if a carbon tax and other levies were instituted so that fossil fuels reflect their true costs.
Anon: Part of the problem with attempting to calculate how much the fossil fuel industry is subsidized is that we would all have to agree on exactly what constitutes a subsidy?
In the case of the fossil fuel industry, there are direct subsidies, favorable tax treatment (including deductions and credits that are specific to their situations, as well as the rest of the deductions and credits that are available to all businesses), EXTREMELY cheap access to public lands and resources, government provided services that while available to everyone are mostly used by the oil, gas and coal companies, miliatary expenditures and (again, depending upon your definition of subsidy)- heath care costs and pollution could also be considered to be subsidies.
So, depending upon your definition, 72 billion is probably an underestimation.
Glen: If the industry that has a "leg up" is costing society more than the cost to society would be with the new, "better" technology, then yes....there is an argument to be made that the "new" industry is deserving of subsidization.
Nobody is saying that renewable energy should be subsidized simply for the sake of it being "new". Advocates of these subsidies are making the argument that renewables should be subsidized because they are cleaner, more healthy, lessens our dependence upon foreign oil, is more environmentally friendly, etc. etc. etc. In essence, the renewables COST society less and therefore is more efficient and deserving of the subsidies that they are receiving.
These "advantages" are real and while I agree with you regarding the costs of fossil fuel's extenalities, I don't see why we should leave 1/2 of our argument off the table.
Again, I don't mean to be argumentative here, but your insistence on using a "megawatt" as a yard stick is somewhat simplistic. The fact that nobody has a crystal ball that can accurately predict which technology is going to bear fruit means that a technology that the "free market" would kill right now, could very well be the best one of the bunch 10 or 15 years from now.
Keller: I disagree with you! Renewable energy is the ONLY hope of maintaining our standard of living. That's not to say that it's going to happen overnight or that it's going to be easy, but the facts of the matter are that fossil fuels are 1) finite and (2) dirty.
Conservation is good and should be encouraged, but it's not going to be the answer. As a matter of fact, with China and India and other places developing a middle class, world wide, per capita energy consumption has been and probably will continue to rise. Replacing fossil fuels with renewables is our only hope!
Anon: Read my earlier comment. 6.1 billion isn't even the tip of the ice burg!
The fact is, we don't know how much is spent on fossil fuel. We might not be able to know. We cannot quantify how much health care is affected by fossil fuel pollution, because we really can't always define causes of illness.
We might be able to determine how much is spent on military protection, but how to subtract the value in mid-east stability, and lives saved thereby, as opposed to lives lost?
We can't prove global warming/climate change. The 100,000 year interglacial cycle we HAVE evidence of is ignored [yes, Virginia, there is an ice age coming] There is a despised minority that posits CO2 emissions might actually be holding the ice age at bay a little longer. Climate might change - it always has - but we don't know why.
More importantly, though, we don't know where technology will go. When diode lasers became possible, they brought a new world of data storage/reading. We might all be very surprised to see the winners and losers in energy a century from now. Which horse do you bet on today for a race that will be run two years from now?
The nation came a long way on subsidized oil and coal, this is true. However, nuclear came along very rapidly in comparison, due to one large push, all government funded.
If there was again such an effort applied, we might be able to rid ourselves of fossil fuels, but we don't even know what direction to push in yet.
Some of our subsidies are the result of corrupt practices.
Some of our subsidies are viewed as necessary for the smooth operation of our nation. Everyone wants to be the judge as to which are which, but sometimes the details are too intricate to sort out easily.
It is all very complicated, so we have a complicated set of rules, and every time someone gets 'educated' about another facet of energy sources and uses, the rules change.
I heard all of this debate thirty years ago, and fossil fuels are still cheaper.
I don't use "MegaWatts" as my yardstick. I use the levelized cost of energy (LCOE). I choose dollars/MWh because that's standard, but we can convert easily enough to cents/kWh or dollars/GWh if you prefer.
What we cannot do is ignore costs. We also cannot ignore deployment prospects.
What would help renewables advocacy more than anything else I can imagine is to come up with an agreed-upon COST of these externalities. If that accommodation cost for fossil fuels is less than the additional levelized cost for renewables (something I suspect is true for many renewable options), then those renewable paths should be de-funded... because IT JUST ISN'T WORTH IT.
However, if the cost of those externalities is indeed greater than the additional cost of the renewable energy, then it's cheaper to mitigate the damage than to accommodate it, and that should be followed aggressively.
Ronald
You have a point considering conservation - as that is by far the cheapest mitigation strategy... but that could be done with subsidies MORE easily than with taxes. If we simply taxed fossil energy to reflect it's true cost, we would first see everyone's power cost go up as though all power is fossil sourced. The wind farms won't continue pricing their energy at $50/MWh if the energy from coal plants costed $100/MWh (or more, depending on your assumptions). So the end user would pay as though 100% of his/her energy was fossil sourced. That represents a large increase in energy costs, and a more difficult time making the bills. Now the person has an incentive to get better insulation in his/her house... but they're having trouble meeting bills - which means no bank will give them a loan to get that insulation.
A subsidy works the opposite way; the people have plenty of money to meet their bills, but a new subsidy gives them an incentive to upgrade their insulation, so they would then do so.
Another issue with regards to emissions tax is free-trade. I could rant on a soapbox here about this issue for some time, but this isn't the venue. However, the problem is that if our energy cost ~$100/MWh more than energy does in other countries, then the stuff that we manufacture costs more as a result. However, tariffing imported goods or subsidizing the sale of U.S.-made goods are both against WTO rules. Which means that if we were to tax the crap out of fossil energy, no U.S. product would be competitive - either in the U.S. or in any other country.
I am not a fan of free trade, and have often accused its supporters of a lack of foresight, but we've jumped off that cliff, and this is the situation we are faced with.
I used to advocate a tax-refund program in which fossil energy is taxed for its externalities, with the money going into a fund and then refunded back monthly on a flat basis to every person who had filed their tax forms that year. THAT would have encouraged people to spend their refund checks to improve their efficiency... but there was no work-around for the WTO rules, so that idea would simply result in the final nail in the coffin for American industry.
Comment
37 of 66
Anonymous
February 21, 2011
Here is a sample of the 'fossil' tax breaks ... given to some of the most profitable companies in the world ....
"When the Deepwater Horizon drilling platform set off the worst oil spill at sea in American history, it was flying the flag of the Marshall Islands." Registering the rig in that country allowed Deepwater to significantly reduce its American taxes. Other companies involved in the Gulf Oil Spill also receive financial breaks from our current tax code. BP received a tax deduction of 70% of the cost of leasing that foreign rig from Deepwater, more than @$225,000 a day. Transocean, another player in the Gulf Oil Spill, moved its corporate headquarters offshore from Houston in 1999, and then to Switzerland in 2008, helping that company avoid U.S. taxes.
One of the most significant of these 'black' tax breaks is the Foreign Tax Credit. American producers have aggressively exploited the tax code, opening small offices in low-tax countries.
Oil production is among the most heavily subsidized businesses in the US, with tax breaks available at virtually every stage of the exploration and extraction process. One of those tax breaks will soon celebrate its 100th birthday. The Tariff Act of 1913 encouraged exploration and drilling for oil by allowing oil companies to write off more than the costs. It was repealed by Carter and then reinstated by the Reagan administration in a different form.
The G20 have agreed to reduce these subsidies. The issue will be when, because changing them must be done over time. Maybe by the time they are mostly gone the renewable industry will be up and running, past the so called valley of death and parts of this argument won't matter.
AND since tax code goodies are responsible for almost 25% of our possible federal income, maybe getting rid of many more special perks is a good idea, even the home mortgage tax break for anything over the average cost of a home.
I plan to post a longer response (not just to you, but also to Bob Mitchell). But I am curious why you think that taxing externalities and then "recycling" the revenues through cuts in income taxes -- e.g., to make the package tax neutral -- would be in any way incompatible with WTO rules. That is exactly the kind of tax shifting that many economists (including myself) advocate, and I am generally in favor of free trade.
David Larsen,"We can't prove global warming/climate change. ... Climate might change - it always has - but we don't know why."
That is absolutely UNTRUE. Don't believe the liars and deniers who are paid to disinform and confuse you.
Climate science is an old science. The natural climate driving forces are well known and well understood. NONE of the natural warming drivers are presently active. The only present warming driver is human belching of CO2 - at the tune 30,000,000,000 tonnes per year. That's 17,000,000,000,000 (17 trillion) cubic meters per year. PER YEAR. Enough to cover the whole USA in a pile of CO2, 2 meters deep. Each and every year. Into our very thin atmosphere. CO2 is more effective than Argon at trapping heat. We put Argon in our windows to keep our homes warm in the winter.
Read up, there are plenty of good books written by true experts on the subject. Dont believe the high paid frauds on exxon's payroll and unstable attention seakers.
First, I'd like to comment that this exchange has been both stimulating and pleasant - thank you for that.
As to the prospective costs, again we are discussing the cost of externalities. Hence, we are paying those costs NOW. To take the estimate (er... wild guess) $200/MWh (or $0.20/kWh if you prefer), and we did indeed subsidize the offset of externalities to such an extent that they were fully reduced, then perhaps we would spend $360 B/year. But that means we would NOT spend $360 B/year on externalities. The goal here is budget neutrality.
But, if we determined that the net cost to society from the emissions of fossil fuels was $200/MWh, the resultant subsidies wouldn't be listed as "0.20/kWh of clean energy produced"... the subsidy would be based on (purely hypothetical numbers follow) ~$10/tonne-CO2 abated and ~$200/tonne SO2 abated and ~$100/tonne NOX abated...
Hence, energy efficiency improvements for a home or business could qualify by showing a marginal lowering of emissions... If you installed good windows, insulation, and a geothermal heat pump for a 2500 ft2 house, you would lower your consumption by an estimated X,000 MWhs over 20 years, hence lowering the total emissions profile by Y,000 t-CO2, z,000 t-SO2, etc... and your purchase would be eligible for subsidies totaling $AA,000 (after deducting for a 20-year discount period at ~4%).
So conservation could also be incentivised... but the budget impact should be minimal if the externalities are correctly priced.
You write, "If we simply taxed fossil energy to reflect it's true cost ... ." I wonder if you have an idea of what that means that differs from what economists mean. The optimal setting of policy is not to charge all the externalities to the entity generating them, but to set the charge at a point where marginal abatement costs equals the marginal damage caused. That is likely to be a charge lower than the kinds of numbers you are citing, which is the average damage per MWh.
Also, as you mentioned, the revenues from pollution charges would likely enable reductions in other taxes, ideally on activities that we DON'T want to discourage (like labor).
On the other hand, by subsidizing pollution reduction, once you get into serious levels of abatement, the levels of subsidies required would be enormous, and those subsidies would have to be paid for somehow -- including by more heavily taxing industries that are not contributing to the problem.
In 2009, US Electric Power Industry net generation amounted to just under 4 trillion kWh. Almost 45% of that was generated by coal, and just under 70% by all fossil fuels.
If displacing that 70% would cost $0.022 per kWh (using your figure from Comment 2 above), which is close to the estimated federal subsidy estimated by the EIA for solar and wind in 2007, that comes to some $62 billion/yr (not counting the cost of associated infrastructure) ... every year.
How much conservation could that kind of money buy (thus helping to avoid having to build so much capacity)? I suspect quite a lot. But if there is no cap on pollution, then a lot of the savings would be eaten up in expanded consumption (bigger homes, etc.)
One way or another, making the transition from fossil fuels to greener energy is going to cost money (while reducing externalities). The question, and the challenge to policy makers, is how to get the incentives at the margin right.
Just to explain the discontinuity in our comments: I saw an arithmetic error in my earlier post, and deleted it. Meanwhile, I see that you were writing a reply to that as I was fixing my earlier post.
You write, "Hence, energy efficiency improvements for a home or business could qualify by showing a marginal lowering of emissions... If you installed good windows, insulation, and a geothermal heat pump for a 2500 ft2 house, you would lower your consumption by an estimated X,000 MWhs over 20 years, hence lowering the total emissions profile by Y,000 t-CO2, z,000 t-SO2, etc... and your purchase would be eligible for subsidies totaling $AA,000 (after deducting for a 20-year discount period at ~4%)."
And, so, people who have been living lavishly would qualify for the biggest subsidies, and those who were already living frugally and could not squeeze out many more energy (and hence emission) savings would end up footing the bill (through their income taxes). Where is the equity in that?
People who are living lavishly will be able to afford the upgrades on a moment's notice. If we started increasing the price of energy, then the poor would shoulder the increase with no way of cutting their energy usage (again no banks would loan them the money to do so), and so no energy efficiency improvements would be realized from the poor... meanwhile the wealthy would simply pay the bills for some efficiency upgrades and pay the increased bills, and things move on.
We live in a country with a progressive tax system. So if we were to increase our outlays to such a point that more taxes would be required, they would fall disproportionately on the wealthy anyway, so the subsidy route still has quite a bit of equity in it. But with the subsidy route its a good bet that the poor would be able to afford home improvements, while the other way it's highly unlikely..
You are correct, I didn't bother to check your math earlier. But the point is the same. There is only an additional cost to society if the amount paid to mitigate the externalities is higher than the actual cost of those externalities... otherwise no taxes will be raised - they will be lowered (or at least net budgetary outlay will be lowered as a direct result of the subsidy).
Comment
45 of 66
Anonymous
February 21, 2011
AND here is another set of facts to put into your discussion: some come from Credit Suisse and some from DeutcheBank
Substantial Investment is required NOW in our power industries ...
$70+ Billion is the cost estimated by several large banks to upgrade or replace our current power plants. That investment must occur over the next 10-20 years and is based only partially on the requirement to meet enforced and expanded Clean Air regulations. The main reason is the age of the plants.
Seventy percent of our coal plants and all of our nuclear facilities are more than 30 years old. Thirty percent of the coal plants in the U.S. are more than 40 years old. Some have no pollution controls installed at all. They must be replaced and upgraded and that will require a massive investment.
Glen, my point regarding whichever unit that you use, you can use it to trivialize the amount of the subsidy that fossil fuels get. By listing it as a lump sum (that is if we could ever agree on what should or should not be considered a subsidy) it's easier for people to comprehend how much the fossil fuel industry is being subsidized.
Regarding your point on letting the free market determine if a technology is worthy of subsidization, I still don't think that this is something that the free market does well in the short run.
As Mr. Larson pointed out, we don't know where technology will be in the future. In the long haul, the free markets will sort these things out, but in the short run, he's right that it's like betting on a horse that is going to run two years from now. At best it's not an accurate science.
That's not to say that we don't benefit from our society sponsoring research (at least) and even subsidizing pilot projects and even still attempts at implementing technologies that have a good chance of lessening the costs to society.
For example, wave technology might not pan out, but there is a good chance that it could. Let's fund it and see. That's my point. Maybe it won't, but maybe we'll learn something from the effort that will benefit us all.
A common published perspective of Economists and Analysts is that the current global recession shares the same "catalyst prime" as the vast majority of the past recessions - the price of petroleum. Petroleum has been the largest traded commodity in the world for almost 100 years so even a small change in price has a rippling and compounding impact on world GDP and a large change will have a staggering and long term effect on world GDP.
The current recession is the most severe compared to past recessions simply because the 2008 petroleum peak price was the historic record high. The looming "double dip" or a full blown depression will also be the result of the continued soaring petroleum prices. Respected petroleum analysts are projecting a $100 barrel price again within the coming months and the impact this will have to the already weak global economies will not have been experienced since the Great Depression.
No change in party control, no new brilliant political agenda and certainly no government cash bailout to flailing industries will solve our current economic problems. We continue to live (granted - now at a more humble level) in a petroleum economy.
We must solve our petroleum problem to solve our economic problem as the former continues to be the catalyst of the latter.
We must solve our petroleum problem to solve many of our environmental problems as the former continues to be a catalyst of the latter.
Eliminating as many of these fossil fuel subsidies as possible will motivate new, sustainable and renewable fuels.
http://etcgreen.com Article: Are you driving your last gasoline powered car?
I certainly agree with funding R&D and funding pilot plants! But that isn't the same thing as trying to force-deploy a non-competitive technology.
We're actually working on a true solution for carbon-neutral fuels, and it would be nice if government was willing to fund some of our development:
www.WindFuels.com
But government is too interested in giving insane handouts to non-competitive ideas that it is trying to force into deployment anyway (such as electric cars), than to spend a very small amount of money funding disruptive novel technology.
The system is wrong. If something is tried, and shows a clear lack of promise (there is no way this will be competitive), then money is simply shoveled at it in the name of "alternative energy"... but if something DOES work, then the subsidies dry up... and if something is novel, then there's absolutely no money available to fund development - that won't be available until it has been demonstrated and proven to be a failure.
A good example is wind vs. solar. Wind energy is strongly competitive with coal on a cost/energy basis in good wind regions, while solar is only marginably competitive with peak energy rates in high-priced regions. So wind has deployed more than 20fold greater extent than solar...
But our subsidies grant solar energy 5-10 times the amount of money per MWh than they grant wind, even though the net benefit to the environment and health of the U.S. is greater for wind than it is for solar. (This is due to the energy profile of the fossil energy that is being offset).
I would LOVE it if the U.S. focused more on R&D and early development. They don't. In fact the DOE doesn't really fund anything they weren't already funding in the 70's.
They want to fund failures, and justify everything in the name of externalities whose value have never been qualified.
When the SEC settled its case with Goldman Saks for what seems like a huge sum of money (>$500 million), some viewed the lawsuit as a simple charade. A $500 million fine that seems to prove you don't have the entire system rigged is probably a smart investment for Goldman to make. Currently, the firm makes around $100 million, per day, in gross profit.
The energy industry is in similar position and talking about subsidies focuses on the wrong issue. Per MMBtu, the fossil industry gets a small fraction of what renewables get. In total dollars they get insanely more. However, the bigger issue is that the 200 million year accumulated value in fossils is even considered to belong to individuals (corporations). Those individuals love it when people talk about subsidies and funding non-competitive renewable energy ideas helps direct that discussion.
It makes perfect sense that governments back big money interests because no one wants a game changer, the game is a good one. We thrive on those government jobs and we gorge annually on 9 tons of fossil fuels. It is best for everyone to make subsidies or some other window dressing the issue on the table.
Imagine a world without 9 tons of fossil fuels available per N. American. In 10 years we will be using about 7 tons per person. The difference is equal to all our driving or all our heating and cooling. Now imagine using 4 tons per person and think of what it will be like to work those jobs that remedy the problems caused by expiring nuclear and fossil facilities or keeping oil routes open in unstable parts of the world. If that causes a migrane, then it is time to again to talk about who gets what subsidy.
"We live in a country with a progressive tax system. So if we were to increase our outlays [on subsidies to renewable energy] to such a point that more taxes would be required, they would fall disproportionately on the wealthy anyway, so the subsidy route still has quite a bit of equity in it."
That might be so, Glenn, but you miss my point, which is that WITHIN any income class, people who have been parsimonious in their energy use will end up subsidizing people who have not been. (Think of the subsidy for ethanol: the owner of a flex-fuel SUV that tanks up regularly on E85 costs the federal government $1000 a year in tax credits to the fuel suppliers. Meanwhile, the driver of a small, fuel-efficient car gets nothing.) By contrast, when fossil fuels are taxed, people pay proportional to the fuel they use. And the revenues from the taxes can still be used to reduce income taxes in a progressive way -- i.e., to lighten the income-tax burden on the poor.
@rrogers
"the bigger issue is that the 200 million year accumulated value in fossils is even considered to belong to individuals (corporations)."
That's not the case in most countries, where the sub-soil resources belong to the government (or crown), but it is in the United States, and has been that way since the founding or the Republic. There is nothing wrong with that kind of system of property rights: what it means is that owners of land can demand royalties from corporations who want to extract minerals from under their land. In many cases on-shore, and in all cases off-shore, the rights belong to the government. Whether governments are charging adequately for the rights to exploit those resources is a different question. But to say that "the 200 million year accumulated value in fossils is ... considered to belong to ... corporations" is simply not accurate, at least not in terms of property law -- except where the original owner (or the government) has sold their rights to corporations.
"IN THE first three quarters of 2010, Chevron earned $13.73 billion in profits. A substantial portion of those profits came from oil drilled in the Gulf of Mexico. Other profits came from oil drilled on private land. If Chevron drills oil on private land, it has to pay royalties to the owners of the land for the right to drill there. Normally, when Chevron drills oil on public land, it would pay royalties to the government, ie the taxpayer. But when Chevron drills oil on certain deepwater wells in the Gulf of Mexico, it doesn't have to pay royalties to anyone. That's because back in 1996, Congress decided it would be a good idea to encourage deepwater drilling by offering royalty-free leases in certain areas that wouldn't be otherwise commercially interesting.
"Which is fine, if you believe in prolonging our addiction to fossil fuels; but that's another discussion. The main problem is that Congress obviously doesn't want to be handing out royalty-free drilling leases on sites that would be commercially attractive even at the going rate. That's just handing out taxpayer money to a few corporations for no good reason; among other things, it's not fair to other drillers who have to pay for their leases."
What I find most staggering is the inefficiency of burning coal. 70% is wasted in the burning process. This is similiar to what we lose in automobiles. Now if one takes a close look at the defence budget while trying to secure oil for a nation that is overly dependent on it, one can clearly see that those costs far outweigh the nominal amount of money we would invest in developing a clean energy economy. This is sickening to see our nation be hijacked by these greedy oil bafoons. Our foreign policy is being driven by oil companies. We declared war on a country that was not a threat to the United States. Our vice president ordered the CIA to torture innocent men to force them to lie and say there was wmd in Iraq. That cost to the United States is incalcuable. So you tell me when does it end and how does it end? Nothing good can come from this course of action. Absolutly nothing@! As the planet continues to disintergrate around us we ignore the ominous signs that nature is telling us. The imbalance we are creating in nature will not go on forever. I am affraid that we may be one more species to become extinct along with the 634 already driven to extinction.You tell me what the value is for our actions? Using my math the amount is staggering.
First, very few people are concerned with the efficiency of any system. Coal averages ~30% conversion efficiency, but state-of-the-art ultra supercritical pulverized coal (U-SCPC) plants can exceed 50% efficiency. These plants are rarely built because the final levelized cost of energy (LCOE) is the only consideration that people truly pay attention to.
One of the reasons that both Ronald and I wish to price the externalities of coal is so that these additional costs to society are considered - though we sharply disagree about how that pricing should be included into market consideration.
But unless those externalities are priced in, the remaining costs - including the cost of the misguided Iraq war - are insignificant compared to the added cost of shifting from coal to solar and/or from oil to biofuels (and don't even get me started on the insanity of spending fortunes to shift from oil to COAL, as the EV advocates would prefer).
Using some form of market manipulation (some form of factoring in the external costs of fossil fuels) would result in the market seeking options that did less damage.
Ironically, outside of extremely good wind resource regions: decommissioning older, lower efficiency coal plants and replacing them with U-SCPC plants with exhaust separation and scrubbing equipment would be the most cost effective means of reducing CO2 and other emissions, so you are onto something with your irritation at the low efficiency. But the market only cares about the final price.
Also, I believe that it is unthinkable to assume humans will become extinct outside of an extinction level event, so statements like your last make you appear to be something of a loon. But if we did become extinct, we would join millions of species, not 634.
Ronald,
The people within any income class who were responsible presumably care about the environment. The goal should be to do as much good for the environment with a given amount of money as possible.
The boundary for the phrase "the amount of money we are talking about" is unfortunately whatever society decides. Last year that figure was only a few tens of billions of dollars... That sucks, but I vote for and support candidates, campaigns, platforms, and referendums that seek to increase that total...
However, after that I demand that the money that is spent is spent in the most cost effective manner possible. This is where I have an extreme problem with the DOE, and with much of renewable advocacy at large.
I don't think we are likely to see even 100 billion spent in a single year towards this goal (from America) within the next decade. But I hope that I will be proven wrong.
"the 200 million year accumulated value in fossils is ... considered to belong to ... corporations.. is simply not accurate, at least not in terms of property law"
If you look at where "value" goes (following the money), corporations essentially do control that value but they do share that with today's needs of government and consumers. That is not all that different from Libya where someone who claims all resource value also shares it according to some tribal tradition. Both resource controllers maximize their own take by sharing some. The issue is that both narrow that sharing to today's people, which is great for exploiting value, but abominable for conserving it for long term strength and well being.
A dollar used to tap oil in key reserves in the Middle East produces about $20-30 of product value per month. The US had that at one time but now makes $0.20-0.30 per month. A dollar invested in renewables produces $0.002-0.02 per month (wind now on high side and PV on low side). Value alone is not the issue, though.
An oil recovery project that yields 1,000 bbl/day today receives about $60/bbl and might give 15% to landowner and 5% to State. Of $1.8M/mo, the landowner receives $.275M, the State, $.09M, the local utility $.365M for electricity, with project owner grossing $1.1M after three expenses. For every pound of carbon burned by a car owner, another 0.6 pounds is burned by some utility to support oil production. That is considered good business because some "individual" makes a $1M/mo, gov. and consumers thrive, etc.
If I were hired to persuade 40 teens to enjoy healthy eating, the content and outcome of that talk would depend if the average listener weighed 130 lbs or 600 lbs. As energy consumers, N. Americans are equivalent to a 600 lb teen. To me, talking about who gets what government energy incentive is like debating sweet vs. savory. There will be good discussion points on each but the same outcome on long term health.
I don't think we fundamentally disagree. I was interpreting your phrase "is considered to belong to" in a legal sense. Otherwise I agree with what you just wrote.
Also, your point that "[t]he issue is that both narrow that sharing to today's people, which is great for exploiting value, but abominable for conserving it for long term strength and well being" is an important one. (Thanks for raising it!) Indeed, which is why artificially accelerating the depletion of oil is, in the end, counter-productive. And why savvy countries such as Norway have invested the royalties from hydrocarbons in funds intended to generate a sustainable stream of revenue for future generations (and keep the money out of current politicians' greedy hands).
Wow, step away from the computer long enough to do some real work and "boom" the conversation has gotten away from you! ;=)
Getting back to the subject of subsidies for the fossil fuel industry, I think that you have to count the "free ride" that the fossil fuel industry gets in terms of externalities as a subsidy, at least in terms of the relationship between fossil fuel and renewable energy.
The point that was made above about the markets only caring about the end cost is very true. That's how come we need a government that can address this inefficiency in the markets.
In a strictly economic way, this is the only true reason for governments.
The problem with our current governments is that big money interests have taken control and these legitimate governmental practices aren't being allowed to happen.
In a perfect world, our government would step back and look at the big picture and see that the markets weren't factoring in the "true" costs of fossil fuels such as the environmental and health costs associated with their use and would take steps to remedy the situation.
If this were to happen, through the use of a carbon tax or other such device, then renewable energy could stand on it's own.
Now before somebody says that renewables can't compete, look at the true costs of the externalities...somebody said above that they don't think that we could go extinct, read up on "ocean acidification" and see where that might lead! Not that it would, but it could and even if it doesn't, the costs to humanity is going to be astronomical!
Unfortunately, we don't live in a perfect world and vested interests are going to attempt to protect themselves..that being the case, those of us in the renewable energy world need to fight for whatever we can get and expect our competitors to do the same!
The externalities must include the cost of global warming, which even Exxon agrees is real. That cost alone, would far exceed the tax subsidies and even the military cost of defending oil routes.
Also, if that's not enough, how much does is costing our country to send billions overseas for oil each year - especially when it's supporting a commodity sold by countries that are less than friendly to us and our allies?
Here are the numbers (in round, rough values): crude oil contains 37 MJ per litre, and on a well-to-wheels basis it emits around 100 g of CO2-eq per MJ, or 3.7 kg per litre. U.S. consumption of petroleum products is about 300 billion gallons a year, or about 1.1 trillion litres. That comes to just over 4 trillion kg, or 4 billion metric tons, of emitted CO2-eq.
Multiply by your chosen externality estimate:
$10/tCO2-eq = $40 billion dollars a year
$25/tCO2-eq = $100 billion dollars a year
$50/tCO2-eq = $200 billion dollars a year
$100/tCO2-eq = $400 billion dollars a year
These are estimates of external costs imposed on the world, however, not on the United States alone.
Heavy Emitters in Alberta Canada pay $15 per tonne for GHGs emitted over 100,000 tonnes per year - money is pooled provincally for Clean Tech start-ups. I am proud of this fact, especially since we are one of the few regions in North America doing so.
We are partially funding the first large scale CCS in North America to kick start this industry:
http://www.energy.alberta.ca/Initiatives/1897.asp
GO CANADA!
Steven - the US buys 13,000,000 barrels per day on foreign oil. That comes out to $1.3B per day or $475B per year at current WTI prices, no wonder the US has an export imbalance.
For your information - starting in 2012 seven US States & four Canadian Provinces begin a mandatory GHG Cap & Trade initiative:
http://westernclimateinitiative.org/about-the-wci
Here is a link to an example of this new Cap & Trade legislation in British Columbia:
http://www.leg.bc.ca/38th4th/3rd_read/gov18-3.htm
This implies that within the next 24 months, Clean Tech companies within the WCI jurisdiction will be able to reap the benefits from this additional funding.
Global Warming ie: Climate Change is Science the GOP can't wish away... reports concluded that "scientific evidence that the Earth is warming is now overwhelming." Party affiliation does not change that fact...All the Politicians Need to Step away from the Monetary Feed Trough filled by Big Oil and Big Coal Industries.
Need I mention again that Clean Energy Production will also create JOBS? and Lessen the Demand the US has on Imports of Oil from the Middle East?
It really pisses me off to think about all the prior Service Men and Women who have given so much to protect our Nation from the Damage created from the consumption of OIL, especially from Nations that oppose the Freedoms the USA is best know for. We can lessen this demand and create Clean Energy Jobs for the USA.
This document quotes the National Academy of Sciences, which claims that the available evidence to date shows that the US health care costs in 2005 from coal power came out to be $62B. The Academy bases these estimates almost entirely on sickness and premature deaths—particularly from heart and lung disease -asscoiated with SO2 & PM2.5 emissions.
This is equivalent to $159M subsidy to each coal power plant in the US per year!
Thanks you for your information.
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khuyen mai
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Mike Casey is the President and founder of Tigercomm, a leading U.S. cleantech PR firm with offices in Arlington, VA and San Francisco, CA. He uses his 28 years...
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The national conversation about wasteful welfare for highly profitable dirty energy corporations has gone from the 
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Hmmm...
In 2002, the U.S. generated 2.73 BILLION MWhs of fossil-sourced electricity.
2003: 2.76 Billion MWhs
2004: 2.82 Billion MWhs
2005: 2.91 Billion MWhs
2006: 2.89 Billion MWhs
2007: 2.99 Billion MWhs
2008: 2.93 Billion MWhs
2002-2008 total: 17.3 billion MWhs.
72 billion in subsidies for an industry that generates 17.3 billion MWhs totals $4.16/MWh.
Note that is only tracking fossil-sourced electricity. If the environmental law institute includes subsidies for nuclear power in that 72 billion then an additional 5.51 billion MWhs needs to be factored in, for an average subsidy of $3.16/MWh.
It is doubtful that the Environmental Law firm also counted subsidies for liquid fuels in this study, as the Iraq war could legitimately be called an oil supply subsidy, but during the 2002-2008 timeframe in question the US consumed over 50 billion bbls of oil! So even if the cost of the war was included, along with other subsidies, we're still looking at less than $0.75/gallon in subsidies.
The renewable subsidies, by comparison, are far greater for any renewable source.
I personally defend the subsidies for renewables. Any jobs that are created offset unemployment and welfare payouts, while CO2, SO2, and NOX emissions reductions offset considerable societal accommodation costs.
But renewable advocacy needs to think carefully about challenging congress to cut ALL subsidies. They just might get what they're asking for... and if solar looses its 30% PTC + $24/MWh federal subsidy (totaling more than $50/MWh), it will hurt them much more than coal losing their sum total of ~$3/MWh.
We need to be smart about our advocacy lest it come back to haunt us.