Energy Subsidies
(Laura0509 photo.)
The Envirnomental Law Instutute (ELI) has released a report on government subsidies of energy in the U.S. Subsidies are an important issue because they give certain types of energy a competitive advantage over other types of energy. In theory, we would subsidize those forms of energy that we want to encourage. Thus, it makes sense to subsidize renewable energy to an extent because its long-term costs to society are much lower than those of fossil fuels.
In practice, according to ELI, over eight years the U.S. actually paid $73 billion in subsidies for fossil fuel energy, and only $29 billion for renewables. Comments EcoMii,
"Of equal concern is that 58% of renewables subsidies ($16.8 billion) went towards corn-based ethanol, a fuel that’s carbon credentials are in question and has been linked to increasing world food prices."
They note that only $12 billion, or about 12% of the total, went toward non-corn renewables.
Although I'm opposed to subsidizing the big oil companies, I am in favor of having all the facts, and some perspective is in order here. Comparing subsidies per energy output reveals a somewhat different story. Here I've used figures that come from 2007 EIA data. The subsidy amounts may differ somewhat from ELI's, but considering the amount of energy used is illustrative:
| Source | Subsidy | EnergyConsumption* | Subsidy per unit | |
| Coal | $0.9B | 22.750 | 3.9 cents | |
| Oil & Natural Gas | $2.1B | 63.401 | 3.1 cents | |
| Biofuels | $1.0B | 1.025 | 97 cents | |
| Other Renewable | $0.4B | 5.789 | 6.9 cents | |
| Nuclear (excludes insurance) | $1.3B | 8.458 | 15.4 cents |
Renewables here include both hydroelectric and wood-derived fuels, the two largest energy sources in the category, as well as wind, geothermal, and solar. We may assume that these various sources are not subsidized equally, so the "sexier" renewables may receive significantly higher subsidies than this chart shows. Still, it is clear that coal, for example, receives a much lower subsidy per unit than does ethanol. By this measure, biofuels receive the most money per unit, followed by nuclear power.
Government subsidies of oil and coal help give us such low electricity and gasoline prices. We pay less at the pump and more on our tax bill. Go figure.
Subsidizing a product gives that product an advantage over a non-subsidized product, artifically lowering its cost. If we subsidize coal and oil, and we want less destructiuve technologies to compete, then we must also subsidize renewables. But if we stop subsidizing fossil fuels, then renewables would need less subsidy to compete.
Posted by DJ at 10/31/2009 8:00 AM 
Categories: OIL,Renewable Energy,Economics
Tags: spending government
Categories: OIL,Renewable Energy,Economics
Tags: spending government
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