Get Energy Smart! NOW!

That title provides a reasonable summation of Estimating U.S. Government Subsidies to Energy Sources: 2002-2008, a report released today by the Environmental Law Institute and the Woodrow Wilson International Center for Scholars looking at U.S. subsidies for energy, the relationship of fossil fuel to renewable energy subsidies, and how this relates to foreign production of energy. In short, two key points:

• For Fiscal Years 2002-2008, the lion’s share of energy subsidies supported energy sources that emit high levels of greenhouse gases.
• The largest U.S subsidies to fossil fuels are attributed to tax breaks that aid foreign oil production

Thus, as this post’s title suggests, US subsidies through the Bush Administration promoted the production of dirty energy overseas to create jobs for foreigners and send US dollars overseas rather than promoting clean energy (cleanliness) that would create jobs for Americans.

As can be seen in the graphic above, the Federal government provided substantially larger subsidies to fossil fuels than to renewables. Through the seven year period

• Fossil fuels benefited from approximately $72 billion in subsidies
  • Of this, over 95 percent (some $70.2 billion) went to traditional coal, oil, and natural gas
  • Some $2.3 billion went to research and work on carbon capture and storage
• Renewable fuels totaled only $29 billion.
  • More than half the subsidies for renewables (some $16.8 billion) went to programs that are, quite possibly, counter-productive on climate and environmental fronts: corn-based ethanol.

As the press release highlighted, “energy subsidies highly favored energy sources that emit high levels of greenhouse gases over sources that would decrease our climate footprint”.

Throughout the US energy market, there are explicit and implicit national and state policies that favor the use of traditional energy sources. We should be judging complaints about and discussions of actual and potential support for clean energy (whether energy efficiency or renewables) in light of the long-existing subsidization of fossil fuel extraction and usage.

Policies favoring fossil fuels range from royalty relief to the provision of tax incentives, direct payments, and other forms of support to the non-renewable energy industry.

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

There are two basic subsidy arenas that this report looked at:

• Foregone revenue:  mainly tax breaks.
• Direct spending: mainly research and development.

Note that they are leaving aside massive arenas of subsidies in terms of road construction, subsidization of buying fuel inefficient vehicles, subsidies for unsmart growth (sprawl, large single-family homes, etc),  the costs for security (such as US military protection of oil), and the pollution impacts (whether health costs or climate change).  Even when “limiting” the discussion, the equation falls quite heavily to subsidization of climate-unfriendly energy sources.

When looking at “foregone” revenue, which is often far from the thinking of most Americans (but a favorite of Corporations, finding the tax code an easier path to subsidies rather than direct spending), this study calls out an item that is even farther from most Americans’ radar scope:  The largest single tax subsidy is the Foreign Tax Credit (at $15.3 billion) which “applies to the overseas production of oil through an obscure provision of the U.S. Tax Code, which allows energy companies to claim a tax credit for payments that would normally receive less-beneficial treatment under the tax code.”  Thus, there is an element of the tax code that provides even greater benefits for taxes related to overseas energy production than what other business activities receive for their overseas costs.  What does that $15.3 billion in special subsidy represent:  subsidizing filth to employ foreigners rather than spending the money on cleanliness to employ Americans.