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Renewable energy sources received 25 times more in taxpayer subsidies per energy unit produced than fossil fuels in 2010

AEIdeas

subsidiesIn 2010, renewable energy received $14 billion of government taxpayer subsidies, while fossil fuels energy sources received only $4 billion of taxpayer handouts that year, according to estimates by the Energy Information Administration (EIA) and reported in today’s WSJ by Bjorn Lomborg in an op-ed. According to energy production data from the EIA, the US produced 8.12 quadrillion BTUs of renewable energy in 2010 from geothermal, solar, wind and biomass sources, while the energy produced from fossil fuels (coal, oil and natural gas) totaled 58.2 quadrillion BTUs.

The chart above displays the dollar amount of taxpayer subsidies per billion BTUs of energy produced in 2010, and shows that renewable energy in 2010 received 25 times more in taxpayer subsidies than fossil fuels, adjusted for the amount of energy produced: $1,724 per billion BTUs of renewable energy produced vs. less than $69 per billion BTUs of fossil fuel energy produced.

That was one of the points made today by Bjorn Lomborg in his WSJ op-ed:

Three myths about fossil-fuel subsidies are worth debunking. The first is the claim, put forth by organizations such as the Environmental Law Institute, that the U.S. subsidizes fossil fuels more heavily than green energy. Not so.

The U.S. Energy Information Administration estimated in 2010 that fossil-fuel subsidies amounted to $4 billion a year. These include $240 million in credit for investment in Clean Coal Facilities; a tax deferral worth $980 million called excess of percentage over cost depletion; and an expense deduction on amortization of pollution-control equipment. Renewable sources received more than triple that figure, roughly $14 billion. That doesn’t include $2.5 billion for nuclear energy.

Actual spending skews even more toward green energy than it seems. Since wind turbines and other renewable sources produce much less energy than fossil fuels, the U.S. is paying more for less. Coal-powered electricity is subsidized at about 5% of one cent for every kilowatt-hour produced, while wind power gets about a nickel per kwh. For solar power, it costs the taxpayer 77 cents per kwh.

Discussion (36 comments)

  1. Andy says:

    I don’t have a horse in this race, but it’s hardly surprising that a mature technology requires less $/BTU than ones still actively being developed.

    1. hitssquad says:

      How do you know they can be developed at all? Solar and wind are diffuse fuels. All the development time and money in the world can’t change that, and fuel diffusion drives cost and danger.

      Coal, nuclear, hydro, and gas aren’t cheap and safe because they’re old. They’re cheap and safe because they’re dense.

      1. Nick Bradley says:

        residential solar is soooooo dangerous!

        1. RonRonDoRon says:

          It might be fiscally dangerous. How much would it cost to install enough residential roof-top solar panels to provide all residential electricity needs? Will they ever be cost effective without subsidy?

          1. Ron H. says:

            Solar will never be effective as anything but a supplemental energy source, unless and until massive and efficient energy storage systems are available for load leveling.

    2. butasha says:

      Do you pay taxes in the US? If you do then you have a horse in this race.

    3. The point was to de-bunk the claim made by some that the U.S. subsidizes fossil fuels MORE heavily than green energy, which is obviously false.

      1. marque2 says:

        But the items counted as subsidies for Big fossil fuel, are really government offsets for ” Clean Coal Facilities” that government mandated.

        Or the “excess of percentage over cost depletion” which companies in other industries call a standard writeoff for depreciation, but that isn’t allowed to the oil companies in this case, so congress makes an exception.

        Looking at it, I see almost zero real subsidies for oil.

    4. John Dewey says:

      Andy: ” it’s hardly surprising that a mature technology requires less $/BTU than ones still actively being developed.”

      Do you really believe that fracking is a mature technology? or that extreme deepwater drilling is a mature technology? Here’s a few examples of how those “mature technology” industries are keeping your energy costs lower:

      1. EMC Corporation will spend $100 million over the next few years to build ” a new R&D center in Rio de Janeiro primarily focused on the acquisition, analysis, collaboration and visualization of seismic data generated by the oil and gas industry”

      2. Foro Energy, founded in 2009, has developed high powered lasers to destroy ultra hard rock and make possible drilling into some oil formations which were previously deemed inaccessible.

      3. Oxane Materials was founded in 2002 to commercialize research from Rice University. The company’s Advanced Ceramic Proppants are used by fracking companies to increase well production while simultaneously reducing the environmental impact of the process.

      Those are just three of thousands of companies which are investing many billions of dollars in oil and gas technology.

      Global energy industries are anything but mature technology.

    5. Trey says:

      Mature technology?? Silly. Wind and solar (and water) ran the preindustrial world. After 3000 years we got off this mature technology b/c the power density is 50 to 200 times less dense than fossil fuels. I will tell another heresy: that increased density makes fossil fuel more environmently friendly than so called green tech.

    6. Don Hart says:

      For non/less-partison research comparing the taxpayer subsidy costs of all energy sources try the Nuclear Energy Institutes extensive study. http://www.misi-net.com/publications/NEI-1011.pdf They are a conservative, pro-nuclear group. Oil/gas/coal received over 70% of all the benefits. Nuclear and renewables were both at only 9%. Or stick with the smoke and mirrors system presented here.

    7. Erik says:

      This is fair analysis, but it’s obviously being used to stoke an agenda. If there is such concern over subsidy imbalance, why not end them all across the board?

      Further, we have a methodological issue here: in charting subsidies by $$/per unit of current energy produced, which is a nice looking graph that conveniently ignores raw subsidy dollars by sector, the impression is given that you get much more for fossil fuels subsidy, and very little for renewables. Certainly someone capable of 10th grade math can appreciate the compounding effects of dollars invested for nearly 100 years to specific sectors. Um, duh, that’s why so little relative subsidy looks like the best investment. So, it’s not myth that fossil fuels received absolutely more money in federal financial perks (including favorable tax treatment for certain aspects of the business for over 100 years), it’s absolute dollar fact. And yes, if you have a brain, it’s quite easy to see why $$ per BTU produced was significantly higher for technologies coming into their own in the last 30 years or so (excluding hydro and nuclear). That makes perfect sense; so what’s the issue? Either you favor subsidizing renewables proportionally more for both climate and energy benefits, or your don’t. If you don’t then fine, but voting no you in essence have de facto voted yes for the last 100 years of coal, oil and gas. So, end them all, every last one of them, across the board. Or give emerging technologies a fighting chance, just like wed did with the Internet, space program, etc. What’s the issue?

  2. marque2 says:

    Seems like the subsidies to fossils fuels are mostly to cover costs of government mandates and are therefore not really subsidies at all. More like eminent domain payments. We are forcing you to use your property differently and will pay you for some of the extra costs.

  3. Benjamin Cole says:

    It doesn’t matter what anybody says.

    Wind power and ethanol are going to get subsidized.

    The Plains States want wind power and they have two Senators for every state. The corn states want ethanol.

    Rural and agriculture subsidies never end. You have “states” like North Dakota—population less than Brookyln or Detroit—with two Senators. Of course they are going to get subsidized.

    As a result, North Dakota receives about $20k in federal spending per capita more than it kicks in to the feds.

    It is pink-gravy nirvana time in rural America. Rural America is a socialist heaven.

    They call it the USDA: The United Soviet Department of Agriculture.

    1. Nick Bradley says:

      agree on ethanol. disagree on wind.

    2. butasha says:

      Ethanol is just another form of welfare and a conduit to move tax dollars from those taxed to those that have the know how to play the game.

      The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.
      Alexis de Tocqueville

  4. Nick Bradley says:

    This isn’t really surprising since hydrocarbons are a mature technology.

    hydrocarbons – particularly power plant production – received heavy, heavy subsidies from the 1930s through the 1950s…along with the infrastructure to distribute power (the grid).

    Today, renewables are growing at a rapid clip due to subsidies…as they should. Subsidies to renewables — and I’m talking about wind and solar here — should be seen more as a capital investment:

    If a tax credit increases the number of residential solar panels by x%, those panels will continue to produce for 25+ years — there is no depletion of supply…nobody else is capturing that sunlight. Same goes for Wind, although wind is more centralized in production (i.e. nobody puts wind farms in their back yard).

    The USG reaps a massive ROI from subsidizing solar…and I think we should subsidize them even more! you can basically take every home in the western US off of grid power during daylight hours.

    1. Rick says:

      Pixie dust isn’t “mature” either and has exactly as much chance of changing our energy future as solar or wind. I’ve lost patience with you liberals who can’t do math. Wishing and hoping, and subsidies for that matter don’t make the math go away. The math says that the cost of building a solar array or windmill will never be recouped in energy costs.
      Can you point to anywhere in the world, Denmark or Germany have very robust wind and solar, where renewable energy has eliminated one conventional power plant?

      1. marque2 says:

        You are right except for in special applications.

        1. Ron H. says:

          You are right except for in special applications.

          Yes. Solar makes sense in these applications.

          And wind power makes good sense here as it has for centuries.

        2. Rick says:

          No, I’m right about it 100% of the time. However, there are places where saving energy or money isn’t the issue. In those cases solar or wind makes sense.

          A good case is the remote Island of Eigg off Scotland. Since they have no other real options short of imported diesel fuel to run generators they have gone to renewables. However, they gloss over where the power really comes from. They show you their 4 tiny little wind generators and their solar array and then casually mention their hydro. Of course the truth is the wind and solar stuff is just for show and tell, (and I’m sure money,) but almost all their power comes from the hydro.

          1. hitssquad says:

            They don’t use pumped storage?

    2. John Dewey says:

      Nick Bradley: “This isn’t really surprising since hydrocarbons are a mature technology.”

      Why do you believe that either the extraction or processing of hydrocarbons is “mature technology”? Have you read anything about the technological advancements used by energy industries to keep the cost of gasoline and natural gas low?

      Value investment advisor ValueWalk explains:

      “While hydraulic fracturing has been the most visible revolutionary advancement, other high-tech developments are keeping the ball rolling—from the next generation of ultra-deepwater drillships, subsea oil and gas infrastructure and multi-well-pad drilling to M2M networking, floating LNG facilities, new dimensions in seismic imagery and supercomputing for analog exploration.”

      http://www.valuewalk.com/2013/07/six-tech-advancements-which-are-changing-oil-gas-usage/

  5. Nick Bradley says:

    Big Coal was built by the gummint, and we’re not even talking about negative externalities yet. Shoot, the non-carbon externalities from Coal (e.g. water pollution) run in the hundreds of billions of dollars a year.

    Looking at maturity:

    “In comparing current support for renewable energy with past aid for today’s traditional energy sources, the report focuses on two types of assistance: funding during the first 15 years of support and annualized expenditures over the life of the energy source.
    The first 15 years, the report says, are critical to developing new technologies. It finds that oil and gas subsidies, including tax breaks and government spending, were about five times as much as aid to renewables during their first 15 years of development; nuclear received 10 times as much support.
    Federal support during the first 15 years works out to $3.3 billion annually for nuclear energy and $1.8 billion annually for oil and gas, but an average of only $400 million a year in inflation-adjusted dollars for ­renewables.”

    http://cen.acs.org/articles/89/i51/Long-History-US-Energy-Subsidies.html

    1. Che is dead says:

      Your source:

      For coal, which generates half the nation’s electricity, the authors were unable to quantify government support for the first 15 years, which includes federal and state aid. Coal, Pfund notes, benefits from a host of centuries-old programs that signal a rich history of aid, which is intertwined with the development of the nation. The aid runs deep and comes in many forms—state and federal tax breaks for mining and use; technological support for mining and exploration; national resource maps to encourage exploration and development; tariffs on foreign coal; and aid to steel smelters, railroads, and other industries that burn coal to encourage greater use and develop a steady market for coal.

      “Big Coal was built by the gummit”. — Elizabeth Warren. Er, sorry, Nick Somebody

      No matter how convoluted the lie, it’s still a lie.

    2. Ron H. says:

      Nick

      Yours is a really strange argument: That since the ability of crony capitalists to dip their hands into taxpayer’s pockets is a well established practice with a long history, that it should continue.

      Do you really believe that “Those Who Know What’s Best For All Of Us” should be be making our choices for us?

  6. Duracomm says:

    Benjamin’s bigotry toward people in rural states is facilitating his economic ignorance.

    If he was not bigoted and economically ignorant he would understand that ethanol and wind subsidies would not exist without the active support of urban interest groups and politicians.

    But bigotry is more important to Benjamin than knowledge so he remains ignorant of the fact that things like ethanol subsidies benefit a tiny portion of red state residents and harms everyone else in those red states he is bigoted against.

    If Benjamin would like to be less bigoted and more knowledgeable he might study up on the economic concept of Bootleggers and Baptists before he embarrasses himself with more cut and paste comments that highlight his bigotry and ignorance

    1. Benjamin Cole says:

      I am not bigoted. But let’s face facts: You give 750,000 residents two Senators (North Dakota) and you have created the perfect plan for eternal subsidy.

      1. RonRonDoRon says:

        Pork-barrel is like crony capitalism. It could be stopped (or at least minimized) if the voters who are paying cared enough.

      2. Che is dead says:

        Hey, genius. If those states didn’t have two Senators you would already be living in a larger version of Castro’s Cuba.

        And while “blue states”, like New York, may have greater populations, their citizens are apparently too stupid to be trusted with making even basic decisions for themselves, like how much soda to drink, or how much salt to use. Why should they be allowed to vote?

        1. Ron H. says:

          Che: “And while “blue states”, like New York, may have greater populations, their citizens are apparently too stupid to be trusted with making even basic decisions for themselves, like how much soda to drink, or how much salt to use. Why should they be allowed to vote?

          Hmm. Good point. Ironically, they elect people who can make those decisions for them. Go figure.

      3. morganovich says:

        benji-

        ahh, because such a plan would not have to also pass the proportionately representative house?

        isn’t the senate run by team donkey at the moment? (and for the last 7 years?)

        so just how are the north dakota senators responsible for ethanol?

        seems to me that the urban folk have had loads of opportunities to block this.

        your reasoning here is not convincing.

      4. Paul says:

        I keep pointing out to Benji, and he keeps running away when I do, that 80% of the USDA’s budget is devoted to food stamps, a program that goes overwhelmingly to Obama voters in red states, blue states, rural areas, urban areas, you name it.

        And while he loves to attack rural America, his boyfriend Barack received 98% of the vote in Detroit.
        America’s most crime ridden, welfare sucking, illiterate hellholes are run by Democrats.

        http://mojosteve.blogspot.com/2013/06/surprise-most-dangerous-cities-in.html

  7. John Dewey says:

    The worst thing the oil and gas industries could do is start accepting more government funding. The reason the world is currently awash in oil and gas is because capitalists made huge investments in successful technologies over the past four decades. Because those capitalists were working in their own self-interest, they made sure that money was invested in projects and research with a reasonably good chance of success.

    Had government been in control of the purse strings of oil and gas investment, those industries would have wasted billions and billions of dollars on politically influenced projects.

  8. juandos says:

    First of all what is a fossil fuel subsidy?

    Look at crude oil, Uncle Sam makes more off of a gallon of gasoline in taxes than does the energy company [ies] involved in exploration, transportation, chemical rendering, and finally getting the end products to the consumers…

    From API: The U.S. oil and natural gas industry does not receive “subsidized” payments from the government to produce oil and gas. However, there are many provisions in the tax code that allow companies to recover their costs. The oil and gas industry are eligible for these deductions, which are similar to, if not the same as, deductions available to many other industries

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