It’s time for green energy to hide its subsidies
Environmentalists took a beating this year on their top issue, the fight to tax carbon emissions so that polluters would have a powerful new economic incentive to clean up their act.
Politico is speculating that the Obama administration’s “green czar” may step down, overwhelmed by the political and bureaucratic obstacles to real change.
So greenies need a quick, easy and meaningful win and here’s one that could really change the game: Hiding the renewable-energy subsidies.
Let me explain.
Currently, when Americans gobble up energy, we don’t realize that it’s all subsidized. The Federal government props up oil and gas companies to the tune of around $4.5 billion dollars a year, mostly in the form of tax breaks.
But that complicated — and controversial — reality is hidden from us.
We don’t often connect the dots between wars in Iraq or hugely costly oil spills in the Gulf of Mexico and our driving habits.
All we know is that we get reasonably cheap energy when we go to the gas pump, or have our fuel-oil tank filled for the winter.
The same isn’t true for renewable or conservation subsidies. If you want to buy a high-efficiency refrigerator, for example, you usually have to apply for rebates.
Same goes for buying a hybrid car. You have to jump through government hoops to do the right thing — and that’s if the subsidies are available at the time when you’re ready to buy.
And if you want government help to put up a wind tower, install solar panels, or build using a geothermal heat system, you are opening yourself to a world of bureaucratic ballyhoo.
You’ll be filling out forms and dealing with state or Federal agencies until you’re blue in the face.
A quick and non-controversial reform of this system would simply shift the subsidies to the manufacturers and the distributors — along with a mandate that every penny in Federal aid be passed along to the consumer.
That way, when I go to buy a new solar panel array, or a new Prius, it costs a third less than it used to right out of the box. And I don’t have to worry about filling out forms and paperwork.
The green energy industry should, in effect, borrow the oil and gas industry’s “hide the subsidy” approach.
We’ve known for years that the biggest hurdle to going green is the start-up cost, the up-front investment.
If government can help people over that threshhold without tangling them up in red tape, we might spark a real conservation revolution.
Tags: environment
It was my understanding that “green” energy is already heavily subsidized by the Federal Gov’t. One example I recall is T. Boons Picketts windmills earning some ridiculous sum, like $25.00 per kilowatt hour regardless of what the energy sold for. I think this is worth looking into to see if subsides already exist.
I’ll not bother to point out any subsidies just screw things up.
Worldwide fossil, non-renewable fuels are subsidized to the tune of over 550 BILLION dollars in 2008. Click this link to see what I’m talking about:
http://news.cnet.com/8301-11128_3-20007059-54.html
Or read the article below:
June 8, 2010 7:56 AM PDT
IEA: To promote efficiency, cut fossil fuel subsidies
by Martin LaMonica
The International Energy Agency on Monday published an analysis that found subsidies for fossil fuels are higher than previously thought. Cutting subsidies would encourage energy efficiency and low-carbon fuels, it said.
The amount of money paid to subsidize fossil fuels around the world was $557 billion in 2008, which is up from $342 billion in the previous year. The key findings on fossil fuel subsidies (click for PDF) were published in advance of the IEA’s annual World Energy Outlook report, which is due in November.
The IEA, which gathers energy industry data, recommended that governments set up programs to phase out fossil fuel subsidies, which would create incentives to use energy more efficiently and use fuels that emit fewer greenhouse gases.
Phasing out subsidies for fossil fuels between 2011 and 2020 would cut global oil demand by 6.5 million barrels per day in 2020, or about one-third of current U.S. demand. It would also cut global energy demand by 5.8 percent by 2020, the equivalent of the energy consumption of Japan, New Zealand, Korea, and Australia combined. Greenhouse gas emissions would be the equivalent of current emission of France, Spain, Germany, the U.K., and Italy combined.
In its initial report, the IEA warned that fossil fuels directly related to electricity generation and other “essential energy services.”
The IEA said that the upcoming Outlook report will focus on making information on energy subsidies available and transparent, which it said is “an essential step in building momentum for global fossil fuel subsidy reform.”
“I see fossil fuel subsidies as the appendicitis of the global energy system, which needs to be removed for a healthy, sustainable development future,” Fatih Birol, the chief economist with the IEA, told the Financial Times.”
Now, how much do you thing the total worldwide subsidy for renewable, green energy is? Answer that question and you’ll see why green energy can’t compete at present.
Brian,
I don’t think this is a bad idea. The only problem is this. Even if you cut the 30% off the price tag, the upfront costs for using alternative energy are still staggeringly high. I just converted a cabin that I own to solar power. I could have used electricity off the grid for a few hundred years before I pay for the set up. At least when you are aware that there is a 30% cut now you might consider that this is a good time to switch. Once the subsidies go away you are going to have to jack the price back up anyway. Now they are kind of a selling tool. Even if subsidies for “fossil, non-renewable” fuels were at 500 billion when you look at the percentage of renewable fuels an equivalent subsidy would be very very low. We can’t force folks to switch by manipulating the price too much otherwise the average person will freeze to death. High energy costs hurt the lowest income people first.
But Brian, what about all the millions spent for energy efficiency and to meet renewable portfolio standards which are paid for through RGGI, REC proceeds, and through other charges, all of which consumers pay for through utility bills but which rarely appear on the bills as such?
That said, there certainly could be more transparency for the breaks fossil fuels get.
$46 Billion total worldwide subsidies for renewable energy. Peanuts compared with half a TRILLION….Wonder why they can’t compete?
Fossil Fuel Subsidies Outpace Renewables
Published: July 29, 2010
New York The research and consulting firm Bloomberg New Energy Finance (BNEF) reports that subsidies for fossil energies are far outweighing those for renewables. While many governments are putting support behind clean energy, the figures show that renewables are still far behind, reports BNEF.
The $43-46bn figure stands in stark contrast to the $557bn spent on subsidizing fossil fuels in 2008, as estimated by the International Energy Agency last month.
The following is a summation from BNEF of its analysis, released earlier this week:
In all, governments of the world provided approximately $43-46bn to renewable energy and biofuels technologies, projects, and companies in 2009, BNEF concludes in preliminary analysis. This total includes the cost of feed-in-tariffs (FiTs), renewable energy credits or certificates (RECs), tax credits, cash grants, and other direct subsidies. (It does not include more upstream support, such as subsidies to corn farmers to grow feedstock for use in US ethanol plants, nor does not include any value transfer due to carbon cap-and-trade schemes.)
The $43-46bn figure stands in stark contrast to the $557bn spent on subsidizing fossil fuels in 2008, as estimated by the International Energy Agency last month.
“One of the reasons the clean energy sector is starved of funding is because mainstream investors worry that renewable energy only works with direct government support,” said Michael Liebreich, chief executive of Bloomberg New Energy Finance. “Setting aside the fact that in many cases clean energy competes on its own merits – for instance in the case of well-situated wind farms and Brazilian sugar-cane ethanol – this analysis shows that the global direct subsidy for fossil fuels is around ten times the subsidy for renewables. And that is without taking into account the enormous security and public health costs of fossil fuels, as well as the appalling pollution catastrophes on the Gulf Coast, the Niger Delta and elsewhere.”
The BNEF preliminary analysis suggests the US is the top country, as measured in dollars deployed, in providing direct subsidies for clean energy with an estimated $18.2bn spent in total in 2009. Approximately 40% of this went toward supporting the US biofuels sector with the rest going towards renewables. The federal stimulus program played a key role; its Treasury Department grant program alone provided $3.8bn in support for clean energy projects.
China, the world leader in new wind installations in 2009 with 14GW, provided approximately $2bn in direct subsidies, according to the preliminary analysis. This figure is deceptive, however, as much crucial support for clean energy in the country comes in form of low-interest loans from state-owned banks. State-run power generators and grid companies have also been strongly encouraged by the government to tap their balance sheets in support of renewables.
Feed-in-tariffs (FiT) subsidizing the purchase of clean electricity in Europe accounted for roughly $19.5bn of the total 2009 spend, or just under half the global total. Germany is home to what was the world’s single most expensive clean energy subsidy program in 2009, BNEF’s preliminary research found. Its FiT cost Germany’s ratepayers an estimated $9.6bn in 2009 and is a reflection of the extraordinary number of PV systems installed in the country in recent years.
The gap between what governments spend on subsidizing fossil fuels and clean energy should narrow considerably in 2010 for two reasons. First, support for renewables and biofuels will grow as disbursement of $188bn in global stimulus funds for clean energy accelerates, based on BNEF research. Second, the amount governments such as China spend to keep fossil fuel prices artificially low for consumers has dropped as oil prices retreated from their mid-2008 peaks. Simply put, less government support is needed to make these dirty sources of energy more affordable to populations around the globe.
So to add some perspective, the United Sates spent the most of that $46 billion dollar figure (18.2 billion) on alternative energy subsidizes. In the same year, the United States Department of Defense received over $80 Billion in its annual budget appropriation for “Research and Development” of new weapon systems. For NEW weapons systems….Just to illustrate where our priorities really lie.
Sorry, so I understand this. In 2009 we spent 18 billion dollars on subsidizing renewable energy. I got that. What portion of the 550 billion spend on non-renewables world wide was paid for by the US? Thanks.
I can’t find the exact figure for the US, but the pdf contained in the IEF article above states that the highest single country was Iran with $101 Billion in total subsidies. Interesting….
The US “subsidizes” many energy companies through the tax code. So it may be very difficult to determine what the amount is. I think this is the “hide” that Brian is referring to. I would agree that we could give renewable energy companies some kind of similar tax incentives (maybe we already are). But the reality is that non-renewables are used at such a higher rate that they cannot help but “subsidize” them at these staggering amounts. The more we buy them the more we get a tax break and they more they are “subsidized”.
If we need to quickly “save the planet” then I suggest that we focus on increasing efficiency of what we are currently using and quickly develop ways to limit our emission of carbon into the atmosphere (CO2 sequestration and other means). Most of the plans I see that have a hint at a viable strategy for renewable energy rely very very heavily on wind power. This is not realistic given the limits on the rare earth elements that are needed to develop this technology. Not only does it make us almost completely dependent on China (one county instead of a hand full of oil producers) but it may do even worse irreparable damage to the environment at the same time.
Maybe some of you alternative energy guys can give me your view on something- Seems that every time someone comes up with an idea that seems workable (windmills, tidal generators, geo termal, very large solar arrays in the desert) 101 environmental groups instantly spring into action, with slimy politicians in tow, to tell us why we can’t do that. What are your views on this? Is this just NIMBY or is there a consolidated effort to simply block everything no matter what it is?
Alternative energy has been framed as an environmental issue. It should be framed as a national security issue (and it is), then everyone will be happy to spend practically unlimited amounts of money on it.
Look at our national highway system. Ike sold it as national security–the answer to the German Autobahn. At the same time it was a gift to the Detroit auto companies. If instead Ike had spent those billions on improving our rail systems and other forms of mass transit the world would still have a lot more oil underground.
Those environmentalists that have unreasonable opposition to alternative energy are part of the looney left (yes, I admit a looney left segment exists).
Knuck, you must have been listening to Noam Chomsky this morning. What a great interview!
First. The total amount of the subsidies for any energy source is misleading. The proper metric is the subsidy per unit of energy. In fact the traditional sources are not subsidized anywhere near what the alternatives are getting. From the Energy Information Administration:
Subsidies and Support to Electricity Production
Subsidy and Support Per unit of Production (dollars/megawatthours)
Coal – $0.44
Natural Gas and Petroleum Liquids – $0.25
Nuclear – $1.59
Hydroelectric – $0.67
Biomass (and Biofuels) – $0.89
Solar – $24.34
Wind – $23.37
Energy Subsidies Not Related to Electricity Production
Subsidy per million Btu (2007 dollars)
Natural Gas and Petroleum Liquids – $0.03
Ethanol/Biofuels – $5.72
The take home point is the only reason the absolute numbers are larger for the traditional sources is the quantity produced by those sources dwarfs the alternatives.
Second. One thing I see a lot is people claiming we can reduce our dependence on oil by building alternative sources like wind mills and solar cells. We only generate about 3% of our electricity from oil and that is using the part of the oil (residual oil) that has no other practical uses. In spite of all the hype in the media we are nowhere close to having an adequate battery for transportation. The high density batteries we do have are made with something that is by far less abundant than oil, lithium.
PNElba, yes, actually I did listen to Noam yesterday morning. Why doesn’t NPR give Chomsky a few seconds every hour instead of reporting on what the stock market is doing?
Obama is so liberal that he placed Chomsky in the Cabinet…oh, wait a minute.
What?! Chomsky and Dean and Kucinich have no voice in this administration but Rahm and Tim do? What kind of a liberal administration is that?
The only real way I see our dependence on oil shrinking is to come up with a realistic alternative. So far one does not exist. Battery powered cars just don’t work outside metropolitan areas. We keep passing laws mandating heavier vehicles that get poorer mileage. The 1980 Dodge Colt that got 50mpg is history and simply couldn’t be sold today. Why? Europe has small diesels that get fantastic mileage that can’t be sold here. Why? We currently add corn based ethanol to our fuels that destroy engine parts. Why? We have blended diesels that are horrible in terms of efficiency and in some parts of the country special blended gasolines that are also horrible in efficiency and harmful to the engine. Why? WHY? Simple, because our all knowing politicians bowed to the whims of lobbyists for special interest groups that convinced them ( with cash no doubt) that this was the way to go. The same politicians will willingly triple our electrical costs with cap and trade and then probably tax us more for whatever else we make use of.
I see no solution in the future at this rate.
“Alternative energy has been framed as an environmental issue. It should be framed as a national security issue (and it is), then everyone will be happy to spend practically unlimited amounts of money on it.”
knuckleheadedliberal, you may be right but I think if you did you would find that the current strategies for alternative energy, that focus on wind, solar etc., are strategies that could be detrimental to out national security.
Like I said above, and what people don’t seem to understand, is that the natural materials needed for this plan would make us almost completely dependent on one country, China. ALL the rare earth elements needed for wind turbines and other components of some alternative energy producing devices, come from China. In fact they are not even sure if there is enough of it for what we would need. It is going to get more expensive, it is going to have very serious consequences for the environment extracting it, and it is all in a country that is now spending lots of money to build up its military capability! Hopefully these are hurdles we can manage, but to frame this as a national security issue may be a mistake.
If the plan included increasing domestic production of fossil fuels, along with more hydroelectric and nuclear production than I would call that a plan that could be framed as better for our national security. However the current democratic administration is pretty much opposed to any plan like this. The environmental groups that are mentioned above certainly are. Just try and build a large dam in this country.
Try and build ANY large power project. It’s a shame.
Paul, what about numerous small scale hydro projects on water sources with existing dams?
What about technologies that reduce consumption of power? All methods should be explored.
We have to work from grounds up – on a grass roots level. As long the greedy and corrupt profit driven elements have the financial backing to manipulate the vast public with mass media brain wash.