Fossil Fuel Subsidies Dwarf Support For Renewables

TravisTR sends word of research from Bloomberg New Energy Finance which found that direct subsidies for renewable energy from governments worldwide totaled $43-46 billion in 2009, an amount vastly outstripped by the $557 billion in fossil fuel subsidies during 2008. "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."

Comments

No Surprises Here

[WrongSizeGlass]

The fossil fuel industry has a lobbing campaign that dwarfs that of renewable energy. 'nuf said.

Re:No Surprises Here

[c6gunner]

The fossil fuel industry has a lobbing campaign that dwarfs that of renewable energy. 'nuf said.

Ah, yes, it's all about the lobbyists. It can't have anything to do with the scale difference between the renewable energy industry and the fossil fuel industry.

You know what REALLY pisses me off? I, as an individual, get close to ZERO subsidies! Where's my $40 billion? I demand equal treatment!

Re:No Surprises Here

[commodore64_love]

I'd like to know why they include military expenses as a "subsidy" for fossil fuels. We don't have to use the military to get oil from Iran or Iraq - we could buy it from friendly countries like Canada, UK, Russia.

Also renewable energy like solar cells, hydroelectric, and so on need military protection as well (from invasion or terrorism). So the military expenses should be on that tally sheet too, but they conveniently left it off.

Re:No Surprises Here

[tompaulco]

I'd like to know why they include military expenses as a "subsidy" for fossil fuels.
Because it helps to spin the story to express the viewpoint which they would like you to believe and they hope that most people will not dig too deeply and just accept them at their word.

Re:No Surprises Here

[TastyCakes]

Yes, this article is somewhat misleading. First, it's talking about world wide subsidies, which considering most of the world's oil is owned produced by state owned companies is likely a very complicated calculation. This article puts US subsidies at between $15 and $35 billion, numbers that include some very dubious things in there, such as construction of the highway system, the strategic petroleum reserve etc.
What people don't seem to understand is the motivation for US subsidies. The US government wants to encourage as much domestic production as is reasonably possible, and they don't want a government entity to have to produce it (like countries with nationalized oil industries do). The only way to do this, therefore, is to make it more attractive for oil companies to extract oil that would otherwise be uneconomical. "Relaxing the amount of royalties to be paid", as the link above calls it, is I believe the main way the US government supports the oil industry.
If these royalties reductions weren't in place, many of the wells in America would simply be uneconomical. The stripper wells mentioned by someone before wouldn't stand a chance, and collectively they account for 18% of US production (according to Wikipedia). Without deep water credits, much of the gulf production would be an economic non starter (and gulf production is about a third of US production). And the overriding thing that people ignore is that 50% of zero is less than 5% of something. If you force a stripper well producing 2 barrels a day to pay a regular royalty, you're not going to bring in more money for the government, you're going to force that well to be plugged and abandoned, and it's probably never going to be economical to redrill it. Both the government and the industry loses.
It is expensive to extract oil in America's increasingly depleted fields, particularly compared to the younger and much larger oil provinces of the middle east and elsewhere. Because of this, the US government grants the oil industry here better incentives than in those countries to try and keep them in America - simply put, they allow the companies to keep more of the oil they produce. Maybe Americans are no longer comfortable with that deal, but they must remember that hiking royalties will significantly lower US production and will necessitate greater imports from unsavory places.

Re:No Surprises Here

[Geoffrey.landis]

Without subsidies your electricity bill would be larger.

And that would be a good thing. It makes sense that the people who use electricity should pay for electricity.
This is known as a "market economy," and it encourages things like efficiency, and matching the supply to the demand.

There's some sense to subsidizing an emerging technology: encouraging the fledgling technologies in hope some of them will grow could result in a large payout further down the line. There's no sense in subsidizing the giants.

...In the case of the major oil companies it's very dubious that they should still get handouts, but some of the tax breaks have been useful to small operators...

And only a trivial percentage of the tax breaks actually go to small operators, because the big operators have much more money to lobby with; and also much more money to pay lawyers to find the loopholes to enable them to qualify for the subsidies intended to support small operators. (Much like farm subsidies, actually-- the bills that are passed because they will be "supporting America's family farms" actually end up supporting the huge factory operations.)

Re:No Surprises Here

[PopeRatzo]

The only way to do this, therefore, is to make it more attractive for oil companies to extract oil that would otherwise be uneconomical.

If it's "uneconomical" to drill that for as much as 2 million barrels of domestic supply, wouldn't you think this is a big incentive to increase development of alternative sources of energy?

The reason these subsidies irk a lot of people is because the same conservative "grass-roots" "think-tanks" and the Chamber of Commerce that are all about letting the God of the Free Market control everything would howl with outrage if these subsidies to oil companies were to be cut off or even reduced.

There's no where near a concerted effort to develop alternative energy in the US, despite environmental disasters of enormous scale, including a million barrels now dumped into the Kalamazoo River in Michigan. Yet, any time alternative energy is mentioned, you'll hear scoffing and arguments such as "Alternative energy is never going to replace energy" or "If it was going to happen, it would have happened already" or "Solar energy can never be useful because it wasn't useful ten years ago".

What they're really saying is "Nothing's going to replace fossil fuels until we find another source of energy that will enrich the same corporations and to the same extent that are currently getting rich from fossil fuels". If there was a way that BP or Exxon could get hugely rich off of solar energy, solar energy would have replaced fossil fuels decades ago.

Re:No Surprises Here

[PopeRatzo]

The fossil fuel industry shows profits in the hundreds of billions.

And they still expect to be paid by the government to convince them it's worth their time to make hundreds of billions.

I'm sorry, but that's just ridiculous. And the same people who believe the free market should determine everything about our lives also believe those subsidies to oil companies are absolutely necessary. And a remarkable number of those people are the same ones who will tell you that we absolutely must continue to pay huge cost overruns and ridiculous markups to military contractors, because otherwise, they might not want to make all that great hardware with which we fight our glorious wars.

Oh, and absolutely no negotiating with pharmaceutical companies, because otherwise they won't want to do the research and make the pills that earn them hundreds of billions in profits. And although CEOs must be free to negotiate hundred-million dollar salaries because that's the free market at work no workers must be allowed to collectively negotiate their salaries because that would HURT the free market. Got that? CEO's negotiating = Good / Workers negotiating = Bad

Re:No Surprises Here

[sjames]

Yes, but the oil companies do like the cheaper higher grade stuff from the Middle East. Why in the world else would we be so involved in the Middle East decade after decade while refusing to intervene in places that actually ASK for our help?

Every country needs protection from invasion and has a military to deal with that. None of them spend anywhere near as much of their national budget on it as we do. If all our military had to do was protect us from invasion, they wouldn't be dropping so many of those million dollar smart bombs today. You seem to be desperately clutching at straws here.

Re:No Surprises Here

[owski]

I heard a great quote from an economist that is related here, "You wouldn't have to subsidize public transportation if you'd stop subsidizing private transportation [roads, mainly.]" It's not literally true, but it makes a good point.

Priorities

[Voline]

To help the now-wealthy to become yet more wealthy, or help all of humanity to avert climate disaster and live in a cleaner environment? Hmmmm decisions, decisions ...

Where is the study?

[Anonymous Coward]

It would be interesting to see how the fossil fuel subsidy number was calculated. Even assuming the calculation is accurate, I'm not sure I buy the argument that renewable energy would be more economically viable than fossil fuels if not for government intervention. The article ignores taxes on fossil fuels, which I'm sure would dwarf any subsidies.

Re:Where is the study?

[WindBourne]

Not even CLOSE to accurate.
How much money is paid for the right to DUMP pollution in the air in the burning? Nothing. We have a couple of 100 fires in old coal mines that the company that created the mine does not have to stop (too expensive). Both pollutions are HUGE. And how much is paid to offset it? Nothing by the power companies.

How much money is paid by Power companies for the right to send out mercury? The vast majority of mercury that is emitted by man is from power plants. In fact, out here in West USA, nearly all of the mercury in our waters come from power plant emission, or in a few areas, from old mining tailings.

The money that BP will pay for the gulf is but a fraction of the damage that it caused. Exxon paid very little of the clean-up in Alaska. And Nigeria has large amounts of environmental damage, all caused by oil companies that do not care about spills.

In addition the taxes that will be paid on the oil that will likely be sold elsewhere (such as Alaska oil) is a pittance compared to how much we are stealing from out children.

Finally, the thought that we burn oil is just amazing to me. Oil truely is one of the worlds wonder chemicals. It permeates our society in every aspect. Yet, we throw away the majority, and really do not pay but a fraction of the real costs of burning oil and coal. It is time to stop this for our national security.

Re:Where is the study?

[BigSlowTarget]

A quick search found this $557 billion is primarily from China, Venezuela, Egypt Iraq and Iran consumer subsidies. When the government owns the oil company the subsidy is not making the owner rich. It might help the less well off more than the better off through reduction of gas costs but study results seem mixed.

http://www.businessweek.com/news/2010-06-07/ending-fossil-fuel-aid-will-cut-oil-demand-iea-says-update1-.html

The number $557 came from the IEA

http://www.iea.org/files/energy_subsidies.pdf

Re:Where is the study?

[rbrander]

The taxes on oil primarily are taxes on gasoline and diesel for consumer use - as farmers know, industrial use is not so much. The taxes on coal are a joke. I googled the words "taxes coal" and came up with this news story from Tennessee, 2008:

"The state coal tax is currently set at 20 cents per ton and has not been increased since 1984.

As introduced, the bill would have set the tax at 4.5 percent of gross value, which Jackson said is the same rate charged in neighboring Kentucky. Members of the Senate Tax Subcommittee suggested the levy was too high at an earlier meeting and presented an amendment Tuesday that calls for a two-step increase to 3 percent." ...while that $557B comes to about 14% of worldwide spending on oil & coal, based (roughly) on the Wikipedia articles.

I'm sure that on the whole, more is taken from than given to the fossil-fuel industries, but the subsidies, as another poster mentioned mostly in Asia, mean that world-wide, the "pressure" on the whole industry is much lighter than most would assume.

It's not that renewables are economically viable in any situation where the fossil-fuel industries don't have to pay for their externalities; it's a way of highlighting that far from bringing in those externalities in the form of a tax or fund or cap or any other restriction, we are taxing their use at all, very lightly.

The moment all the subsidies stop and something like $50/T (C) is imposed on digging or pumping carbon out of the ground (and $50/T is paid to those who put it in), the game is pretty much up for fossil, save where gas/kerosene/diesel are the only way to go for high-energy density (aviation, remote cabins).

Subsidies are not just there because of lobbying and power, though - subsidizing cheap energy is a great economic stimulus in general, which is why you find it in new, growing, developing economies especially. Which is the heart of the warming issue: if "saving the world" involves telling a couple of billion Asians to spend an extra generation in poverty, is it worth it?

Re:One less counter-argument...

[16384]

They'll always tax everything they can. Or, do you think that if a renewable energy starts getting a dominant position it won't be heavily taxed?

Relative

[kamukwam]

This might be true, but if you compare it to which fraction of our total energy production is renewable, then renewables get relatively more fuel subsidies than the fossil fuels.

Re:Relative

[WindBourne]

Of course, when you compare to what Coal and Nukes got in their beginning, this is absolutely NOTHING. Both Coal and Nuke power got HUGE subsidies in their early days. Which is exactly why they remain at the top on these. Which is also, why I have suggested changes to our subsidies structures for years.

Re:Yup; Needs to change

[WindBourne]

Please show me where I am being supportive of Obama in this post.

Being against neo-cons, does not mean that I am in favor of Obama or lefties. I oppose the neo-cons for their total disaster that they created. However, if you even read this post or others, you will see that I am also calling Obama/dems to task for their in ability to change things. Or their UNWILLINGNESS to do the right thing. ANd I separate the neo-cons (reagan and W minions) against the republicans (lincoln, goldwater, truman, etc).

But hey, cowards like you, do not see that. YOU are the problem.

Re:Isn't anything bio+energy bad?

[piotru]

Maybe off point, but with my wife we used to joke: if the color is green, it must be healthy.
Last year we went to a vineyard in France, where the owner explained he had not applied for the "Bio" label because he used modern selective fungicides, thus his soil is alive. The "Bio" use copper sulfide at such quantities as to completely eradicate the microbial life from their soils. I prefer not to think what they drink from their wells. As agricultural engineer I think this case of "Bio" is entirely harmful.

Figures don't lie -- but liars figure

[redelm]

If you're a greenie, you'll like this rah-rah study. Maybe you need some re-energization.

However, if you're not, maybe you'd like to know exactly _how_ true numbers have been distorted:

Dollar-wise, the biggest distortion is to consider road maintenence and building as a subsidy. This is slippery, since the substantial fuel taxes were justified and accepted by the voters on the basis they would pay for roads. Most places, the road funds are in surplus and contribute to general revenue, not draw from it.

Another large item in the US, but totally unaccounted is the oxygenated gasoline regulations. In many areas, the (obsolete and ineffective) legal requirement is for gasoline to contain 2% oxygen, earlier met with MTBE (which doesn't biodecompose fast enough) and now met with ethanol. In addition to the $1.50/gal direct subsidy, this legal requirement puts a demand floor under deathanol. How much is it worth? Who knows, but probably a large fraction of the direct subsidy.

Accounting for electricity is tough -- renewables use the same grid, and so anything is common. But renewables have poor reliability characteristics, so regs like equal buy/sell price actually are an uncounted subsidy. They certainly require more standby generation.

For those of you objecting to this report

[WindBourne]

Here is a pretty little graphics for American subsidies.
Now, here is where you can get the study.

What this shows is just 6 years. It does not show the money that was originally put into many of these programs. For example, Nuke had LOADS of R&D done by the feds. Still does. And it still needs more (hopefully this time, the feds will not stop the IFR project that has been quietly started at UIUC; GD kerry for pushing it and CLinton for not having enough backbone to say no). And Coal had LOADS of fed and state assistance to get started. Free land; loads of pollution with zero clean up (see pix of eastern aChina to get an idea of what some parts of America was like in the 60's).

Even now, the subsidy that is being calculated in the above study has NOTHING about the air, water, and ground pollution that is allowed. If burning coal and oil had to pay for their pollution in all these areas, then they would quickly run to the top in terms of costs. WELL OVER Solar PV (which today is the current king of costs).