Follow this blog:: RSS

Energy subsidy showdown: Fossil fuels, nuclear, biofuels vs. renewables

By Kirsten Korosec | September 23, 2011, 10:36 AM PDT

Renewable energy has snagged just a fraction of the federal subsidies that fossil fuels and nuclear received when they were emerging technologies, according to a new report from venture capital firm DBL Investors.

The report probably isn’t surprising to renewable energy backers who have long argued that subsidies for fossil fuels make it impossible to compete. And it’s unlikely to settle the debate over ending subsidies for the oil and gas industry. But it does provide a valuable historical view of each energy source and helps explain why they’re so dominant today (check out the charts below).

The analysis was conducted by Nancy Pfund, a managing partner at DBL Investors of San Francisco, and Ben Healy, a Yale graduate student and former staff director for the Massachusetts legislature’s environment and natural resource committee. Pfund and Healy say — as far as they know — they’re the first to quantify exactly how the current federal commitment to renewables compares to support for earlier energy transitions.

To be clear, the analysis has its shortfalls. For example, the authors acknowledge the difficulty of determining what should count as a subsidy. The report also doesn’t quantify the value of renewable energy mandates nor does include state levels subsidies. And the report only takes data up to 2009, meaning stimulus bill money isn’t included.

Even so, the report shows a distinct gap in support between the early days of fossil fuels, nuclear and biofuels and today’s emerging technology of renewable energy. The report tracked the actual dollar subsidies to each sector during the first 30 years of those subsidies’ existence (check out the chart below for an illustration). It found:

Early subsidies to nuclear dwarf all others;
Biofuels subsidies had a consistent, linear trajectory and then jumped significantly after policy changes in the mid-2000s

The chart below shows the average annual subsidies to each sector over their lifetimes.

[Via: NYT Green blog]

Photo: Flickr user Brooks Elliott

Related:

Start your week smarter with our weekly e-mail newsletter. It's your cheat sheet for good ideas. Get it.

About Kirsten Korosec

Kirsten Korosec is a contributing editor for SmartPlanet.

Full Bio
Disclosure
Contact

If you liked this, don't miss...

Comments

Add Your Opinion

Join the conversation!

Follow via:: RSS

Top
Rated

Couple of things

1>. Corporations do not charge tax; they collect tax. They collect taxes from the consumer in the form of higher prices and pass those taxes on to the Federal government. Corporate taxes create higher prices on consumer goods and services.

2.> Corporate subsidies not only take money out of the hands of hard-working taxpayers, but they artificially keep prices lower, in part to offset the higher prices caused by item one (1) above. It's a stupid system.

Our "big oil" companies, of which there are only a handful, have to compete in a world market with state-subsidized oil companies from all over the world.

Hey Kristen, how about a chart that shows the amount of energy produced by Oil & Gas, Nuclear, Biofuels, and Renewables, and post that for comparison alongside your chart showing the subsidies?

Edited by bb_apptix

Updated - 26th Sep

Just
In

Really?

Then why is everything much more expensive than it was in the 1990's before Bush lowered corporate taxes ten years ago and why is your and most of Europe's (who did the same thing) goverment broke.

Also State owned oil companies make as large of profits as private ones but profits from public companies lower your taxes and improve your services where private profits buy ivory back scratchers.

Your last point is a chicken-egg question.

Posted by shaunehunter

6th Nov

Show:

Please Select

+3 Votes

+ -

Doubtful numbers.

Considering GE got billions in wind tax credits in 2010 and paid $0.00 corporate income taxes on $13 billion in profits because of them the chart is wrong when it shows less than $1 billion in susidies for all renewable energy.

Of course this data is cherry picked to stop at 2009 so the huge 2010 tax credits for wind and solar do not show.

Posted by Hates Idiots

Updated - 23rd Sep

Reply
Flag

+3 Votes

+ -

Agreed

Yup - I hear ya, Hates Idiots, which is why I made special note of the study's shortfalls. I see this analysis as a starting point. Clearly, there are gaps and it would be great to see state level subsidies, mandates etc. included.

Posted by kirsten korosec

23rd Sep

Reply
Flag

+1 Vote

+ -

Tell you what, Mr. Idiots...

Add up the billions that oil, gas and nuclear got in their first ten years and see how that compares to any taxes on $13 billion that GE avoided in 2010.

Remember to use the taxes on $13 billion and not the entire $13 billion. Offhand, looks to me that fossil fuels and nuclear grabbed that much in their first two years.

Posted by Wallace Bob

25th Sep

Reply
Flag

+2 Votes

+ -

Hang on a moment...

As far as I know GE owns no wind farms, they manufacture turbines. Subsidies for wind would not have gone to GE to help them cut their taxes. Wind subsides go to the owners and operators of wind farms.

GE found a different way to avoid paying their fair share....

Posted by Wallace Bob

25th Sep

Reply
Flag

+3 Votes

+ -

Just a few.

GE received a tax credit for each turbine produced. They also received tax cuts for money invested in the plants to build the turbines.

That was just 1 company that got caught paying $0.00 income taxes. GE should have paid over $6 billion. So I would say the eco credits were substantial.

To keep you honest, I have been calling for cuts on subsidies to all energy industries for decades. Wind and solar are recent additions to the list.

Where did you stand before the president made bashing oil a talking point?

I hate late season bandwagon jumpers.

Posted by Hates Idiots

Updated - 26th Sep

Reply
Flag

+2 Votes

+ -

After some checking...

You are partially correct. GE did receive some tax credits for turbines manufactured. They also received tax credits for building jet engines and other activities. I found no information about the percentage of tax savings which resulted from "eco credits" vs. other production.

However, the bit tax dodge that GE enjoyed came from moving much of its profit offshore.

"The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States."

http://www.nytimes.com/2011/03/25/business/economy/25tax.html?pagewanted=all

Posted by Wallace Bob

26th Sep

Reply
Flag

+1 Vote

+ -

part 2...

Read the NYT article. It's clear that wind turbines did not allow GE to avoid billions of taxes.

Another source stated that GE purchased tax credits from wind farm operators who did not have adequate profits to allow them to fully use the credits. That's a common practice, selling tax credits, and does not mean that GE was receiving those credits from the government.

Where did I stand "before the president made bashing oil a talking point"?

I stood from getting us off of fossil fuels as rapidly as possible. I understand the physics of climate enough to know that we are in deep trouble and need to transition away from fossil fuels rapidly.

Posted by Wallace Bob

26th Sep

Reply
Flag

+1 Vote

+ -

Get on the right track

Subsidies for hydrocarbon fuels should be diverted to renewables to promote inovative progress to bring these energies into reality. We need to break away from our bad habits.

Posted by Agnamel

25th Sep

Reply
Flag

+3 Votes

+ -

Couple of things

Posted by bb_apptix

Updated - 26th Sep

Reply
Flag

+1 Vote

+ -

Really?

Posted by shaunehunter

6th Nov

Reply
Flag

+2 Votes

+ -

Thanks to subsidies, it is now impossible to make intelligent decisions...

...which for many, is the actual goal.

Without honest knowledge of costs, it is not possible to make rational decisions as to which technology is the most efficient use of resources. Subsidies all across our economy now make it impossible to know what the real cost of almost anything is, be it fuel, food, housing, etc. Is it any wonder our economy is now a mess and nobody knows how to allocate capital?

Of course, this suits certain people just fine. They don't want us to know the real costs of certain actions or technologies, because they know that if we knew the honest costs of those technologies, we'd reject them on the spot. And since politicians derive most of their power from granting or denying subsidies, they're happy to play along.

The article above and that this we're debating it is the proof that this is the case.

Posted by JohnMcGrew@...

26th Sep

Reply
Flag

+3 Votes

+ -

Agree

The root word for economics means "to choose", economics is a choice for everyone and the combined choices is the economy. Subsidies do diguise the actual cost of a product.

An example of this is the nuclear power industry. While it is important to have a healthy nuclear industry, we also need to understand that the idea of "too cheap to meter" has not become a reality. The cost to build a new reactor is huge, partly due to regulations but also due to design problems in generating power from a reactor. There are maintenance costs, storage of spent fuel and decommissioning costs. Decommissioning costs are outrageous and pretty much wipe out any savings over other generation methods. Many of these costs don't show up when the reactor is proposed and that is partly because of subsidies and also the future costs are unknown.

Subsidies may have value in getting a new industry started, but once the industry is mature enough to be profitable then the subsidies should end.

Posted by sboverie

26th Sep

Reply
Flag

+1 Vote

+ -

Send some subsidies

Excellent piece. Thank you. Only renewable technologies should be subsidized.
And I do not count bio-fuels in this group.

Posted by YourFavoriteMartian

26th Sep

Reply
Flag

+1 Vote

+ -

Questionable relevance

It's highly questionable whether past investments in existing technologies are relevant to how much to invest in new technologies. The amounts spent on developing fossil fuels, nuclear or bio-fuels are sunk costs & can not be recovered. Neither do they create either a floor or a ceiling on which to spend on solar or on wind because there is a requirement for fairness.
Secondly, the secondary costs of a technology can be difficult to quantify in the short term but can not be ignored for the sake of simplicity. What is the cost of securing the supply of imported oil? What will be the long-term costs of large scale fracking? What is the impact on the global economy of devoting arable land to fuel crops?

Posted by hoodedswan

26th Sep

Reply
Flag

+1 Vote

+ -

change your math

You need to account somehow for actual BTUs (joules) of energy produced. Otherwise this is nonsense. I suggest dividing by the energy produced. Nuclear won't look so grossly over-subsidized then.

Posted by dmm99

14th Oct

Reply
Flag

Join the SmartPlanet community and join the conversation! Signing up is fast and free. Don't wait -- we want to hear your opinion!