(2011-01-16) Leonard Vs Energy Subsidies

Jeffrey Leonard: Energy subsidies (Subsidy) are the sordid legacy of more than sixty years of politics as usual in Washington, and they cost us somewhere around $20 billion a year... Energy subsidies take many forms. Some of them are direct outlays of taxpayer dollars, like payments to corn producers for Ethanol. Most are in the form of tax benefits, such as the deduction for “intangible drilling costs” (labor, repairs, hauling, you name it) in oil exploration—a notoriously abused provision of the tax code. The sheer number of subsidies is part of what makes them so hard to track.

But one thing about them is easy to summarize: they are heavily tilted toward Fossil Fuels (Fossil Fuel Subsidies). Government statistics show that about 70 percent of all federal energy subsidies goes toward oil, natural gas, and coal. Fifteen percent goes to ethanol, the only renewable source of energy that consistently gets bipartisan support in Congress (think farm lobby and Iowa). Large hydro-power companies—TVA, Bonneville Power, and others—soak up another 10 percent. That leaves the greenest renewables—wind, solar, and geothermal—to subsist on the crumbs that are left.

None of these estimates account for continuing support to the nuclear industry, estimated to be about $1 to $2 billion, much of it to promote research and development efforts on new nuclear technologies and waste disposal methods. There are plenty of hidden subsidies, too. We place a cap on liability for accidents (like the BP oil spill). We offer the nuclear industry large loan guarantees. And, of course, we maintain an immense military embroiled in the Middle East and elsewhere as it tries to secure access to energy resources around the globe.

What do we taxpayers get in return? Not much. Certainly there’s no evidence that subsidies do anything significant to increase our domestic energy supply. A recent study by the U.S. Energy Information Agency found that subsidies for domestic energy production doubled between 1999 and 2007, but despite all the extra money the amount of energy supplied by domestic sources stayed the same.

Feb update: Tom Evslin is hopeful that desires to reduce the Budget Deficit will move the idea of ending all Energy Industry Subsidy.