{"id":258,"date":"2010-07-19T12:43:38","date_gmt":"2010-07-19T16:43:38","guid":{"rendered":"http:\/\/www.riverbendadvisors.com\/blog\/?p=258"},"modified":"2010-07-19T13:11:43","modified_gmt":"2010-07-19T17:11:43","slug":"tax-breaks-and-subsidies-for-energy","status":"publish","type":"post","link":"https:\/\/www.riverbendadvisors.com\/blog\/2010\/07\/tax-breaks-and-subsidies-for-energy\/","title":{"rendered":"Tax breaks and subsidies for energy"},"content":{"rendered":"<p>Hovering in the background of several current energy and sustainability-related news stories is the question of tax breaks and subsidies for energy.  <\/p>\n<ul>\n<li>In the wake of the BP oil spill disaster, the Senate Finance Committee will discuss <u>a possible rollback of oil and gas tax incentives<\/u>, partly to fund clean energy incentives and job creation.<\/li>\n<li>A cap on carbon is the fundamental element of the climate and energy legislation now before the Senate.  <u>Implementing a cap requires consideration of tax preferences and subsidies<\/u>, whether <em>indirectly<\/em> through the allowances inherent in a market-based (cap &#038; trade) mechanism or <em>directly<\/em> through a carbon tax.<\/li>\n<li>The issue of subsidies is also regularly, albeit carelessly tossed around during the tug-of-war between incumbent fossil fuel interests and renewable energy advocates over long-term economic viability and jobs.<\/li>\n<\/ul>\n<p>Some things are clear.  <strong><span class=c>Worldwide, subsidies that support fossil fuels dwarf those for renewables.<\/span><\/strong>  The International Energy Agency&#8217;s study for the G-20 documents a worldwide total of <strong>$557 billion<\/strong> of fossil fuel subsidies.  It is important to note that these are purely consumption-based subsidies &#8211; they exist to maintain a below-market price for fossil fuels.  As such, they artificially drive up demand.  The IEA estimates that phasing out these subsidies would reduce global energy use in 2020 by <strong>5.8%<\/strong>.<\/p>\n<p>Contrast those to the more broadly-based tax preferences and subsidies in the US, the world&#8217;s largest economy and the largest user of energy.  The most recent comprehensive analysis, done by the US Energy Information Administration in 2007, estimated the <b>total impact of all federal energy subsidies at 16.6 billion<\/b>.  That total includes categories of spending not estimated for the IEA study, which is focused on consumption-based subsidies.  The US total includes:<\/p>\n<ul>\n<li>Direct Expenditures <b>(15%)<\/b> &#8211; payments to producers or consumers of energy<\/li>\n<li>Tax Expenditures <b>(63%)<\/b> &#8211; reductions in the tax liability of (and therefore the revenue to the federal government from) companies and individuals, based on actions they take involving energy production, consumption or conservation<\/li>\n<li>Federal R&#038;D Spending <b>(17%)<\/b><\/li>\n<li>Regionally-targeted electricity programs <b>(5%)<\/b> &#8211; programs like the Tennessee Valley Authority<\/li>\n<\/ul>\n<p>While US subsidies for renewables increased significantly from the previous such analysis done in 1999, they were still smaller than those for fossil fuels ($4.875 billion to $5,451 billion).  So even without considering the additive impact of more broadly calculated subsidies in other countries, <b><span class=\"c\">renewables represent a tiny fraction (1%) of energy subsidies worldwide<\/span><\/b>.<\/p>\n<h3>Other items of interest in the US report<\/h3>\n<ul>\n<li>Virtually all of the government subsidies for both fossil fuels and for renewables were the result of tax preferences or R&#038;D (98% and 96%, respectively), with almost no direct payments to producers or consumers.<\/li>\n<li>The overwhelming majority of direct government payments go to low income consumers &#8211; 86% of the total ($2.2 billion) is disbursed through the Low Income Home Energy Assistance Program (LHEAP).<\/li>\n<li>Subsidies for nuclear power were primarily R&#038;D focused ($922 million, or 73% of the $1,267 million to nuclear).  The R&#038;D spending for nuclear exceeded that for both fossil fuels ($613 million) and renewables ($727 million).<\/li>\n<\/ul>\n<h4 style=\"margin-top: 3em\">References:<\/h4>\n<ol class=\"references\">\n<li id=\"_note-IEA\"><a href=\"http:\/\/www.worldenergyoutlook.org\/subsidies.asp\" target=\"_blank\">IEA Joint Report on Energy Subsidies for G20<\/a>, http:\/\/www.worldenergyoutlook.org\/subsidies.asp <\/li>\n<li id=\"_note-EIA\"><a href=\" \" target=\"_blank\">US Federal Financial Interventions and Subsidies in Energy Markets 2007<\/a>, http:\/\/www.eia.doe.gov\/oiaf\/servicerpt\/subsidy2\/<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"<p>Hovering in the background of several current energy and sustainability-related news stories is the question of tax breaks and subsidies for energy. In the wake of the BP oil spill disaster, the Senate Finance Committee will discuss a possible rollback<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36,49,5,67,13],"tags":[],"class_list":["post-258","post","type-post","status-publish","format-standard","hentry","category-clean-energy","category-policy-federal","category-finance","category-fossil-fuels","category-policy-global","","tg-column-two"],"_links":{"self":[{"href":"https:\/\/www.riverbendadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/258","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.riverbendadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.riverbendadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.riverbendadvisors.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.riverbendadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=258"}],"version-history":[{"count":8,"href":"https:\/\/www.riverbendadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/258\/revisions"}],"predecessor-version":[{"id":265,"href":"https:\/\/www.riverbendadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/258\/revisions\/265"}],"wp:attachment":[{"href":"https:\/\/www.riverbendadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=258"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.riverbendadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=258"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.riverbendadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=258"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}