Our weeklong collaboration with UN Dispatch rolls on today with a discussion prompted by On Day One user taylorshelton who suggests government subsidies for non-renewable energy should be eliminated.
Eliminate all subsidies for traditional fuels (coal, oil and nuclear) and invest all energy-related funds into renewable energy resources like solar, wind and cellulosic ethanol with the goal of completely eliminating dependence on fossil fuels and nuclear power.
Nigel Purvis, President, Climate Advisers
Phasing out subsidies for climate damaging technologies is good, common sense. The challenge is mostly political — powerful industries, labor unions and other interest groups defend these subsidies whenever they are challenged. Because the benefits of subsidies are concentrated and the costs are not, subsidy recipients are usually more organized and effective in the political process than ordinary tax payers. Two things will make a difference. First, alternative economic opportunities are needed in places like West Virginia and Kentucky to help local communities thrive in a more climate-friendly economy. That is one reason why public funding for R&D for carbon capture-and-storage technologies for coal-fired electricity production makes sense. CCS turns climate action into a fight against dirty coal not against coal-dependent communities. Second, the broader electorate needs to be mobilized to overcome the special interests. Will Al Gore’s ‘we’ campaign make a difference? It is too early to say. But it’s hard to see a fundamental shift in U.S. energy policy without a fundamental shift in voter attitudes and behavior.
I’m with Nigel; this proposal makes a lot of sense. But of course, there are large political obstacles. Lobbyists for wind, solar and other renewables don’t have nearly the power on the Hill that the fossil fuel industries have, nor does the climate movement have the same wealth of, er, wealth to flood to politicians to encourage them to support a change like this. It would be a tough fight to get these subsidies simply shifted to renewables though; many politicians would balk at the idea of “favoring” these new sources of energy rather than just “letting the market decide.” Which is, of course, a crock of crap since we’ve been gaming “the market” for all these years to privilege fossil fuel industries. It would probably be an easier sell to invest these funds in research and development of new technologies rather than subsidies.
He makes another good point about the need to help communities that would have some hardship during this transition. I’m not as much a fan of massive government investment in CCS, since I think coal is a dirty fuel source from start to finish — not just in the burning of it. Rather, we should be investing in worker transition and new green jobs programs in industries that are actually green.
As Nigel and Kate have said, this idea has always had immense intuitive appeal, but it turns out to be one of the most devilishly difficult things to do in the real world of American politics. Attempts to shift a modest amount of subsidies from oil to renewables were blocked in the Senate no fewer than four times just this last session (with, ahem, John McCain joining the Republican obstructionists).
This is true for all the reasons already described by Nigel and Kate. And for another thing, no one can agree just how much subsidy fossil fuels get. Direct payments are often the least of it. There’s sweetheart deals on royalties, lax enforcement of environmental regulations, regulatory biases against efficiency and distributed power, longstanding political insider influence, and on and on. Is the military budget a subsidy for oil? In some sense it is, but it’s not clear how to quantify it, or how exactly to shift it.
Ultimately, while fossil subsidies are egregious, they are far less significant than the global macroeconomic forces we now see at work: skyrocketing demand, inexorably tightening supply, and the rise in commodity and construction costs. It is these forces that will squeeze fossil fuels and drive the shift to efficiency and renewables. Subsidies can delay and gum up that process, make it less speedy and equitable than it would otherwise be, but they can’t stop it.
So the goal should not be a clean, rational appropriations process (or a unicorn). The goal should be to give renewables and efficiency enough of a boost to get them rolling. Once they’re providing the jobs, the power, and the revenue, legislators will be far less likely to cling to fossil subsidies. Greens are fond of saying that the era of whale oil didn’t end because we ran out of whale oil. It didn’t end because we removed whale oil subsidies either. Everything hinges on the rise of robust, viable alternatives.
I agree with Nigel, Kate, and Dave that eliminating tax breaks to the “traditional” energy industries and transferring those breaks to the renewable energy industry sounds good on paper, but would be politically difficult, to say the very least. Dave raises the excellent point that it would be difficult to rescind those tax breaks because we are not exactly sure how much they get in the first place; calculating the total amount of subsidies that go to the ‘traditional’ sources of fuel is no easy task. Estimates of our subsidies to fossil fuel companies alone range from $15 – $35 billion annually. Throw in the $100 billion we have subsidized the nuclear industry over the last half century and we are talking about a whole lot of money in direct and indirect subsidy payments to the fossil fuel and nuclear industries.
In stead of completely stripping our subsidies to the fossil fuel and nuclear industry, which the others rightly argued would be a political nightmare, perhaps we could analyze how those payments actually take place and make the necessary adjustments to free up revenue for cleaner energy sources. Certain subsidies could potentially be completely eliminated from the mix if lawmakers can frame those payments as the wasteful government handouts they are. Why should the government assume the legal risks of exploration and development (in stead of the private corporation doing so)? Why do we grant below-cost loans with lax repayment terms? Is it really necessary that we grant income tax breaks, sales tax breaks and low-interest construction bonds to corporations that are continually reporting record profits?
With that said, all subsidies are not inherently evil (government-sponsored R&D programs, in particular, might be one type that we might be bet better off leaving alone). But the longer they exist, the more likely it is they become codified into our tax structure, and the harder they are to take away. If a tax break is on the books for long enough, removing that tax break is then framed by its supporters as a “tax increase” that would “cripple our economy and threaten our prosperity.” Recent debates in our Congress have shown this very phenomenon in action. If we are to make any substantive change in our energy subsidy programs, we need to approach it not as an ‘either-or’ proposition, but rather as an exercise in pragmatic, rational, and fair budgeting.