Should the US Subsidize Alternative Energies?

“Fossil fuel subsidies are a key barrier to a transition to a clean energy system. Although linked to a reduction in emissions, their reform alone will be unlikely to deliver the permanent emission reductions necessary to meet climate change targets. A “swap”— reallocating some of the savings from subsidy reform to fund the clean energy transition—could magnify the contributions to long-term, permanent emission reductions, the economy, jobs, public health and gender equality…

Fossil fuel to clean energy subsidy swaps are already taking place—at a global level, fossil fuel subsidies have declined while renewable investments are now greater than investments in fossil fuel-based generation. But the pace of change needs to accelerate considerably. Although fossil fuel subsidies are linked to emission reductions, their reform alone will be unlikely to deliver the permanent emission reductions necessary to meet climate change targets. A swap, reallocating some of the savings from subsidy reform to fund the clean energy transition, could magnify the contributions to long-term, permanent emission reductions while bringing additional economic and social benefits, in particular in relation to jobs, public health and gender equality.”

“Estimates of subsidies vary according to who’s doing the counting: For example, as Oil Change International notes, should the cost to taxpayers for cleaning up fossil fuel pollution be counted as a subsidy? Still, it’s pretty simple: The more taxpayers invest in renewables, the greater the benefits. The more taxpayers prop up fossil fuels and nuclear power, the greater the burdens.

It is past time for the nation to shift tax resources to accelerating the urgently needed transition to clean, renewable power, instead of accelerating the climate crisis and harming public health to boost the profits of the fossil fuel and nuclear industries.”

“[T]here ought to be a level playing field between fossil fuels and clean energy. Right now, fossil fuels subsidies in the tax code, for the most part, are permanent and the clean energy tax credits, for the most part, are temporary. Now, there is a good reason to make tax credits, subsidies, and incentives temporary in the tax code; from a policy standpoint, that requires legislators to reevaluate how a policy is working over time and to make modifications. But when you make a tax incentive permanent, you are never forced to reevaluate your circumstances…

Many of us in Congress are working hard to accelerate the clean energy transformation already underway. And we believe that if subsidies for fossil fuels are permanent, the tax credits for clean energy should be as well. If we can’t make clean energy tax credits permanent, then the fossil fuel industry should only get temporary subsidies that get reevaluated every several years.”

“If renewable energy is getting so cheap, why do we still need policies and subsidies to support it? Here’s why. Even if they’re now, finally, cost-competitive at the point of sale, low-carbon technologies are still working with an infrastructure—a utility regulatory system, a power grid, a highway system, a combustion engine-centric fueling system—built for a world powered by fossil fuels. These massive infrastructure projects were built up with public-sector support, including tax credits, low-cost loans, and outright grants from the federal government. Companies designing new energy sources, in contrast, often have to build their own infrastructure and factor it into their costs…

Not only was the playing field built for carbon-intensive energy technology; it is still tilted strongly in that direction by ongoing government subsidies for fossil fuels. Despite the pledge by G-20 countries in 2009 to end handouts for fossil fuels, those subsidies continue to grow. Here in the U.S., the International Monetary Fund has found that the government provides $700 billion a year in subsidies to fossil fuel companies, equivalent to every American handing these companies a check for $2,180 each year.

The world’s citizens are increasingly clear about the major risks we face by continuing our dependence on carbon-intensive energy sources. Innovators and entrepreneurs are stepping up to the plate with amazing new low-carbon technologies to move us forward in a more sustainable direction. But just as with any other major economic transition—the Industrial Revolution, the Marshall Plan, the fall of Communism—there is a role for government policy, finance and investment in speeding the adoption [of] the new, while easing the phaseout of the old.”

“To get where we need to go, the federal government has to turn its outdated energy subsidy policy on its head. The oil and gas industry has been enjoying average annual subsidies and tax breaks of $4.86 billion in today’s dollars since 1918, according to a 2011 analysis by DBL Investors, a venture capital firm. The nuclear industry, DBL found, benefited from an average of $3.5 billion a year in subsidies from 1947 to 1999. And coal, which has been getting federal and state subsidies since the early 1800s, currently receives at least $3.2 billion a year, according to a 2011 Harvard study.

Renewables, on the other hand, averaged only $370 million a year in subsidies between 1994 and 2009, according to DBL. The 2009 stimulus package did provide $21 billion for renewables, but that support barely began to balance the scales that still tilt toward fossil fuels.

So after subsidizing coal for more than 200 years and oil and gas for nearly 100 — which inadvertently got us into this mess — it’s long past time to take fossil fuels off the dole and go all out to promote renewables.”

“The subsidies in place allow the [alternative energy] industry to grow and technologies to be developed and mature and drive costs down…

Alternative energy is most developed in countries where government subsidies have been in place for some time. Germany put in place strong incentives in the early part of this decade to encourage demand for solar modules, to encourage installations of wind farms and to support the biofuels industry. Companies in countries with a more progressive alternative energy policy framework therefore developed technology and intellectual property at an earlier state. Other European countries such as Denmark, Spain and Portugal also embraced alternative energy therefore companies tend to be more mature in Europe. However the potential for growth in the U.S. is greater, and once a longer term framework has been put in place, we would expect the U.S. to catch up fast.”