Fossil Energy Subsidies and Renewable Energy Competitiveness

Michael Giberson

Some, not all, of you believe that fossil fuel energy gain massive and undeserved subsidies from the federal government, that such subsidies way outweigh subsidies for renewable energy, and that subsidies for fossil fuels undermine the market success of renewable energy.

You may want to read Severin Borenstein’s post, “Are Fossil Fuel Subsidies Really the Problem for Renewables?

In brief, he claims that government-based fossil fuel subsidies don’t amount to much per unit of energy delivered so don’t undermine renewables, are pretty stupid anyway, and the more significant fossil fuel support is elsewhere.

5 thoughts on “Fossil Energy Subsidies and Renewable Energy Competitiveness

  1. To be fair, I think the largest fossil fuel subsidy is not the explicit ones that you see in the paper. It’s the fact that, by law, neither buyers nor sellers of fossil fuels have to pay for the full cost of production: carbon emissions. The unpriced carbon can easily represent 50% or more of the coal costs,* which even exceeds the large wind tax credit of $22/MWh.

    * = (Social Cost of $20 per ton of CO2) * (~0.06 tons of CO2 emissions per MMBtu of coal) * (EIA’s Avg Coal Cost of $2.4 per MMBtu)

  2. I have seen estimates of the social costs of carbon emissions of up to $300 per ton. That tells me that we have no real idea of the social costs of carbon emissions. There are even analyses which suggest that the social cost of carbon emissions is negative for the next 50-60 years, primarily as the result of the beneficial effects of a carbon dioxide enriched atmosphere of the growth of field crops.

    I believe that the largest “explicit” fossil fuel “subsidy” is the Low Income Heating Energy Assistance Program (LIHEAP), which is actually a welfare program.

  3. Mr. Borenstein took a bogus number from a bogus report and divided it by a huge number. What he got was hash. The real problem with all of these discussions is that most of what they label as subsidies are only subsidies in the funhouse mirror world of calling the determination of taxable income a subsidy. This does not compare to actually writing people checks.

    I recommend referring to experts in the field who can provide real information. My favorite is Robert Rapier, who blogs at Consumer Energy Reports:

    I think these essays of his tackle the main issues:

    “Getting Even With ExxonMobil” By Robert Rapier on May 2, 2011

    “Analysis Requested by Senate Democrats Highlights the Risks of Their Energy Proposals” By Robert Rapier on May 16, 2011

    “‘Tis the Season for Oil Company Misinformation” By Robert Rapier on Aug 1, 2011

  4. Hmm is anyone else experiencing problems with the images on this
    blog loading? I’m trying to find out if its a problem on my end or if it’s the blog.
    Any feed-back would be greatly appreciated.

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