earth energy Solutions GROUP

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Understanding Energy Subsidies

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Illustration: Different types of renewable energy.

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Posted by Green Life Staff

Not sure what energy subsidies actually are?  Well, you’ll find that they are something that is wielded as a champion of energy technologies that are favorites against those technologies that are competing.  Those that really support nuclear energy and fossil fuels try to say that those energies such as solar and wind and other types of renewable energies can’t stand up by themselves.  Those who advocate these renewable forms of energy then argue that these other types of fuels have been supported by the government for some time.

What you need to understand when it comes to energy subsidies is that every form happens to be subsidized.  There are not any types of energy, including nuclear, renewables, or any others, that can stand on their own without having loan guarantees, tax preferences, or even research grants on their behalf.  Of course, this really doesn’t have to be a bad thing.  The biggest questions is which problems are we dealing with when it comes to energy and in order to solve them, what energy subsidies need to be used?

Trying to pin down what really is and is not a subsidy is not that difficult.  There really isn’t a definition of subsidy that is accepted universally, according to the U.S. Information administration back in 2008.  This makes it even easier for people to get confused on what subsidies are all about.  Since there are benefits and costs with all programs from the government, many times the term subsidy ends up getting connotations that are derogatory.

When you keep this in mind, several reports need to be kept in mind which try to calculate the subsidy amounts and their beneficiaries.  Back in 2004, several energy worthies that are bipartisan, came up with estimates that ranged between 27-64 billion dollars each year.  They included tax incentives, cleanup of sites that are polluted, R&D grants, royalty relief for gas and oil, and oil supply line protection by the military.  They did note within their reports that the numbers they came up with were really only estimates.

Another estimate was done by Earth Track about three years later, which was done on the Organization for Economic Cooperation and Development federal subsidies.  Their estimates were that there is $49-100 billion each year, with conservation getting only 2.1%, about 2/3 going to fossil fuels, ethanol getting 7.6%, , 2.4% going to nuclear, and 7.5 percent going to various other renewables.  Then in 2008, there were even different numbers that were come up with by the Department of Energy, saying that the total was only about $16.6 billion.  Of course, it was made clear that this report shouldn’t be the last word and didn’t include the cap on military protection of supply lines for oil and nuclear power plants.

Depending on policy preferences, subsidies can be described and defined in different ways.  Those who advocate renewable energy sources say that the tax preferences that are for the tax codes happen to be permanent tax code provisions, while the ones for renewable energy forces have been off and on for some time.  On the other hand, those who are champions of nuclear and coal power feel that the cost of subsidies for the renewables are much higher than the costs for plants that run on a constant basis.  So, numbers on subsidies can easily be manipulated and used as weapons for either side of the argument, and it is important that you understand that.


Author: CSea

... embracing what I can change and accepting what I cannot, while totally grateful for everything about my life.

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