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Reporter's notebook: Beware, here be subsidies

What is a subsidy anyway?

Posted

Annemarie did a bit of research while writing this story. Not all of her work on subsidies made it into the paper. Here's what she found.

Subsidies top the list of conservative criticisms of green energy.

But what were they, exactly? In the print edition of The River Reporter, I called our (really quick) look at energy subsidies “a work in progress.” No joke. It’s like turning over logs and watching what crawls out. And half the time there’s something that makes you go back and delete everything you wrote and start over.

Making it even more complicated is that words like “subsidies” get picked up and redefined and turned into propaganda for one group or another.

And—I'm sorry—it’s not always very interesting. I keep asking my editor (with telepathic nudges to the graphics department)  to put in pictures of kittens to keep people focused on these data-heavy stories but they keep not doing it.

So what follows is some (possibly excruciating and probably kitten-free). Also the questions that need to be answered to try to make the issue clear(er).

As of today.

Until I turn over another log and realize I was totally wrong and begin again.

What is a subsidy anyway?

That’s not actually a stupid question. Here’s one answer, shamelessly borrowed from the Council on Foreign Relations’ Fuel Subsidies Workshop Report: the ways the cost of fuel that you and I pay is kept lower than what people elsewhere in the world are paying. (For example, as the CFR points out, in Saudi Arabia, where citizens pay less for oil than everyone else, they don’t call it a subsidy, just say that their people pay for gas at the cost of production.)  Admitting that you offer subsidies to your citizens seems to cause trouble with the WTO but I haven’t figured that out yet.

Here’s another: Anything the government or an industry does to encourage us to use one kind of fuel rather than another. (e.g. making the cost of oil cheaper than other fuels. The questions to answer: Does this really happen? If so, how does that work? Another example: advertising. And lobbying.)

Making it even more complicated is that words like “subsidies” get picked up and redefined and turned into propaganda for one group or another.

Oh, and here: tax expenditures. Often tax credits. That’s related to the second definition but gets its own paragraph because it’s important. The CBO has said that 80 percent of renewables subsidies fall under tax expenditures. Who is getting these credits? Us or the industry or both?

 A fourth way of looking at subsidies redefines unsubsidised fuel: It is the real cost of energy, including the health and environmental price of a fuel choice.

So what definition will I use? Erm, all of them? Because it seems like each one is beloved by a given group of people. Each group deserves to have its take examined.

Moving right along.

Numbers, please

Let's talk about this graphic.

For years, some have criticized the renewables movement because it is heavily subsidized. Sources offer different numbers, because everyone seems to use different metrics; sometimes it was obvious the criteria used and sometimes not. 

The federal Energy Information Administration (eia.gov) puts the amount of renewable energy subsidies at $6.7 billion in FY 2016, and that’s a drop from $15 billion in 2013.  The drop is mainly due to less funding from the  American Recovery and Reinvestment Act of 2009 (which was being phased out). The CBO (quoted in Scientific American, below) said that the the original increase in subsidies was also due to former President Barack Obama’s desire to cut federal funding to fossil fuels.

 That $6.7 billion includes “direct expenditures, tax expenditures, research and development, and credit subsidies to recipients of federal loan guarantees.”

Too much, say conservatives. Give us a timeline for when renewables can stand on their own financial feet.

Clean energy advocates answer that the fossil fuels industry is subsidised too, and has always been.

David Funkhauser, from the Earth Institute at Columbia University, noted in March 2018 that tax breaks for fossil fuels arrived with the Revenue Act of 1916. Oil and natural gas producers benefited until the George W. Bush administration, when the government focused on reducing greenhouse gas emissions.

And, I would add, the financial crisis and stimulus package (and a Democratic Congress) got various clean-energy-friendly programs passed as a way to get the economy going again. See the ARRA, above.

An undated, Obama-era piece in Scientific American found at (https://www.scientificamerican.com/article/making-renewable-energies-competitive/) quotes the CBO as saying that “until 2008 most energy subsidies went to the fossil fuel industry as a way to encourage more domestic energy production.” The column adds “A report by the non-profit Environmental Law Institute (ELI) confirms that, between 2002 and 2008, the federal government provided substantially larger subsidies to fossil fuels than to renewables. ‘Subsidies to fossil fuels—a mature, developed industry that has enjoyed government support for many years—totaled approximately $72 billion over the study period, representing a direct cost to taxpayers,’ reported ELI. ‘Subsidies for renewable fuels, a relatively young and developing industry, totaled $29 billion over the same period.’”

Oil Change International, in a 2017 report, puts the figure for fossil fuels subsidies at that later date at $20 billion, and $350 million spent on lobbying and campaign contributions.

The Center for Responsive Politics in Washington, D.C. ( OpenSecrets.org) reports $124 million on just oil and gas lobbying, electric utilities lobbying at $120.7 million,  and just $25 million in lobbying dollars spent by the renewables industry in 2018. The CRP is a non-partisan research group that studies election funding and lobbying.

Advocates also point to indirect subsidies such as mitigating the effects of climate change (for example, through disaster relief), military actions  to preserve the oil supply chain and the cost of health effects of a warming planet. Those factors are seldom included, often because they’re either hard to pin down or because the group doing the calculating doesn’t feel they count in strictly economic terms.

There is also the ability to use public lands for energy-generating purposes.  The Bureau of Land Management  reports  20 million acres usable for wind energy, 35 wind farms installed as of March 2018. Twenty-five solar projects have been approved, with 19 million acres potentially usable..  For oil and gas, blm.gov reports, “About 26 million acres are under lease to oil and gas developers at the end of Fiscal Year 2017.  Of that, about 12.8 million acres are producing oil and gas in economic quantities.  This activity came from approximately 94,000 wells on nearly 24,000 producing oil and gas leases.”

Some random thoughts

Observers are now raising concerns that the transition to a low-carbon energy model is harming our ability to power our lives. The Economist in 2017 (in an issue with good cover art, hereargued that subsidised renewables have driven down the cost of electricity, making investing in new kinds of power less tempting.)

This is especially a concern in Europe, The Economist wrote. In the U.S., it’s more complicated. Oil and gas drilling have pulled down energy costs, but in some states where renewables are used, like California, electricity costs have gone up.  (See Forbes, April 2018, on whether wind and solar increase energy prices.)

But but but. Take a look at U.S. News and World Report’s list of the top ten states that use the highest percentage of renewable energy: Idaho makes the list at #7, along with South Dakota and Nebraska

Now ElectricChoice’s 2018 list of cost of electricity by state. Idaho is cheap at 10.58 cents/kwh. South Dakota comes in at 12.39 cents/kwh and Nebraska  at 11.31.

California? I assume it didn’t make the U.S. News list because that looks at percentage of total energy used. The ElectricChoice list has it at 19.9 cents/kwh.

Vermont and New Hampshire, which both made the U.S. News list, are also expensive: (18.50 and 19.63)

I haven’t yet found a breakdown of electric costs that shows how much goes to repairing infrastructure. Do utilities get federal dollars to fix the lines after a storm or fire? Or does the cost get passed on to the consumer?

That’s enough for now. If I can figure out how to make this work, and if there’s any interest, I’ll update as I learn more.

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