Time To End All Energy Subsidies – Here Is Why

by | May 19, 2020 |

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It is time to finally end the quagmire of outdated energy subsidies in the U.S. They were built up over a century of programs once intended to help develop innovative ideas for energy development. But now practically all of them are simply aiding and abetting the flow of money to companies and individuals no longer deserving to feed at the government trough.
Assuming governments don’t do something foolish like trying to enable the damaging and hopelessly impractical Green New Deal, no one alive today will ever see energy shortages in America again. Powerful new technologies have allowed our nation to move from worrying about running out of oil to no longer having sufficient space to store all the oil and gas we are capable of developing.
Of course, the problem of over-abundance has been exacerbated by the government’s hysterical reaction to the Chinese Coronavirus that shut our economy for the past two months. Soon, that will pass and our abundance will settle back to normalcy. In the process, there will be a ‘survival of the fittest’ shakeout in the energy sector with some companies having to close their doors, but that ultimately is the way of the world for all industries.
While the vast amounts expended on dozens of subsidy-type programs in the energy sector are near impossible to pin down, the programs developed long ago can give us an idea of wasted tax dollars. Our colleague, American lawyer, policy analyst, and columnist, Peter Ferrara, was able to track the names of 187 different means-tested welfare programs in his 2015 book Power To The People. Obviously, many of them should have been phased out long ago but, as we all know, government programs rarely die. We will not attempt to uncover the breadth of all energy subsidies currently in operation but rather to make a case that it is time to end each and every one of them, no matter the technology.
First, there is the colossal waste of taxpayer monies on so called renewable energy, in particular, wind and solar power. These technologies are mature enough that subsidies to them should have ended long ago, leaving them to stand, or more likely fall, on their own in a competitive marketplace.
Without your federal and state tax benefits supporting them, there would be no solar or wind industry of any significance. While they may, at times, seem cost-competitive with fossil fuels due to the extremely wide and complicated web of government policies biased in favor of renewable energy, consumer prices increase every time. The renewable portfolio mandates requiring utilities to invest in renewables force all ratepayers to subsidize them whether we want to or not.
For years now, the Energy Information Agency (EIA) has shown a combined federal benefit for wind and solar of $2.8 billion per year. It comes through a tax credit of 2.4 cents per kilowatt-hour produced, as well as a deduction of 30% of the installation cost. These benefits were supposed to expire years ago but did not. Now they are set to expire in 2021 but don’t hold your breath on that one either. A 10% tax credit on solar and geothermal installations would still remain, as well.
The situation in Canada is also nonsensical. There, the federal government will spend more than $2.4 billion over the next four years to promote the production and use of “clean energy”, especially solar and wind power. Samples of wind & solar subsidies in Canada include:

>  R&D funding

>  Funding for demonstration projects

>  Grants, contributions and low-interest loans to suppliers or purchasers

>  Preferential procurement practices

>  Tax incentives (e.g., credits, deductions and exemptions that are not provided to other firms)

>  Preferences granted through regulation

>  Preferential, above-market utility rates, e.g., “feed-in-tariffs,” often guaranteed for the life of the contract

>  Restrictions on property and other taxes on solar and wind project sites

Economist Dr. Andrew Reed concluded that variable renewable energy “subsidies and other hidden costs would likely more than double the ‘real’ costs to society for wind and solar in Canada.”
The U.S. states are even more aggressive in helping wind and solar. At the end of 2018, 29 states and the District of Columbia had renewable portfolio mandates collectively accounting for 63% of retail electricity costs. What this means is that these states require every electric utility to include a certain amount of wind and solar power in their energy mix regardless of the cost. And, of course, for every kilowatt-hour the utilities now produce from intermittent and expensive wind and solar plants, they must create an additional kilowatt-hour of capacity from reliable fossil fuels to account for the periods when the sun does not shine or the wind either does not blow or blows too hard (at which point, the blades must be feathered or they will break).

Electricity consumers across America are being severely punished by the cost of this energy that has yielded no benefit to the service they receive from the utility.

And all this in the name of protecting the environment, which, as Michael Moore demonstrated in his superb documentary, Planet of the Humans (over 8 million views on YouTube since April 21), is being severely damaged by these supposedly green energy sources.
Moving on to the even larger elephant in the room: historically, subsidies granted to the fossil fuel industry were designed to lower the cost of fossil fuel production and incentivize new domestic energy sources. Today, U.S. taxpayer dollars continue to fund many fossil fuel subsidies that are outdated, but remain embedded in the tax code. A sample of these include:

>  Intangible Drilling Cost Deductions

>  Percentage Depletion Deductions

>  Non-Conventional Fuels Tax Credit

>  Credit for Clean Coal Investment

>  Foreign Tax Credits

>  Master Limited Partnerships

>  Domestic Manufacturing Deductions for oil

>  Master Limited Partnerships

>  Clean Energy for America Act

Add to these, financial gifts from the U.S. Export-Import Bank and the Overseas Private Investment Corporation.

Not all of the subsidies that oil, coal and natural gas industries receive are obvious, and this is part of the reason that they have been going on forever, long after we went from a nation thought to be running out of oil to one now awash in it.

In seeking fiscal reforms that have the potential to save taxpayer dollars, phasing out subsidies for the fossil fuel industry should be a priority for federal policy makers. While regulations that unnecessarily hamper fossil fuel development should continue to be cancelled, especially those that are founded on the nonsensical climate scare, subsidies aid an industry that is mature and well-established, with abundant private financing. Industry representatives argue that renewable energy gets orders of magnitude more in subsidies and, in support per kilowatt-hour generated, this is indeed true: solar and wind power get 326 and 69 times more in subsidies than coal, oil and natural gas per amount of energy generated, according to an article published in Forbes earlier this month.

But two wrongs do not make a right. Our nation no longer needs a red cent spent on energy subsidies when we are already the richest energy-producing nation on Earth.


Note: Portions of this article were excerpted from Climate Change Reconsidered II: Fossil Fuels (CCRII: Fossil Fuels), produced by the Nongovernmental International Panel on Climate Change (NIPCC) published by The Heartland Institute, with permission of the editors Joseph Bast and Diane Bast. The authors strongly recommend the book for a complete exposé of the fallacies behind the nation’s energy subsidies.

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Dr. Jay Lehr is a Senior Policy Analyst with the International Climate Science Coalition and former Science Director of The Heartland Institute. He is an internationally renowned scientist, author, and speaker who has testified before Congress on dozens of occasions on environmental issues and consulted with nearly every agency of the national government and many foreign countries. After graduating from Princeton University at the age of 20 with a degree in Geological Engineering, he received the nation’s first Ph.D. in Groundwater Hydrology from the University of Arizona. He later became executive director of the National Association of Groundwater Scientists and Engineers.

Tom Harris is Executive Director of the Ottawa, Canada-based International Climate Science Coalition, and a policy advisor to The Heartland Institute. He has 40 years experience as a mechanical engineer/project manager, science and technology communications professional, technical trainer, and S&T advisor to a former Opposition Senior Environment Critic in Canada’s Parliament.

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Dave James
Dave James
2 years ago

Tom Harris and Dr. Jay Lehr assert human-caused climate change is a “nonsensical climate scare.” However, the scientific evidence does not support their assertion. (Source 4th National Climate Assessment, Volume I).
Dr. Jay Lehr’s and Mr. Tom Harris’ opinion pieces show that they are pro-coal activists:
“Time to End the War on Coal” by Dr. Jay Lehr & Tom Harris, May 3, 2019, The Post & Email
“Time to end the war on coal” by Jay Lehr and Tom Harris, May 15, 2019, Citizen Journal
“Trump right to try to end the WAR ON COAL” by Dr. Jay Lehr & Tom Harris, Apr 16, 2019, America Out Loud
“Clean coal for the future” Tom Harris, Feb 9, 2018, Idaho Press
“Coal key to national security strategy” Tom Harris, Jan 13, 2018, The Spectrum
“Climate scare must be debunked for coal to recover” Tom Harris, Jan 2, 2018, Superior Telegram
“Harris: Coal has many uses” Tom Harris, Sep 3, 2018, Casper Star Tribune
Coal is a dying industry. It is being replaced by cheaper cleaner sources of energy like natural gas and renewables. “Between 2010 and early 2019, 546 coal plants that generated 102,000 megawatts retired. And in 2020, another 150 are on the chopping block, says the just-released U.S. Energy Information Administration. Coal’s share of the electric generation portfolio was 50 percent in 2007. Now it is 25% and will fall to 19%.
It’s good news for renewables, which will see its 17% market share jump by 11% in 2020. That’s potentially even better news for climate change because coal makes up about 30% of all manmade CO2 emissions.” (Source “Renewables Have Outrun Coal. Appalachia Needs To Join The Green Brigade” by Ken Silverstein, May 18, 2020, Forbes)

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