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  • Don’t Stop with Fossil Fuels: End Energy Subsidies Altogether

    In his September 25 speech at the G20 summit in Pittsburgh, President Obama praised the agreement among world leaders to end government subsidies for fossil fuels:

    Third, we agreed to phase out subsidies for fossil fuels so that we can transition to a 21st century energy economy — an historic effort that would ultimately phase out nearly $300 billion in global subsidies. This reform will increase our energy security. It will help transform our economy, so that we’re creating the clean energy jobs of the future. And it will help us combat the threat posed by climate change.”

    The President’s remarks point to the fact that many countries provide billions of dollars in subsidies and tax breaks to aid coal, oil, and natural gas companies. The Environmental Law Institute estimates that from 2002-2008, the United States spent $72 billion dollars in subsides to the fossil fuel industries.

    Ending subsidies for fossil fuels is a good idea but it should be coupled with policy that eliminates subsidies provided to all energy sources. Subsidies create complacency within the industry and direct money that could be used more efficiently elsewhere. The private sector investment in energy research is actually larger than many might think. True breakthroughs in energy technology take time but the private sector has been generating marginal improvements in efficiency for decades.

    Eliminating subsidies for fossil fuels only to relocate the money in green energy industries is the wrong path. Wind, solar, and ethanol are not new ideas – the government’s effort to subsidize or mandate chosen winners is bad policy that has persisted since the 1970s. Ethanol, for example, has been subsidized since 1978, originally with the promise that the industry would become viable within a few years, go off the dole and compete in the marketplace. But this has never happened. Instead, Congress passed a huge expansion of the ethanol mandate, essentially forcing Americans to use more of it even as it continues to be heavily subsidized.

    Even after decades of special tax breaks, alternative energy still provides only a small fraction of America’s energy needs. Green energy technology is famously unreliable but it also faces serious technical issues, including the fact that solar farms consume billions of gallons of water every year where water isn’t available. For instance, Solar Millenium announced the construction of two solar farms in Armagosa Valley, Nevada that would consume 1.3 billion gallons of water per year, (20% of the desert valley’s available water). Many people became concerned about the scarcity of water resources and the environmental impact of this massive water consumption on wildlife. More generally, many communities that foster green energy projects are facing water shortage problems.

    Maybe the market eventually will pick solar and wind as winners to provide consumers with affordable energy, but when the government does it through mandates and subsidies, it crowds out the possibility for the emergence of breakthroughs that haven’t even been invented yet. Energy industries should be freed from all government subsidies, allowing companies to come up with innovations in technologies that will be viable on their own in the economy. There may be a limited role for government when it comes to basic research and development, but lavish subsidies and mandates create dependence and divert resources away from real solutions.

    Katie Brown co-authored this post.

    Posted in Energy [slideshow_deploy]

    7 Responses to Don’t Stop with Fossil Fuels: End Energy Subsidies Altogether

    1. TonyfromOz Coomera Q says:

      Coal fired power generation and Nuclear power can effectively provide large scale electrical power for 24 hours of every day.

      Wind and both forms of Solar Power can only ever supply power for eight hours a day at best.

      Think about that as you look forward to what we are being told will be one of the coldest winters in the North East for years.

      Those renewable methods to generate power cost seven to ten times more than current methods, even nuclear power, and will never replace the power being currently delivered from coal fired or nuclear power.

      The only way they can even afford to be constructed in the first place is with the injection of huge Government subsidies both at the construction end and during the actual power consumption phase.

      If there are no subsidies from Government, they will NEVER pay for themselves, never turn a profit (for anybody) and even if the true cost to consumers is passed on, projected to be around seven to ten times higher than current methods, they will still never pay for themselves. They are more fragile, more difficult to maintain, last only half as long, cover huge areas, have huge problems with infrastructure to connect to existing grids, supply marginal levels of power at considerably smaller levels than large coal fired or nuclear plants, and take three times longer to construct in the first place.

    2. Bobbie Jay says:

      There's too many honest solutions that avoid the consequences of his government made crisis. He accommodates unreliable ideas as he, himself is.

    3. Joe, NYC says:

      For once I agree with the Heritage Foundation. Agreed. Let's end ALL energy subsidies and let the market decide the winner. But ALL subsidies need to be quantified. That includes the billions we spend every year to have our military protect the shipping lanes so we can move Mideast oil. Count EVERYTHING, and we'll be paying $13 a gallon for gas. That's not expensive either. It's the REAL cost.

    4. Will S., Leesburg, V says:

      So after the Bush administration showered the coal/oil/gas industries with obscene amounts of funding (to mature industries with large R&D budgets), now the Heritage Foundation belatedly says that such giveaways are wrong, and by the way stop giving them to renewable energy startups, as they are starting to compete with many of the Heritage Foundation's donors and their profits.

      Tony from Oz wrote;

      Renewable energy "costs seven to ten times more than current methods, even nuclear power"

      This is a common myth amongst commentors who read unsourced comments by other commentors. To understand the difference in costs, one needs to understand all the variables that come into play. See 6 specific cost scenarios at the link below, starting at page 26;
      http://fpc.state.gov/documents/organization/10722

    5. TonyfromOz says:

      A common Myth!

      For 23 months now I have been researching and writing about just this thing.

      As far as I know very few commentators ARE actually looking at this in relation to costings, so I am most definitely not following other commentators.

      I go to the source, and I have gone to literally thousands of sources.

      At EVERY one of those, when the costings are accurately worked out those costings for renewable power plants actually are in that vicinity, even taking into account the lifetime supply cost for the coal at coal fired power plants, and the fuel at nuclear plants.

      On an electrical power delivery equivalency basis, for actual supply of power to the grid, renewables DO cost seven to ten times that of coal and nuclear power methods of power generation.

    6. Pingback: Commodities Broker | Drumbeat: October 7, 2009 | Commodities Options | Commodities Futures | Commodities Prices

    7. Bobbie Jay says:

      I believe TonyfromOz. "a common myth" is a reference line of the left. Thank you, TonyfromOz!

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