Warmist Makes Interesting Proposal: Remove All Energy Sector Subsidies

Over at far, far, far Left Washington Monthly, Jeffrey Leonard makes an interesting proposal

Get the Energy Sector off the Dole
Why ending all government subsidies for fuel production will lead to a cleaner energy future—and why Obama has a rare chance to make it happen.

Last September, President Obama promised that the cornerstone of his legislative program for 2011 would be to set an energy policy “that helps us grow at the same time as it deals with climate change in a serious way.”

Today, the president might seem to stand a better chance of refreezing the melting Arctic ice caps. After all, he’s up against a House Republican majority rife with members who openly deny that humans contribute to global warming, as well as members of his own party who are beholden to domestic fossil fuel industries. In November, West Virginia’s new Democratic senator, Joe Manchin, boasted to his constituents that he had secured Harry Reid’s assurance “that cap and trade is dead.”

But not all is lost. If President Obama wants to set us on a path to a sustainable energy future—and a green one, too—he should propose a very simple solution to the current mess: eliminate all energy subsidies. Yes, eliminate them all—for oil, coal, gas, nuclear, ethanol, even for wind and solar. It will be better for national security, the balance of payments, the budget deficit, and even, believe it or not, the environment. Indeed, because wind, solar, and other green energy sources get only the tiniest sliver of the overall subsidy pie, they’ll have a competitive advantage in the long term if all subsidies, including the huge ones for fossil fuels, are eliminated. And with anti-pork Tea Partiers loose in Washington and deficit cutting in the air, it’s not as politically inconceivable as you might think.

I agree with this proposal. Let’s eliminate all subsidies. Most of the energy sector actually receives mostly tax breaks, not subsidies, so this wouldn’t effect most energy other than the “alternatives.” This article from 2012 highlights the reality of energy sector subsidies, with $16 billion going to “alternatives” and energy efficiency, and $2.5 billion going to fossil fuels. Without the subsidies, a huge chunk of the “alternative” energy sector would collapse.

What Mr. Leonard is thinking of are really tax breaks (read on in the article for confirmation), most of which are the same types every other company can take advantage of, like percentage depletion allowance, foreign tax credits, domestic manufacturing deductions, R&D, equipment depreciation, etc and so on.

In fact, Heritage called for an end to actual subsidies, without touching the tax breaks, years ago, some of which overlaps Mr. Leonard’s article. Mr. Leonard also is very supportive of nuclear and natural gas. Huh. Personally, I support alternatives, but, as I’ve written time and time again, they need to be competitive without being truly subsidized by government (this applies to most things government throws taxpayer money at, but that’s a separate conversation).

American consumers will feel the pain. But as was evident during the last (albeit short-term) run-up in petroleum prices, which drove gasoline prices over four dollars a gallon in 2008, Americans will respond to higher prices with countless adjustments—in the cars they buy and in their daily routines—that in turn will move the whole economy toward more efficient energy use.

Removing subsidies from the fossil fuels sector will not cause much pain. It would virtually kill the alternatives sector. Removing all tax breaks would cause pain. It would also violate the Constitution regarding equal treatment under the law if it was only applied to energy companies.

The real question to ask is not whether some energy companies, and indeed whole industries focused on certain “protected” or government-favored technologies or fuels, would survive in their current form if we did slash energy subsidies. Imagine where the American economy would be today if the government had decided to protect and continue to subsidize steam engines or whale oil as sources of energy in past eras. The important question is whether the elimination of energy subsidies would constitute good long-term energy policy for America. Never in my lifetime has it been more important to ask this question.

I’ll admit, hyper-Leftist and Warmist Mr. Leonard makes an interesting, non-moonbat case. Unfortunately for alternatives, he’s making a case that would mostly kill it.

Crossed at Right Wing News.

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3 Responses to “Warmist Makes Interesting Proposal: Remove All Energy Sector Subsidies”

  1. drowningpuppies says:

    The Government Accountability Office says the DOE’s oft-touted $28 billion loan program will cost taxpayers $2.21 billion over the lifetime of the loans. Not only that, the costs to taxpayers for green loans has risen about $500 million as “the result of loan guarantee defaults” from companies like Solyndra and Abound Solar.

    The “credit subsidy cost of the loans and loan guarantees in its portfolio” is expected “to be $2.21 billion, including $807 million for loans that have defaulted,” GAO reports. “The fees DOE has collected have not been sufficient to cover all of its administrative expenses for the program” because the “fees on the current loan guarantees were too low to cover ongoing monitoring costs.”

  2. Jeffery says:

    Let’s eliminate all subsidies. Most of the energy sector actually receives mostly tax breaks, not subsidies, so this wouldn’t effect most energy other than the “alternatives.”

    Sigh. Not the silliness about tax breaks not being subsidies again. Of course tax breaks are subsidies. Only in the fevered imaginations of the far-right are tax breaks not subsidies.

    An even bigger subsidy for fossil fuels is that the cost of damages to the environment (negative externalities to economists) are not incorporated into the price.

  3. Jeffery says:

    From the article you cited:

    Energy subsidies take many forms. Some of them are direct outlays of taxpayer dollars, like payments to corn producers for ethanol. Most are in the form of tax benefits, such as the deduction for “intangible drilling costs” (labor, repairs, hauling, you name it) in oil exploration—a notoriously abused provision of the tax code. The sheer number of subsidies is part of what makes them so hard to track.

    But one thing about them is easy to summarize: they are heavily tilted toward fossil fuels. Government statistics show that about 70 percent of all federal energy subsidies goes toward oil, natural gas, and coal. Fifteen percent goes to ethanol, the only renewable source of energy that consistently gets bipartisan support in Congress (think farm lobby and Iowa). Large hydro-power companies—TVA, Bonneville Power, and others—soak up another 10 percent. That leaves the greenest renewables—wind, solar, and geothermal—to subsist on the crumbs that are left.

    I agree with you that we would be better off removing ALL energy subsidies.

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