Dr. Robert Peltier, editor-in-chief of POWER magazine, recently penned an article which purported to "bust" the "myth" that fossil fuels receive more subsidies than renewable energy. In so doing, Dr. Peltier cherry-picked a single study that conveniently ignores the energy subsidies handed out for the past 90 years to the conventional energy industries in order to back up a falsehood. As the Congressional Research Service puts it, “For more than half a century, federal energy tax policy focused almost exclusively on increasing oil and gas reserves and production. There were no tax incentives promoting renewable energy or energy efficiency.”
Studies from the Government Accountability Office, Congressional Research Service, alongside studies commissioned by the Nuclear Energy Institute and American Petroleum Institute, and even the Energy Information Administration study to which Dr. Peltier refers, all show that despite the federal government funding fossil fuels for the past century, taxpayers continue to spend billions each year supporting the fossil fuel industry and are expected to spend tens of billions more over the next 10 years.
We have already addressed this issue in two fact sheets–one on energy subsidies and incentives in general and one devoted specifically to the EIA report. For the reader who would like to know more about this issue, both are recommended reading. Broadly speaking, though, here are a few of our thoughts:
– Fossil fuel subsidies have been around longer than Social Security, Medicare and Medicare and are currently treated as permanent entitlements in the tax code. Permanent, long-term subsidization of the fossil sector has established a large, mature industry in the U.S. that can stand on its own and does not need government support; yet the subsidies remain intact.
– Despite the sharply contrasting treatment of limited, short-term, and sporadic incentives for renewable energy, the renewable industries have grown but uncertainty remains. Without clear long-term signals from policymakers, we will lose the opportunity to build a brand new American manufacturing sector, diversify our energy mix to improve energy security, and maximize our domestic and clean energy sources.
– The effect of massively subsidizing the fossil fuel industries over the past century has been to tilt the energy playing field and raise the cost of entry for any new energy technologies. This clear government preference has created a monopolistic role for fossil fuel in our energy economy, proven by an 80% market share, ensuring the U.S. remains highly dependent upon too few energy source and leaving Americans exposed to fossil fuel risk.
– The energy sector, and particularly the electricity sector, are highly regulated industries that have been subject to state and Federal supervision for the past century. Any study hand-picking data for a few recent years to expose some “truth” on comparative government support for energy can only misinform and mislead the reader.
– Fossil fuels derive a further "hidden" subsidy because the health costs they impose on society are not included in their market price. The National Academy of Sciences investigated this question in a 2009 report, and found that the hidden costs of fossil fuels–not including costs associated with climate change–are $120 billion per year, far beyond the total of direct subsidies for all energy industries.
In sum, Dr. Peltier's method of "mythbusting"–cherry-picking the single report and statistic that supports his point of view–falls well short of being convincing.