President Obama's rhetoric in recent days has focused on his desire to strip the U.S. energy business of its financial subsidies while giving more government funds to alternative energy sources. A new study by the Environmental Law Institute and the Woodrow Wilson International Center for Scholars titled "Estimating U.S. Government Subsidies to Energy Sources: 2002-2008" examines the subject. The study looked at both direct spending by the government and indirect subsidies through tax breaks. It found that fossil fuels received total subsidies of $72.5 billion over the seven years, 2002-2008, while renewable fuels only were granted $29.0 billion. If we average the subsidies, fossil fuel gets $10.4 billion a year compared to $4.1 billion for renewable fuels, a 2 ½ to 1 ratio.
It found that fossil fuels received total subsidies of $72.5 billion over the seven years, 2002-2008, while renewable fuels only were granted $29.0 billion
A blogger, David Roberts, writing on Grist.com was all over this report and why the government needs to end fossil fuel subsidies. We thought it interesting that fossil fuels were only receiving 71.4% of all the government subsidies for energy. If you look at the distribution of energy consumption in this country by fuel type, traditional fossil fuels -- oil, gas and coal -- accounted for 85.6% of the nation's energy supply in 2007. If we include nuclear in the fossil fuel category, since it is not a renewable fuel, then the fossil fuel component of total energy consumption rises to 93.9%. So on a contribution basis, fossil fuels are being discriminated against, not favored.
An even more telling analysis is to examine the table of U.S. taxes other than income taxes paid by oil and gas companies prepared by the Energy Information Agency (EIA) from data it routinely collects from the energy companies in its Financial Reporting System. Over the period 2001-2007, a similar seven-year period and almost a direct overlap with the period of the subsidy study, the oil and gas industry paid $64.3 billion in taxes other than excise taxes. During that period, the industry also paid $346.2 billion in excise taxes, for a total tax bill of $410.5 billion. And this doesn't include any income taxes the oil and gas industry paid or the value of lease rentals and bonuses paid in offshore lease sales.
In 2007, taxes other than income and excise amounted to $60.3 billion, nearly as much as the seven-year tax subsidies
If we only look at the industry's tax bill in 2007, taxes other than income and excise amounted to $60.3 billion, nearly as much as the seven-year tax subsidies. The problem is that the contribution of the "old" energy sources -- oil, gas, coal and nuclear -- is not recognized by the public because its view of these industries is so negative. Trying to change that image is a worthwhile endeavor, but an effort gaining little traction.
G. Allen Brooks works as the Managing Director at PPHB LP. Reprinted with permission of PPHB.
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