How we subsidize fossil fuels

This is a little old, but I ran across it on Jon Taplin's blog recently and I think it does a good job of making an important point—fossil fuel, as an industry, isn't self supporting. No matter where we get our energy from, we're propping up production with tax dollars.

Couple things to keep in mind with this graph:

Not all fossil fuel subsidies are evil. (Frankly, I think we can drop the fossil fuels part and say "not all subsidies are evil", but I digress.) The Environmental Law Institute—who compiled the research and created this graphic—points out a great example: The Low-Income Home Energy Assistance Program. That's calculated under subsidies to fossil fuels. It's by no means a big part of fossil fuel subsidies, but it's there.

This accounting doesn't include all spending. For instance, there are programs that, arguably, spend money as a direct result of the fossil fuel industry, but that aren't technically subsidies. The Oil Spill Liability Trust Fund, say, or, more controversially, money spent on military campaigns at least partially influenced by a desire to stabilize/defend/friendly-fy oil-producing countries.

Read the full paper this graph is based on. See the full graph with footnotes.

Maggie Koerth-Baker is the science editor at BoingBoing.net. She writes a monthly column for The New York Times Magazine and is the author of Before the Lights Go Out, a book about electricity, infrastructure, and the future of energy. You can find Maggie on Twitter and Facebook.

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Michael Powe

After reading through all the comments thus far, my overall reaction is, “Way to miss the point.”

Subsidies by the gov’t drive down the unit price for the consumers. That is the point at the consumer level. Subsidization artifically depresses prices, which encourages consumption.

Coincidentally, subsidies drive up the profits of the subsidized company, by offloading the cost of doing business onto the consumer. It’s a hidden tax on the consumer.

We have oil companies generating tens of billions of dollars in profit, on a yearly basis, and you people are arguing about unit costs of subsidies? Isn’t it completely obvious that companies with that level of profitability don’t need subsidies?

I can only shake my head. Apparently, I’m the only one offended by being forced to defray business expenses for Exxon.

“The world’s largest publicly traded energy company said it earned $6.3 billion, or $1.33 per share, in the first three months of 2010. That’s up from $3.5 billion, or 92 cents per share, in the same period last year.”

http://money.cnn.com/2010/04/29/news/companies/Exxon

Subsidization by the gov’t has a legitimate purpose in driving technological advances. We have the internet through which we make these exchanges of ideas only because the technology was developed through gov’t investments, which made the technology free for all users. In the same way, the point of subsidizing new technologies in solar, wind, hydro and other forms of power generation, is to drive the advances that will make obsolete dependence on nonrenewable technologies like oil.

Once those technologies have become as sophisticated and self-sustaining as oil, those subsidies should go away. Just as the oil subsidies should go away.

mp
Anonymous

Should this graph is normalised against the amount of
energy these subsidies produce?

Hell go get an old graph of all energy consumption
in fossil based transportation and heating along with
electricity. The greenie bit is a tiny weenie bit of the
small electricity branch of a giant fat oil block.

That is the unreality of the greenie insanity.
Anonymous

It’s not a government, but a corporation.
dogbiscuituk

Sure, if “Not all fossil fuel subsidies are evil”, then we can drop the fossil fuels part, and say “not all subsidies are evil”. That’s elementary logic. Just like, if “Not all rye biscuits are fattening”, then we can drop the rye part, and say “not all biscuits are fattening”.

You might (?) be suggesting that all other specializations are valid: “Not all traditional fossil fiel subsidies are evil”, “Not all renewable energy subsidies are evil”, “Not all corn ethanol subsidies are evil”, and so on.

But this is false, again by basic logic. A counterexample would be “Not all evil subsidies are evil”.
Anonymous

1/10 of what we spent to bail out Goldman Sachs, et. al.
iCowboy

Before we’re forced to issue a fatwa on any more infographics; can the designers who inflict ever more bizarre pictures on the public please take a basic information literacy course or read a book in the area BEFORE firing up their graphics tablets?

http://www.jstor.org/pss/1420573

People are very poor at determining relative areas – especially when circles or segments are used. Look at the bottom right, the outer ring is only twice the diameter of the inner segment, but its area is nearly three times as great. Rather than make things clearer, the shape chosen has downplayed the problem which is only overcome by adding text that clutters the chart.

There is nothing on this chart that couldn’t have been done using simple lines which would have been much more understandable.
jphilby

Alla that stuff is a joke compared to nuclear power. The Feds injected over $200 billion into nuclear by the early 1970s. In today’s dollars: that’s a lot.
Anonymous

Does the subsidy amount for ethanol take into account the costs of fuel for the farm machines and the fossil fuel based fertilizers, herbicides & pesticides used to grow and harvest the corn used for ethanol or the processing of corn & possibly the stalks (which contain much of the sugar in corn)? Corn is a high nitrogen feeder, lots of fertilizer required. Requires quite a bit of water too.
Pyros

I think a prudent person would have to consider Erunnos’ comments carefully (while ignoring the bombast, of course).

I am not so sure that the falling costs of renewables doesn’t make them a compelling (financial) target for subsidies. I would need to see an historical analysis of their pricing to make the determination that he has made (without supplying evidence — which is not necessarily a reason for disregarding it).

But even accepting his argument, what is the ultimate price of oil if we determine that it is destroying the planet. Perhaps it is cheaper than any other imaginable form of energy for always and anon, but perhaps there is also some truth to the adage “you get what you pay for”.
El Zilcho

@#6 Renewable energy subsidies don’t exist just to try and shift more units to eek out economy of scale savings. They’re there as market enablers. They help to create markets that otherwise wouldnt flourish because of the well-developed big power competition. The subsidies prop up the market while it develops technologically. Take the German REFIT scheme, it cost a bit but the results have been good and now fritz exports awesome turbines. Britain at the same time did a shitty short term lower value R&D subsidy, no-one invested, nothing happened, we buy German.
Anonymous

It would be interesting to compare the US spending on Fossil / Renewable fuels with the EU spending. EU has much higher taxes on fossil fuels (at least whatever is in domestic use), so the proportions might be quite different.
Brainspore

Since your cited source is behind a paywall ($20 for one article!) I can’t respond to it in detail.

The abstract is free, and a source behind a paywall still beats the hell out of your source of “stuff I like to say.”

The problem may not be whether or not wind farms are harmful to bird populations, but whether the NIMBY opposition to a wind farm can gin up enough FUD about bird kills to keep the project from becoming a reality. OK??

Funny, I could have sworn you wrote

If “low or zero environmental impact” is the criterion…

instead of

If NIMBY opposition is the criterion…
- Notary Sojac
  
  Thanks for juxtaposing my two posts that way. It helped me realize that I was talking about two sides of the same coin.
  
  If I don’t want any louche wind turbines interfering with the view from my million dollar oceanfront home, and at the same time I want to present myself to the world as “fashionably green” rather than “a hypocritical asshole”, the best strategy is to concoct a whole lot of bullshit about the environmental cataclysm those turbines will cause. And then get all my other oceanfront neighbors to pony up for a campaign to kill the project in court.
  
  So “saving the migratory birds” is a nice cover story for “build this wind farm someplace where no VIP’s live”.
  - Brainspore
    
    As you seem to be arguing different points in different posts I’ll do my best to respond to them all:
    
    â€¢ If you’re claiming “NIMBY concerns tend to stall new power plants and some people are hypocrites,” then I agree.
    
    â€¢ If you’re claiming “NIMBY concerns generally favor fossil fuels over renewable energy” then I think you’re full of it, because multimillionaires sure as hell don’t want to live next door to coal plants either.
    
    â€¢ If you’re claiming “solar/wind plants have a larger negative impact on the environment than fossil fuels,” as you seem to do back in post #36, then I’d like some of what you’re smoking because that shit sounds wicked.
Yaten

I think this graph makes a fascinating statement, though I’d like to see it broken down by kilowatt hour. Surely the subsidies required to support renewable energy production at the rate we consume fossil fuels now would be much higher than the subsidies we currently have for fossil fuels.
Anonymous

If you’re counting tax breaks as subsidies, of course oil’s going to lead- oil’s the major energy product, and generates the most revenue. Give tax breaks to solar energy at the same rate, and oil will win hands down– ridiculously so.
Anonymous

Re: the current cost of renewable energy production – if we’d had the same amount of money poured into renewable sources as we’ve had into non-renewable sources, the efficiency levels would be far higher.

Consider that we’ve had the past few millennia to improve on “burn-some-stuff-to-heat-some-water” technology, but only really been working on wind and solar for the past fifty years. With enough research, we can surely improve our use of renewable sources.

That graph up there proves the point about spending on different sources – swap it over and see how quickly power companies improve their practices!

PS capatcha was the furnace, very appropriate!
- Rayonic
  
  I’m not sure you can assume that research would be hugely further ahead if only the government had invested more money. You don’t necessarily get 10x the research speed if you spend 10x the money.
  Plus there’s a ton of privately funded research going on anyway. Lots of money to be made for the next breakthrough.
James

“I think it does a good job of making an important pointâ€”fossil fuel, as an industry, isn’t self supporting. No matter where we get our energy from, we’re propping up production with tax dollars.”

What twisted logic is that, by allowing businesses to keep the profit they’ve earned you aren’t propping up anything. Tax is what props up the government. Apparently when government doesn’t shove its oar in and allows things to be as they naturally should its called a subsidy. I cannot understand how the mindsets of Americans have fallen so far that they’ve forgotten the fundamental thing that bought the prosperity they enjoy now in the first place.
- El Zilcho
  
  Celebrity alert! I think ‘James’ is a nom de plume for Sarah Palin isn’t it? Yeah!! I can spot your talentless, drivelling pro-oil rants anywhere moron!
  - James
    
    If you don’t have anything to offer other than abuse just don’t bother “El Zilcho”.
Anonymous

This statistically misleading. What is the subsidy per unit of energy produced? A quick google gave a couple of sources that said that renewables were 7% of the energy used in the US (from 2006). Nuclear was 8% so lets remove that from the equation.

So per percent of the us energy used, there’s $0.86B in subsidies for fossil fuels. But there’s $4.1B in subsidies for renewables. That’s almost 5 times as much in subsidies per unit of energy.
- David A
  
  That would make sense. If all of the power capacity of the entire united states was built in 6 years.
  
  Unfortunately, that’s entirely false.
  As such that argument is entirely false.
  
  Heck, I’ve seen this idiotic argument be used on only 1 years worth of subsidies. By a US Senator no less.
victorvodka

The kicker is that corn and ethanol isn’t renewable either, since it takes more than one unit of fossil fuel energy to grow a unit of ethanol energy, so it’s just a greenwashed PART OF THE PROBLEM.
David A

Actually,
The problem with this chart is that paints too rosy a picture in the top right area.

Geothermal, and Solar. Those are only getting roughly 1.05% of that $29 Billion over that time period.

Meanwhile also pictured on the top right. “Alcohol Vehicle Fuel Credit” is getting 64.53% of that $29 Billion.

That is VERY misleading.

Infact, why are they including an alcohol credit at all. If they said they weren’t counting corn ethanol in the top right. Since practically no alcohol from other means was even created in that time period. What gives?!?
Ernunnos

Now compare to the amount of energy we get out of each of those. Fossil fuels provide over an order of magnitude more power, so you rapidly start to see just how expensive renewables really are. We aren’t getting anywhere close to our money’s worth out of them.

And I say this as someone whose roof is covered in solar panels. But I jumped at the chance and the subsidies because I know it’s not sustainable, the subsidies won’t scale, and can’t last. Indeed, subsidies in my state were reduced mere weeks after I got mine. Germany and Spain are reducing theirs as well.

I’m just cynical enough to take advantage of economic illiteracy. Thanks for my $60 power bill last month, idiots.
- dculberson
  
  Dude, my electric bill was only $80 last month with no solar panels, and that’s running the AC during a super hot month!
David A

Ah yes Ernunnos,
Because CLEARLY we should compare the capacity built up over the course of a half century. To the capacity newly being built.

And then use only an 8 year time frame’s worth of subsidies.

All that tells you is OLDER IS BETTER, because… well….

No. That’s idiotic.
- Ernunnos
  
  It’s not a matter of capacity, it’s a matter of energy return on investment. Collecting fresh solar energy is much harder than pumping ancient, pre-concentrated solar energy out of the ground. People who think solar will catch up any day now are just as delusional as people who think that Kobe beef will come down in price to match beans and rice any day now. It’s the modern energy bubble version of the dot-com bubble “We’ll lose money on every sale, but make it up in volume!”
  
  It didn’t scale then, it doesn’t scale now.
  
  If you want to get it at the beginning of a bubble, now’s the time, but at most it will save you some dollars. It won’t save the world.
Anonymous

wacky pie chart/area chart/ …

anti-tufte!
Enoch_Root

Bad graph maker… bad!

There is a serious problem with this graph.

Can you guess what it is?

This pic chart might help.

Looking at total absolute value of subsidies is not very informative considering the vast differences in utilization of these items. In the above pie chart you can see that fossil fuels (I couldn’t quickly find actual value of these items but you get the idea) are a MUCH larger piece of the pie than traditional renewable (which I am assuming is ~7% w/ biomass, hydro, and other).

In fact if you look at both of those graphs it makes the opposite point than the author is trying to make. If you look at the percentages then traditional renewables are subsidized way more than fossil fuels as a percentage of use (like I said I would love to have vaules in USD for these things)

Even in the original “paper” (it seems to be just a summary and that graphic… maybe I am wrong here) they appear to only talk about absolute values of subsidies. Then like the blog post they talk about how large they are in comparison to the relatively tiny amount for renewables. This is not ideal.
- David A
  
  @Enoch_Root
  And can you guess what the problem with that analogy might be.
  
  Gee, lets take power capacity built up over the course of half a century. (Coal and Nuclear in particular has hardly had anything built in over 3 decades)
  
  And then lets compare it to the amount of subsidies over only the past few years.
  
  Which leads to 3 extremely false assumptions
  
  1. OLDER IS BETTER, because clearly, it costs ABSOLUTELY NOTHING to build power plants previous to 2002. AMAZING!!
  
  2. The OLDER and more established a technology gets, it proportionately deserves even more subsidies.
  
  3. Environmental damage has ZERO cost, because it’s not a direct expenditure.
Snig

Yes, but “renewable” means something. Oil/gas/coal will be tapped out/scarcer/more difficult to obtain in a few decades, with higher and higher kw costs, whereas once wind/solar/geothermal are brought into production, they can produce for centuries. Over time (really dependent on your time scale of course) developing renewables will be cheaper by kwh.
- Notary Sojac
  
  It’s hard to address the mix of future energy sources without taking into account the NIMBY factor.
  
  A relatively small group of “activists” with a website and a couple of lawyers can hold up any energy project: renewable, nuclear, or fossil, for as near to forever as to make no difference.
  
  For example: Over the last sixty years, Hoover Dam has generated over 240 billion kwh. It may be the most cost effective renewable energy investment in American history. (not counting Niagara Falls hydropower, which takes advantage of a unique natural formation).
  
  Thought experiment: Do you think that Hoover Dam could be built today?
  - Snig
    
    NIMBY is an issue, but generally a lower issue over all with renewals. Given that even in the gulf today, there’s considerable local pressure to continue to drill, it’s certainly not universal in stopping production.
    
    Hoover Dam would be unlikely to be built today, as it did have a devastating environmental impact. Big water projects are unlikely to happen frequently in the future, but small/micro hydro is becoming of more interest, due to it’s significantly smaller environmental footprint, and it is a relatively untapped resource, even in the relatively developed US.
    
    http://en.wikipedia.org/wiki/Small_hydro
    http://en.wikipedia.org/wiki/Hydropower#Resources_in_the_United_States
    
    NIMBY is an issue with all development, but I personally would rather live adjacent to a windfarm, carbon dioxide sequestration site, small hydroelectric resource, geothermal site, solar farm, vs. downstream from a mountaintop coal project, an oil refinery, or near an oil field. Louisiana beach front property is likely cheap this year, if you’ve an interest.
    - Notary Sojac
      
      If the concern is to “replace fossil fuels with low-carbon energy” then a massive wind farm or massive solar array, (or a big honking dam) beats oil or coal, no question. They need to be massive to replace the energy density of oil and coal.
      
      If “low or zero environmental impact” is the criterion then an underground coal mine or a natural gas well beats those bird-chewing wind farms and habitat-covering solar panels all to heck.
      
      You can’t have -both- except with a nuke (proven gigawatt producer) or geothermal (not so proven).
      - Brainspore
        
        If “low or zero environmental impact” is the criterion then an underground coal mine or a natural gas well beats those bird-chewing wind farms and habitat-covering solar panels all to heck.
        
        You have a source for that claim? Because I’ve got a study right here that concludes that fossil fuel based energy causes more than 10 times as many bird deaths per kilowatt-hour than wind power. Also I’d advise you to google “open-pit mining” if you think solar farms ravage the landscape more than coal does.
      - Notary Sojac
        
        Since your cited source is behind a paywall ($20 for one article!) I can’t respond to it in detail.
        
        The problem may not be whether or not wind farms are harmful to bird populations, but whether the NIMBY opposition to a wind farm can gin up enough FUD about bird kills to keep the project from becoming a reality. OK??
        
        I’m not going to bother googling open pit mining because I specified underground coal mining.
        
        Maybe I should have said “underground coal mining, where the miners get in an elevator and ride way down there to mine the coal, and the mountaintop stays intact”.
        
        That better???
      - Snig
        
        How do you think the birds fare in Centralia Pennsylvania? Coal mines, even the traditional underground kind, are still pretty toxic locally. Generally associated with wastwater, release of methane, as well as contamination of the water table. Also, can’t actually produce energy without a coal fired plant, which is likely a teensy bit less green than most solar/wind arrays.
gamesnight

Looking at gasoline alone, there is a nearly 20Â¢ a gallon fed tax. With the amount sold here, I would guess that to come out to between 25 to 30 billion dollars in income to the fed. govt. Add to gasoline the other fossil fuels’ taxes; e.g. coal, natural gas. diesel, propane… adding their excise tax to the fed. budget and it might just be a wash or even a bit of black ink.
Snig

Over an election cycle time frame, far cheaper to stay with the diminishing fuels (oil/gas/coal). The eternal fuels will cost more over the next few years, but may be cheaper by the time of our children or grandchildren. In related economic strategies, building a house of sticks is far faster and more economically feasible. Those pigs who wish to build from bricks likely overstate the wolf issue.
Snig

Also, health risks from fossil fuels considerably more than renewables:
http://www.nytimes.com/2009/10/20/science/earth/20fossil.html
David A

1. It’s a bit more difficult to pump oil out of the ground, than tossing a pipe the ground. Especially when that ground is in highly militarized areas of the earth, halfway across the planet. Just the military assets protecting the Gulf of Hormuz alone are pretty mind boggling.

2. As I mentioned in my first comment there. Solar got almost nothing in the previous chart. Much less baseload solar thermal, which for most the years on that chart got big fat $0 in subsidies.

3. We don’t make commercial electricity out of oil.
Why does anyone think that we do? I mean sure, it’s great political rhetoric, but it’s simply ignorant or dishonest to say that the two are related.
fnc

Ah, the free market at work.
russellurichards

Our government also subsidizes the oil and gas industries by building roads.
- Michael Smith
  
  #13,
  
  And by not acting against polluters.
- Julien Couvreur
  
  “Our government also subsidizes the oil and gas industries by building roads.”
  
  That was my first thought as well, but actually roads are not fuel specific.
  
  Rather I would say that government subsidizes energy consumption by building roads, because it encourages people to live further away (drive more), where they can get bigger houses (more energy use, more materials, more infrastucture, less economies of scale).
Snig

There was likely an argument in the 1880′s that the government should be subsidizing more and more whaling boats and not spend anything on developing oil/gas infrastructure, as there was no way petroleum could replace the whale oil industry.