Friendly policies keep US oil and coal afloat far

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Friendly policies keep US oil and coal afloat far more than we thought

Most energy subsidies go not to renewables but to producing more of the dirty stuff.

Two months current enough for you? Before losing your shit, please find something as recent, with data as recent, to refute the following

By David Roberts@drvoxdavid@vox.com Updated Jul 26, 2018, 7:54am EDT


Thanks, taxpayers! |(Shutterstock)

The coal industry and its allies in the Trump administration have devoted considerable energy to arguing that subsidies to renewable energy have distorted energy markets and helped drive coal out of business.

“Certain regulations and subsidies,” Energy Secretary Rick Perry has said, “are having a large impact on the functioning of markets, and thereby challenging our power generation mix.” You can guess which regulations and subsidies he’s talking about.

This is nothing new, of course. It is in keeping with a long conservative tradition of challenging the economic wisdom and effectiveness of energy subsidies.

At least, uh, some energy subsidies.

Energy analysts have made the point again and again that fossil fuels, not renewable energy, most benefit from supportive public policy. Yet this fact, so inconvenient to the conservative worldview, never seems to sink in to the energy debate in a serious way. The supports offered to fossil fuels are so old and familiar, they fade into the background. It is support offered to challengers — typically temporary, fragmentary, and politically uncertain support — that is forever in the spotlight.

So let’s change that. Let’s talk about “certain regulations and subsidies” — namely, the ones propping up US fossil fuels.

Three recent analyses can help. The first does the yeoman’s work of tallying up federal and state energy subsidies. The second shows the effect those subsidies have on oil and gas production. And the third shows how thoroughly the US coal industry is propped up by regulatory policy. Together, they paint a clear picture: The profits of US fossil fuels are built on a foundation of government assistance.

All right then. First: What gets subsidized, and how much?

WASHINGTON, DC - FEBRUARY 16: U.S. President Donald Trump signs H.J. Res. 38, disapproving the rule submitted by the US Department of the Interior known as the Stream Protection Rule in the Roosevelt Room of the White House on February 16, 2017 in Washington



Here’s Trump allowing mines to pollute more. We’re not even counting that in the subsidies, though. |(Photo by Ron Sachs-Pool/Getty Images)

US fossil fuel production is subsidized to the tune of $20 billion annually

Researchers at Oil Change International (OCI) set out to quantify the level of US fossil fuel subsidies, but before we get to their results, a few important caveats.

OCI is only counting direct production subsidies. As they acknowledge, that leaves out a great deal.

For one thing, it leaves out the annual $14.5 billion in consumption subsidies — things like the Low Income Home Energy Assistance Program (LIHEAP), which helps lower-income residents pay their (fuel oil) heating bills. (There are better ways to help poor people, but let’s leave that aside for now.)

It also leaves out subsidies for overseas fossil fuel projects ($2.1 billion a year).

Most significantly, OCI’s analysis leaves out indirect subsidies — things like the money the US military spends to protect oil shipping routes, or the unpaid costs of health and climate impacts from burning fossil fuels.

These indirect subsidies reach to the hundreds of billions, dwarfing direct subsidies — the IMF says that, globally speaking, they amount to $5.3 trillion a year. But they are controversial and very difficult to measure precisely.

Finally, OCI acknowledges that its estimates of state-level subsidies are probably low, since many states don’t report the costs of tax expenditures (i.e., tax breaks and credits to industry), so data is difficult to come by.

All of which is to say: OCI has produced about the most conservative possible estimate of the subsidies received by fossil fuels in the US. These are solely production subsidies — taxpayer money that goes directly to producing more fossil fuels.

So what’s the verdict?

Adding everything up: $14.7 billion in federal subsidies and $5.8 billion in state-level incentives, for a total of $20.5 billion annually in corporate welfare.

Of that total, 80 percent goes to oil and gas, 20 percent to coal. On the right, subsidies are broken down by stage of production. Extraction gets the most.




Notice that asterisk by remediation, which refers to the cost of cleaning up environmental messes and abandoned infrastructure left behind by fossil fuels. Shady insurance, bonding, and liability-cap policies mean that taxpayers are probably on the hook for lots more than this in the end, but it’s difficult to quantify in advance.

There are dozens and dozens of fossil fuel production subsidies — OCI’s report has a whole appendix devoted to listing them — but here they are broken down by the biggest offenders:


You probably can’t read that text, so here are the top six:
•Intangible drilling oil & gas deduction ($2.3 billion)
•Excess of percentage over cost depletion ($1.5 billion)
•Master Limited Partnerships tax exemption ($1.6 billion)
•Last-in, first-out (LIFO) accounting ($1.7 billion)
•Lost royalties from onshore and offshore drilling ($1.2 billion)
•Low-cost leasing of coal-production in the Powder River Basin ($963 million)

(I listed six because that sixth one is the biggie for coal.)

These kinds of obscure tax loopholes and accounting tricks are not widely known or debated, partially because you have to be a tax lawyer to understand them, and partially because they are simply old. The single biggest one, the intangible drilling deduction, has been around for over a century!

As subsidies age, they start to look less like subsidies. They start looking like fixed features of the landscape, like mountains or rivers, rather than choices we are making. They just look like the status quo.

How does this compare to renewable energy subsidies? In terms of permanent tax expenditures, fossil fuels beat renewables by a 7-1 margin:



You can pick up the rest of the article here. Hint, you'll find nothing to corroborate your 'beliefs':

https://www.vox.com/energy-and-environment/20...-subsidies

So, let’s take a step back and sum up.

Right now, the US pays rhetorical fealty to a carbon goal that would require stopping all new fossil fuel development and phasing out all coal plants.

Meanwhile, US taxpayers are spending tens of billions of dollars a year subsidizing new fossil fuel exploration and exploitation, and US regulatory policy keeps the zombie coal fleet shambling on.

All the while, conservatives complain volubly about subsidies to renewable energy and the US energy secretary tries to use them as an excuse to dump even more public money on coal companies.

It’s a train wreck.

But still. The oil and gas companies making decisions to develop new fields and the utilities keeping coal plants alive are going to realize, at some point, that their vulnerability to “carbon risk” grows every year. (Arguably, big oil is way ahead of big coal in understanding this.)

The Obama administration identified $8.7 billion a year in federal fossil fuel subsidies to eliminate, but couldn’t get it past Congress. Now both sides of Pennsylvania Avenue are fossil-addled.

But if the US ever does get serious about mitigating climate change, those companies are going to be the ones caught with their pants down, holding a bunch of high-carbon assets that are destined to be stranded.

US fossil fuel companies and utilities are basically gambling on the continued perversity of US energy policy. It’s not a terrible bet — an odds-on winner, historically speaking, and probably for the next few years — but it can’t last forever.

Can it?

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