Fed subsidies support GHG emitting fuels

By Erin Voegele | September 15, 2009
Report posted Sept. 21, 2009, at 6:05 p.m. CST

The Environmental Law Institute, in partnership with the Woodrow Wilson International Center for Scholars, recently released a study on energy subsidies. The study, titled "Estimating U.S. Government Subsidies to Energy Sources: 2002-2008," offers a comparison of subsidies the federal government provided to fossil fuels and renewable sources of energy spanning from fiscal year 2002 through fiscal year 2008.

During this seven-year period, the researchers found that approximately $72 billion in subsidies were provided to benefit the fossil fuels industry, while only $29 billion in subsidies were provided for renewable sources of energy. Of that $29 billion, $16.8 billion specifically benefitted corn-based ethanol.

The subsidies examined in the study fall into one of two categories; foregone revenues, which are primarily in the form of tax breaks, and direct spending, which generally include expenditures on research and development. The fossil-fuel related subsidies included in the study relate to petroleum and its byproducts, natural gas, and coal. The renewable-fuel related subsidies include those relating to biofuel, wind, solar, biomass, hydropower, and geothermal energy production. The study does not include data on subsidies for nuclear energy.

Of the $28.9 billion in subsidies that supported renewable energy from fiscal year 2002 through fiscal year 2008, $11.6 billion went to the Volumetric Ethanol Excise Tax Credit (VEETC) and approximately $5 billion went to corn subsidies. Other major areas of renewable energy subsidies included $5.2 billion for the Renewable Electricity Production Credit, $259 million for the Renewable Energy Investment Credit, and $200 million for the Five-Year Modified Accelerated Cost Recovery System Period for Solar, Wind, Biomass, and Ocean Thermal. Only $198 million in subsidies was used to support the Alcohol Fuel Blender Credit, which can be taken in lieu of the VEETC, and $182 was attributable to the Biodiesel Blenders Credit and Biodiesel Excise Credit. An additional $165 million in subsidies supported the Deduction for Clean Fuel Vehicles and Refueling Property in relation to biofuels, and $39 million supported the Credit for Clean Fuel Vehicles and Refueling Property for biofuels. Rounding out the $28.9 billion in subsidies was $85 million for Clean Renewable Energy Bond Holders and $1 million supporting Special Depreciation for Cellulosic Plant Property.

Key findings of the study include:
The majority of the federal subsidies studied support fuels that emit high levels of greenhouse gases.
Subsidies for fossil fuels during this time frame were substantially higher than those for renewable sources of fuel and energy
Subsidies to fossil fuels generally increased during the time frame studied, with the exception of fiscal year 2008. Funding for renewable energy generally increased, but dropped in fiscal years 2006 and 2007 before rebounding in 2008.
The largest subsidies supporting fossil fuels are included as permanent provisions in the U.S. Tax Code, while many subsidies for renewable energy are time-limited initiatives with expiration dates.