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Why A Realistic Energy Policy Must Eliminate Fossil Fuel Subsidies

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Now that the presidential election is over, perhaps we’ll see some reality injected into our energy policy.  The existing energy policy professes to encourage “energy independence”.  That policy in action embeds permanent subsidies, tax credits, and tax breaks in the US federal tax code for highly profitable fossil fuel industries.

Have these favorable treatments given us energy independence?  No, and that’s because reliance on fossil fuels is at odds with price stability or economic security.  We don’t get price stability with fossil fuels.  Some readers will remember the price shocks and economic fallout from the first oil embargo in the 1970s; and others may recall the historical volatility of natural gas prices.  And the future could be much more expensive than the rosy projections of today. No one in the energy business today thinks that natural gas will always be as cheap as it is now – for the reasons noted by Vice Admiral Dennis McGinn (USN, ret.) in my previous article.  Fossil fuel prices are inherently unstable because they are subject to global economic and political forces.

Capitalism dictates that commodities will flow to the highest prices, onshore or off.  There’s no guarantee that any oil or natural gas extracted within the borders of the USA will stay here.  There’s no guarantee that any oil transported via a Keystone pipeline from Canada to Houston will stay in the USA either. Building a policy of energy independence on assumptions that these commodities will remain inexpensive and onshore is shortsighted and wishful thinking.

And here’s the question we should pose to everyone that expresses concerns about subsidies for renewables.  Why complain about subsidies for renewables and remain silent on the subsidies for fossil fuels?

There’s a great story relayed in Matthew and Luke in the Bible’s New Testament in about people who focus on removing the motes in their neighbors’ eyes when they are utterly ignorant of the planks in their own eyes.  For the renewable subsidies critics, it’s time to remove your planks. If you are upset about the subsidies for renewables, then you should be apoplectic about the permanent subsidies for fossil fuel businesses – which have always dwarfed the temporary subsidies for renewables. This website offers an interesting visual on fossil fuel subsidies.

The Big Five oil companies alone – Exxon, BP, Chevron, Shell, and AmocoPhillips – get $2.4 Billion USD annually in tax deductions.   In our current fiscal situation, why should American taxpayers be this generous to hugely profitable multi-national corporations when we do not get energy independence in return?

If renewable subsidies critics really want a level playing field for energy, if they truly want economic and energy security via energy independence, then they need to strenuously advocate for the elimination of every tax break, investment credit, and loophole for fossil fuels.   They should consider doing likewise for the subsidies going to the nuclear industry.

Should we give serious credence to criticism of temporary governmental subsidies for renewable energies while the permanent fossil fuel energy subsidies exist?  No.  That criticism is akin to focusing on the mote instead of the plank.

We’re modernizing the electric grid into a Smart Grid that can take advantage of all the benefits of clean, domestic, and renewable energy sources.  Renewable energy sources do not suffer from price instability like natural gas or gasoline.  Armies don’t need to be deployed to protect the sun, wind, or tide, like they are for fossil fuel supply lanes.  A realistic energy policy that eliminates fossil fuel subsidies in favor of these domestic and clean renewable energy sources helps us gain the short and long-term benefits of the Smart Grid, and true energy independence too.

Image: Subsidies via Shutterstock

Christine Hertzog's picture

Thank Christine for the Post!

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Steven Scannell's picture
Steven Scannell on December 25, 2012

Merry Christmas to you Christine, and to all my fellow "best thinkers" here.   That was another great article.  I do differ with the idea that as you say:

"We’re modernizing the electric grid into a Smart Grid that can take advantage of all the benefits of clean, domestic, and renewable energy sources.  Renewable energy sources do not suffer from price instability like natural gas or gasoline."

I would say that electric grid systems for renewables are not scalable for many reasons of which we're all aware. I say that full scale wind with other renewables to even a fantastic smart electric grid, can't be done cost effectively, and so fundamentally ... it's just not feasible to keep on trying to jam that square peg into the round hole.  You're chasing after a panecea.  All the chanting in the world from armies of wide eyed optimists won't make it so.  I would grant that this could change, but I'm not holding my breath for a major breakthrough in electricity storage systems.  

To me the wiser plan, and one that's much more feasible in the long term,  would be green subsidies that can potentially comodify the outputs of our vast renewables.  From your writing, and lack of comments in this area I take it that you, and most of us here, have not studied this possible solution to our energy crisis or to our climate change crisis.  As well many are thrown off course here by the inertia of our status quo systems, which have worked well using fossil fuels.  Try to think in terms of a green grid, instead of a smart grid.   The necessary object with a green grid system is the comodification of these vast renewable outputs, and this  would shape future energy markets. Simply put a green grid would drive our vast potential green energy systems.  This could only be done if our vast resources of wind, wave, tidal (rise and fall), sea current, solar, geothermal, and nuclear, were; 1. storable as non-electrical "green fuels", and;  2. practically shipable, transportable.  Economically there is a "missing price".  We can't well subsidize what we can't price and comodify.  To be sure the undertaking would be monumental, and so a consortium approach would be to our utility advantage. 

Wind to highly charged compressed air makes more sense.  Wind to hydrogen makes more sense. Why?   These are scalable.  These fit well with the old systems.  These are common denominator conversions to bridge the old to the green systems.  While it is true that we don't have pipes for this right now, it doesn't mean necessarilly that we can't design them and build them.   Throw me a bone, think outside the box, and admit that in principle it is in fact a possible thing to comodify, ship, and store "energy" in pipes.  Energy does not have to be electrical energy.  We're hung up on a sand bar here.  I'm saying that just because we're only comfortable with this old medium, doesn't mean we can make it fit.   Every day that we're watching the earth founder, is a day lost. 

Furthermore Christine, as fine as this article is, you are stating the obvious again.  Our entire political arena is an ignorant and patronage based mess, which is why we do things against the public trust, and this is true on so many  policy issues.  This situation certainly is an affront, and one of many, but it's been said so many times before. And yes Obama did win, but the reality is he's not smart enough, and especially not independent enough to engage well on energy policy.   I don't believe in tax subsidies for the oil companies who are doing quite well.  I know they don't need it and that we're fools for allowing this to go on.  


www.environmentalfisherman.com    11 pages illustrated, The Tripe System: Track+Pipe.  The Tripe System is a mega-system design, because that's the job.  We don't need small solutions as much as we need that silver bullet.  It's comprehensive in nature and provides for many diverse energy systems, a multiple of transportation system platforms, and various ancillary utility plug-ins, such as large scale water, natural gas, bio based sewage, and much more, beans if you like.  We need to green the earth, and this is how.  I'll walk you right through it.  Merry Christmas everyone, and Happy Holidays.   

 

Richard Rodriguez's picture
Richard Rodriguez on December 26, 2012

What concerns many of us alternative energy supporters is why you think govt should even be involved at all. The Obama administration is supporting subsidies for solar and wind developments which cannot be sustained without direct govt subsidies  Unfortunately he would have you think it involves no regulation which is misleading. Let the market dictate price by supply and demand. Take away oil subsidies(deductions) and you certainly will raise the price of oil but of course obama has the carbon tax waiting for in the wings to further his redistributon of wealth plan. No government will screw up alternative let the new commodities development like grass biomass without the subsidies.

Daniel Ferra's picture
Daniel Ferra on December 26, 2012

 We don't even take into account the tremendous health cost to us and our planet, when we burn oil, coal, and natural gas, which would make them more expensive than Solar or Wind. We need a National Feed in Tariff, for Solar and Wind, with laws that level the playing field, this petition starts with homeowners in California. Japan, Germany, and our state of Hawaii, will pay residents between 21- 54 cents per kilowatt hour, here in California they will pay us 5 cents per kilowatt hour, and they wont let us oversize our Solar systems, want to change our Feed in Tariff? Campaign to allow Californian residents to sell electricity obtained by renewable energy for a fair pro-business market price. Will you read, sign, and share this petition?

 
 
Steven Scannell's picture
Steven Scannell on December 27, 2012

Thanks for posting this and for your activism.  I signed.  I believe in penalties and incentives to trend us over to the green.   I did not research this, but am wondering what the utility problems are.  It seems like a good idea also to encourage electric cars.  

Leo Klisch's picture
Leo Klisch on December 28, 2012

If Uruguay can do it why can't we? See link below.

http://www.smartplanet.com/blog/global-observer/uruguay-aims-to-be-world...

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