Why A Realistic Energy Policy Must Eliminate Fossil Fuel Subsidies
- December 25, 2012
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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