It’s long been Barataria’s position that energy independence, followed closely by a decrease in reliance on limited resources, is a very wise policy. The key question is resilience, which is to say the economy’s ability to weather any storm and still provide basic services. Food and energy should not become expensive overnight because of political concerns or currency shifts.
Getting to this point is a bit more controversial, however. Even the paltry $29B spent in 2013 as subsidies for renewable energies has become a political football. That amount comes to $236 per household, which is to say about 5% of what we spend on defense. Nevermind, it seems like a lot.
But according to a new study by the Overseas Development Institute (ODI), that’s almost exactly what we spend in subsidy to fossil fuels. And by global standards we’re actually doing far more than our share.
Estimates for the total amount of money that goes into subsidizing the production of fossil fuels has always been a guess. It’s run between $10B and $50B, depending on who you ask and how they measure it.
Good numbers are hard to come by because there is no direct subsidy that is handed out to oil companies. It comes in the form of tax credits, reduced price leases on federal land, and reduced taxes on certain kinds of partnerships that take a lot of risk with a capital asset (which is to say the way oil exploration and only oil exploration can be depreciated).
The work done by ODI is impressive not because they pulled good, believable numbers for the US. Their work covers the entire G20, which is to say the twenty largest economies in the world – representing 85% of total planetary output.
The US, according to their estimate, runs a net subsidy of $20.5B. But the entire G20 is much worse overall with a total of $452B going into propping up fossil fuels.
Why is it so much? The short answer is that energy is indeed critical to every developed economy. That’s why independence is so critical. The temptation for governments to subsidize it to make it cheaper has always been very tempting. Cheap gas is also a good way to keep the people of a nation happy, nevermind who is paying for it.
The net result is that where the US subsidizes fossil fuel production to the tune of about 5% of consumption, the entire G20 subsidizes about 23% of the planet’s consumption of fossil fuels.
Nastiest of all is coal, in terms of pollution, carbon dioxide production, and in subsidy. Governments pumped $19B into coal production in 2014 while private industry only put in $10B. Those high paying, generally unionized jobs came at a heavy price all around.
ODI doesn’t necessarily give any answers in terms of policy as a part of their study. Shining a light on the relatively large subsidies given to energy is enough to shock nearly anyone concerned with developing renewable energy – which overall receives only a quarter of the subsidy that fossil fuels do. The data points directly to a logical course of action for anyone concerned with either national budgets or the environment – a wonderful confluence.
Here in the US? The fact that the subsidy so neatly balances between renewable energy and fossil energy should probably be seen as hilarious. Once again the rhetoric on both sides of the debate proved to be overheated and meaningless. But we can see that in the end renewable energy isn’t being advanced particularly strongly even here.
Ending our subsidy to energy won’t go too far towards balancing the budget. But it could be better applied to targeted challenge grants with identified real-world application. Now that we know there is about $50B total to spend on energy take a moment to imagine what could be done with that, especially with some amazing new technologies that are not quite ready for prime-time but easily identified for more research.
This is probably the best way to read the ODI study if you are looking for recommendations. Certainly, some people would say that it’s better to leave the $400 per year per household in the hands of consumers who work hard to earn it.
But if a few years of that money could make it so that we never had to think about the Middle East again? Can we ponder that goal for a moment?