Often lost in today’s debates over whether to continue tax benefits for renewable energy is a historical perspective on the significant support the federal government has provided and continues to provide the fossil fuel industry. Tax benefits for the energy industry as a whole totaled over $20 billion in 2011, which is, and historically has been, about 2% of total U.S. tax expenditures. In general, the United States has used tax benefits to first support development of domestic fossil fuel and nuclear production for nearly a century and, more recently, to support the development of domestic renewable energy. Until 2005, virtually all energy-related tax expenditures and benefits went toward stimulating domestic oil and gas production with the amount claimed by renewable energy almost negligible.
In recent years, tax benefits for renewable energy have surpassed that of fossil fuel production. For instance, in 2011, the breakdown of tax expenditures and other tax-related benefits within the energy sector was as follows: 68% to renewable energy (including ethanol and biodiesel), 15% to fossil fuels, 10% to energy efficiency programs, 4% to nuclear energy, and 2% to other. These numbers can be misleading, however, because they do not take into account the decades of continued tax benefits the federal government provided to the fossil fuel sector, which helped those industries become the dominant economic and political forces they are today. For instance, one study shows that over the period of years the federal government has supported the oil and gas industry, the average annual subsidy for that industry sector was nearly $5 billion; for nuclear, the average annual subsidy was $3.5 billion; for biofuels, the average annual subsidy was just over $1 million; and for other renewables, the average annual subsidy was $0.37 billion.
Charts from Pfund and Healey, DBL Investors
Moreover, this discrepancy is evident even when one considers only the past decade as opposed to the many decades of support for fossil fuel development. Taking into account both tax benefits and subsides, fossil fuels received $72 billion from 2002-2008, while tax benefits and subsidies for renewable fuels totaled far less, at $29 billion, with almost half of that amount going to ethanol production rather than renewable electricity sources. Thus, while the percentage of tax benefits associated with renewable energy today exceeds tax benefits associated with fossil fuel development, it is important to consider the breakdown of tax benefits by industry over the entire history of such benefits to answer critical questions about “what it takes” to support a desirable energy sector and how long that support should continue.
Consideration of that history argues strongly in favor of continued government support for the renewable energy industry through tax benefits, research and development funding, and other forms of support. Indeed, the main reason it has been difficult for renewable energy to compete with fossil fuels is because the billions of dollars of government support for those traditional industries have made them so strong, powerful, and wealthy that it is virtually impossible for newcomers, like renewable energy, to compete. The government played a major role in creating that strength and it should now play a major role in creating a more level playing field for renewable energy in order to meet current policy goals of reducing GHG emissions and expanding our available energy sources.
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Alexandra Klass | February 8, 2013
Often lost in today’s debates over whether to continue tax benefits for renewable energy is a historical perspective on the significant support the federal government has provided and continues to provide the fossil fuel industry. Tax benefits for the energy industry as a whole totaled over $20 billion in 2011, which is, and historically has […]
Lisa Heinzerling | February 6, 2013
Eighty percent of the antibiotics used in this country are given not to humans, but to animals destined for the human food supply. Most of these antibiotics are given to the animals not for the purpose of treating active infections, but for the purposes of promoting growth and preventing infection in the microbe-rich environment of […]
Daniel Farber | February 5, 2013
Cross-posted from Legal Planet. Cost-benefit analysis has become a ubiquitous part of regulation, enforced by the Office of Management and Budget. A weak cost-benefit analysis means that the regulation gets kicked back to the agency. Yet there is no statute that provides for this; it’s entirely a matter of Presidential dictate. And reliance on cost-benefit […]
Alexandra Klass | February 4, 2013
President Obama’s focus in his second inaugural address on the need to address climate change was welcome after many months of near silence on this critical issue. While tackling climate change will require significant efforts limiting emissions from power plants, automobiles, and other sources, the President has recognized in the past that improving energy efficiency […]
Sidney A. Shapiro | January 29, 2013
Congress created the Office of Advocacy (Office) of the Small Business Administration (SBA) to represent the interests of small business before regulatory agencies. It recognized that, unlike larger firms, many, if not most, small businesses can’t afford to lobby regulators and file rulemaking comments because of the expense involved. The Office was supposed to fill […]
Matthew Freeman | January 28, 2013
CPR Member Scholar David Driesen of Syracuse University has an op-ed in the January 28 Syracuse Post-Standard making the case that the President should reinvigorate his regulatory agenda, in part by diminishing the Office of Information and Regulatory Affairs’ power to stifle regulations. He puts the argument in the context of the pressing need for action on […]
David Driesen | January 24, 2013
Cross-posted from RegBlog. Nobody seems to have noticed, but the Center for Progressive Reform (CPR) recently recommended abolition of review by the Office of Information and Regulatory Affairs (OIRA) based on cost-benefit analysis (CBA). Its report on recommendations for the second Obama Administration made this proposal the sixth item in a list of seven executive orders that Obama […]
Frank Ackerman | January 23, 2013
Cross-posted from Triple Crisis. Climate science paints an ever-more-detailed picture: irreversible, catastrophic events are becoming increasingly likely as greenhouse gas emissions continue to rise. Climate economics, particularly in its policy applications, lags behind: leading models and analyses frequently ignore the extreme risks and the intergenerational aspect of the problem – and rely on simplistic and […]
Joel A. Mintz | January 22, 2013
The National Environmental Policy Act of 1969 (NEPA) was one of the first environmental statutes of the modern era. Best known for its environmental impact statement (EIS) requirement, and for establishing the Council on Environmental Quality, NEPA has been the basis for numerous lawsuits challenging federal government projects that will or may have an adverse […]