As readers of Scaling Green know, we've focused a great deal of attention on the fact that fossil fuels - oil, natural gas and coal - are heavily subsidized, both in absolute terms and also relative to clean energy. One of the top experts we've cited on this subject has been Doug Koplow of EarthTrack. This past week, Koplow presented a webinar on behalf of the Vote Solar Initiative. video of which we've embedded at the top of this post. The presentation was highly informative, and we strongly recommend that you watch it if you're at all interested in this subject. For now, here are a few highlights.
- According to Doug Koplow, government subsidies reflect the political power of recipients as much or more than the goals of the country. One of their many downsides is that they replace economics with political connections as a major driver of market success.
- Older industries and larger firms (e.g., the fossil fuel companies) tend to have more political power than newer industries and smaller firms (e.g., the clean energy companies). They use this power, in part, to protect their interests politically, making their heavy subsidies extremely difficult to pare back or eliminate.
- It's very difficult to quantify the exact amount of subsidies, with wildly different numbers, based on wildly different definitions (Koplow says it's like comparing "apples, oranges and puppies") of what constitutes a "subsidy," being thrown around. The lowest estimates tend to be by the U.S. Energy Information Administration, which in Koplow's view uses an unrealistically narrow definition of what constitutes a subsidy.
- There are a myriad of different ways in which the government supports fossil fuels - direct spending, tax breaks, insurance and indemnification, etc. - yet the largest fossil fuel subsidies are often left out of tallies. In part, this is due to the fact that many fossil fuel subsidies are poorly quantified (e.g., accident liability caps) or excluded altogether (e.g., free use of water for mining and power generation).
- In stark contrast, for clean energy, most subsidies are
visible and easily quantified (e.g., tax credits, government R&D, feed-in tariffs). Thus, comparisons of subsidies to fossil fuels and clean energy are often heavily biased in favor of the former and against the latter.
- Corporate forms like Master Limited Partnerships, available to the fossil fuel industry but not to clean energy, can bring the fossil fuel companies' tax rates to zero, even as a variety of taxpayer-funded government subsidies flow to those companies.
- Finally, "externalities" such as the damages caused to human health and the environment by fossil fuels are enormous, but also hard to value. These need to be taken into account as well. For example, this Harvard study of U.S. coal industry externalities