U.S. Federal energy subsidies

Not surprisingly, the politicians are trying to make points by misrepresenting energy subsidies (a popular whipping boy when petrol prices are high). Those who work in the electricity/energy supply sectors just laugh when they hear one of Obama’s speeches (from the Wall Street Journal The Energy Subsidy Tally):

President Obama traveled to Iowa Tuesday and touted wind energy subsidies as the path to economic recovery. Then he attacked Mitt Romney as a tool of the oil and gas industry. “So my attitude is let’s stop giving taxpayer subsidies to oil companies that don’t need them, and let’s invest in clean energy that will put people back to work right here in Iowa,” he said. “That’s a choice in this election.”

The disproportionate subsidies are of course going to wind and solar. And worse the subsidies are buying down the uncompetitive delivered prices. If these wind and solar subsidies are stopped the building of new wind and solar stops instantly.

There certainly is a subsidy choice in the election, but the facts are a lot different than Mr. Obama portrays them. What he isn’t telling voters is how many tax dollars his Administration has already steered to wind and solar power, and how much more subsidized they are than other forms of electricity generation.

Personally I think all production subsidies should be eliminated. True R&D in zero-carbon options should be increased (Bill Gates is correct – probably 4x increase in US R&D would be right for a start). Eliminating the production subsidies would save USD 37 billion/year:

Mr. Obama’s plan to eliminate oil and gas subsidies would lower the budget deficit by less than $3 billion a year, but creating a true level playing field in energy, and allowing markets to determine which energy sources are used, would save $37 billion. That’s an energy plan that makes sense.