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Energy Subsidies and the “Free Market”

Time and time again, I hear people say that renewables should be subject to the “free market” and should not receive government subsidies. After all, if renewables such as solar, wind and geothermal are viable, the consumer should decide, not the government. And while I understand (and even to a point agree) with those comments, the problem is we simply don’t have a level playing field. Nor do we have (or will we ever have) a truly free market economy. As Wikipedia says, “purely free markets… are theoretical constructs.” So after a recent spate of posts on a couple of threads on my Facebook page, I thought I would address some of the issues that came up.

PURPOSE OF SUBSIDIES
I think the purpose of subsidies is to get fledgling industries off the ground so they can be viable. Call it investment capital, call it what you want, that’s how our culture works. Entrepreneurs have an idea and get investors and/or tax breaks for a period of time so they can build a good foundation and become productive. There is often a huge amount of research and development costs associated with a start-up company. And I’ll be the first to say I’m not an economist. But I will go on to say this isn’t rocket science, either.

The chart I’ve included with this post is based on a 2009 report by the Environmental Law Institute report titled “Estimating U. S. Government Subsidies to Energy Sources: 2002-2008.” The source of the information in the report comes from the Internal Revenue Service, the US Department of Energy, the Congressional Joint Committee on Taxation and the US Department of Agriculture. The report covers the 6-year cumulative period of 2002-2008.

It’s a telling chart because it shows just how disproportionate the playing field really is. 72% of Federal subsidies for energy go to fossil fuels, not renewables. And if you group biofuel in with the fossil fuels (I do; biofuel is stupid), it’s more like 88%. The report goes into a great amount of detail regarding how the subsidies are parsed out.

Historically, a large amount of the subsidies for fossil fuel goes to coal. You know, the same people who brought you mountaintop removal. And black lung disease (and those suffering from it also are subsidized). Oil companies also receive a huge amount of subsidies for off-shore drilling costs, foreign exploration credits and the like.

But I guess my point here is that oil and coal have received subsidies for decades and at least the oil companies, who realistically hold a monopoly over us, are still seeing record profits. It seems subsidies should help companies get established, then phase out, not add on to profits. And the argument that we need to look at how much tax the oil companies pay would be valid if they weren’t paying tax on money we give them. Would you be willing to pay $300 tax on my gift of $1,000 to you? I sure would.

ON AGAIN/OFF AGAIN
In the 1980s, there were some pretty substantial tax credits (yes, subsidies) for solar. During that time, my parents installed a solar hot water system on their house. It’s still plugging along, churning out hot water. Then the Federal credits expired in 2000, 2002, 2004 and almost in 2008. They’ve currently been renewed through 2016.

But in my home state of Oregon, with one of the most aggressive tax credit programs around, the Legislature may look at eliminating them.

It’s this on again/off again situation that never allows any renewable energy company to ever really get off the ground. Why can’t we commit to a consistent subsidy for renewables over 20 or 25 years? It’s that see-saw effect, much like Roland Martin said in his blog about gasoline prices posted here a while back. And it essentially is strangling any hope of renewable energy ever coming close to competing with Big Oil.

LOOK PAST OUR NOSE
It’s the short-sighted view we have, where we don’t look past our nose to the future. We have these spurts of knee-jerk reactions when things get “bad” then fall into complacency when it evens out temporarily.

We can’t keep living like that. If we evened out the subsidies and shifted $30 billion of the oil subsidies to renewables, it would help. I believe even with fossil fuels’ head start, that shift alone, if continued consistently for 20 years, would make renewables viable and an integral part of our culture. And it would go a long way toward leveling that playing field.

Is anyone willing to give it a try?

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Roland S. Martin – CNN Guest Blog

I have never posted verbatim another blog post until today. With the recent events in Libya, gas prices soaring (again) and the nuclear meltdown in Japan, I was going to write something, because I just couldn’t keep quiet. Then, I came across Roland Martin’s post on CNN today (March 12, 2011) and decided he said it better than I ever could. So, I contacted him and obtained permission to repost it here. It’s well worth the read but it would be even important if we actually paid attention to what he says.

CNN Editor’s note: Roland Martin is a syndicated columnist and author of “The First: President Barack Obama’s Road to the White House.” He is a commentator for TV One Cable network and host/managing editor of its Sunday morning news show, “Washington Watch with Roland Martin.”

(CNN) — Gas prices are skyrocketing nationwide and Americans are angry that they have to spend more of their hard earned money at the pump each week.

The crisis in northern Africa, specifically in Libya, has led the dramatic rise in the cost of oil, which now tops $101 a barrel, over the past month. And with summer approaching, Americans are fretting over whether to hit the highway for vacation because the price of gas, averaging $3.52 a gallon nationwide, is expected to go even higher.

Our political leaders? Some Democrats and Republicans are leaning on President Barack Obama to open the Strategic Petroleum Reserve and use some of the millions of barrels of oil we have on tap to provide some relief as a result of the price increase.

In a news conference Friday, President Obama said he’ll release the oil if needed.

“All options are on the table when it comes to any supply disruption,” he said.

Is this Groundhog Day or what?

Three years ago this nation went through convulsions when gas prices skyrocketed. Folks were sharing rides and pushing elected officials to broaden public transportation plans. Hybrids and electric cars started getting a second look from gas conscious drivers, and all the talk was about alternative energy and not being dependent on Arab leaders in the Middle East.

And when those gas prices went back down? We yelled, screamed and cheered, and then pulled the SUVs out of the garage, filled them up with gasoline and forgot all about the pain we endured.

This is the American story: Alleviate our pain so we can go back to business as usual. And when the crisis comes back, we’ll fret, scream and go bonkers.
Please, stop the madness!

When are we simply going to reach the conclusion that as long as this nation has a Charlie Sheen-like addiction to gas, our chains can be yanked at any time, which will send our economy into a tailspin?

The U.S. Energy Department predicts that with the dramatic rise in gas prices, the average American family will spend an additional $700 annually on gas. And with money already tight, that is a huge hit.

Unfortunately, our crack-like dependence on oil continues to lead us down the road of agony and despair, and our political leaders have no courage to own up to the special interests and gas lovin’ Americans and say, “Dammit, enough! We can’t move forward like this!”

Democrats and Republicans are now saying President Obama needs to allow for more drilling off the shores of the United States. Really? So that’s the only answer? Everyone knows there isn’t enough oil to satisfy America’s thirst. But oh no, we keep this charade up.

America will never be able to transition our system from an oil-dependent economy to an alternative plan unless we show the courage to make the tough choices today and get the payoff later.

I don’t care what Minnesota Republican Rep. Michele Bachmann says about energy efficient lightbulbs; the old ones were cheaper, used more energy and we had to buy a lot more. The government’s move to force a new lightbulb standard caused some pain on the front end with my wallet, but over the long term, fewer bulbs are being bought and I’m seeing a decrease in my light bill.

Until the nation accepts this reality, we will continue to be at the mercy of oil-possessing countries.

Embracing non-oil energy alternatives — wind, natural gas, electric and solar — can absolutely create jobs in this country, and we should require Americans to make their homes more energy efficient with products built by Americans. What’s wrong with that? How can the United States create solar technology and then allow the Chinese to become the leading manufacturer of wind turbines and solar panels?

No one alternative energy source can replace oil. It has to be a comprehensive plan that addresses our long-term needs. And it is going to mean we will have to spend money. Yes, we will be affected in the short-term, but if someone told me we could spend $500 billion today, and that would create millions of jobs over the next several years and lead to a transition to an alternative-energy economy, I would ask where I should sign up.

But if we have no courage, we will lose every time.

So, if the only thing you know is “drill, baby, drill,” and that gasoline is our only option, great. Have a wonderful time. And every time gas skyrockets, just smack yourself upside the head with that gas pump, because you’re the reason we remain stuck on stupid when it comes to energy in this country.

The opinions expressed in this commentary are solely those of Roland Martin.

But we here at thesimpleHOUSE share these opinions, too.