Sunday, November 17, 2013

Green Energy Is the Real Subsidy Hog

"Renewables receive three times as much money per energy unit as fossil fuels."

Click here to read this WSJ article by




Three myths about fossil-fuel subsidies are worth debunking. The first is the claim, put forth by organizations such as the Environmental Law Institute, that the U.S. subsidizes fossil fuels more heavily than green energy. Not so. 

The U.S. Energy Information Administration estimated in 2010 that fossil-fuel subsidies amounted to $4 billion a year."

" Coal-powered electricity is subsidized at about 5% of one cent for every kilowatt-hour produced, while wind power gets about a nickel per kwh. For solar power, it costs the taxpayer 77 cents per kwh."

"Global fossil-fuel subsidies do exceed those for renewables in raw dollars—$523 billion to $88 billion, according to the International Energy Agency. But the disparity is reversed when proportion is taken into account. Fossil fuels make up more than 80% of global energy, while modern green energy accounts for about 5%. This means that renewables still receive three times as much money per energy unit."

"A third myth is propagated by a recent International Monetary Fund report, "Energy Subsidy Reform—Lessons and Implications." The organization announced in March that it had discovered an extra $1.4 trillion in fossil-fuel subsidies that everyone else overlooked. Of that figure, the report claims, $700 billion comes from the developed world.

U.S. gasoline and diesel alone make up about half of the IMF's $700 billion in alleged subsidies. Gasoline and diesel deserve more taxation, the report says, so the IMF counts taxes that were not levied as "subsidies." Thus air pollution merits a 34-cents-per-gallon tax, according to the IMF models, while traffic accidents and congestion should add about $1 per gallon"

"According to the IMF, the U.S. also should have a 17% value-added tax like other countries, at about 80 cents per gallon. The combined $350 billion such taxes allegedly would raise gets spun as a subsidy.

The assumptions behind the IMF's math have some problems. The organization assumes a social price of carbon dioxide at five times what Europe currently charges. The air-pollution damages are upward of 10 times higher than the European Union estimates. And what do traffic accidents have to do with gasoline subsidies? 

Finally, the IMF effectively ignores the 49.5 cents per gallon in gasoline taxes the U.S. consumer actually pays. The models cancel out this tax, inexplicably, with an "international shipping cost." But even if you accept the IMF's estimated pollution costs and the European-style VAT, the total tax the IMF says goes uncollected comes to only about 44 cents per gallon—or less than the actual U.S. tax of 49.5 cents per gallon"

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