US Subsidies Fossil Fuels at $550 Billion per year

[Dan J 277]

Fossil fuels are the backbone of economies worldwide, so governments spend a lot to support them. A new report from Bloomberg New Energy Finance says altogether governments spent between $43 anf $46 billion on renewable energy and biofuels last year, not including indirect support, such as subsidies to corn farmers that help ethanol production. Direct subsidies of fossil fuels came to $557 billion, the report says.

This disparity raises the question--if the report is right and fossil fuels require so much backing, can they compete with renewables without government support? After all, some renewables--such as sugarcane based biofuels and some wind farms--can already compete with fossil fuels. Without the huge government subsidies for fossil fuels, wouldn't they be eclipsed by renewables?

The answer, for now, is no. So far renewables just can't provide enough fuel and power to displace fossil fuels. The infrastructure to make and distribute them isn't adequate, and many renewables have shortcomings that can make them difficult to work with--solar panels, for example, only generate electricity when the sun is out. If the fossil fuel subsidies disappear, gasoline and electricity prices will increase. That will help renewables compete, and increase in scale, but it will take years--likely decades--for them to reach levels high enough to replace all fossil fuels.

http://www.technologyreview.com/blog/energy/25545/

[slim 1,514]

It will also p!ss off a lot of fossil fuel lobbyists.

[Heracles 417]

Interesting read Dan. So these bastards receive close to half a trillion in subsidies and then basically use this money to make commercials like that ####### you currently see on TV; where 'concerned' citizens talk about the negative impact of renewable energy. Naturally, middle America buys this #######, hook, line and sinker.

You need to give them some credit though, as these same industries have managed to make middle America actually believe the dominance of crapmart and the destruction of their towns and communities due to outsourcing to third world countries, is a good thing for them; basically, because they can buy cheap ####### for nothing. Personally, I'd rather have money and a well paying job to buy quality stuff made here, than be dirt poor and live in third world conditions but get to shop at crapmart.

Edited July 31, 2010 by Heracles

[Pinocchio Liberal 268]

I guess ethanol aint what its cracked up to be huh? I guess those caribou in Alaska are worth a lot of money. Dan your environmentalist ways seem to be upsetting you.

[mawilson 2,133]

The title is incorrect - the US government doesn't spend $550 billion per year on fossil fuel subsidies.

A report ... details international government energy spending on biofuels and renewable energy. ... report ... says altogether governments spent ...

Altogether, as in "all governments".

Edited July 31, 2010 by mawilson

[Ban Hammer 12,861]

but will gecko be able to stop the raging tide of false outrage? stay tuned, we'll be right back after this commercial!

[slim 1,514]

Why are those guys called wind farmers? Shouldn't they be called wind gatherers or something like that?

[ScottThuy 140]

The title is incorrect - the US government doesn't spend $550 billion per year on fossil fuel subsidies.

A report ... details international government energy spending on biofuels and renewable energy. ... report ... says altogether governments spent ...

Altogether, as in "all governments".

Agreed.. very misleading title as I would love to know how much and if the US subsidizes an industry that has such a huge amount of annual profit even in a downturn...

[mendeleev 68]

The fact that BP will be able to write off all of what they spend on their oil spill against their tax bill -- which will let them pay a income tax total $0.00 for the next three or four years looks a bit like a subsidy to me, given that this company has profits of tens of billions a year.

[Pooky 3,355]

The fact that BP will be able to write off all of what they spend on their oil spill against their tax bill -- which will let them pay a income tax total $0.00 for the next three or four years looks a bit like a subsidy to me, given that this company has profits of tens of billions a year.

Isn't the write-off a one year only event? The set-aside to cover the spill remediation and compensation will occur in this financial year, so won't their tax-dodge only be a one-year event, too? If not, it should be.

[luckytxn 2,263]

Of course it didn't say that the Feds tax fossil fuels heavily in the first place and out of that tax they send a tad amount back to subsidize. The amount of the subsidy of course is dependent on how friendly the receiving company is in subsidizing the election coffers and lifestyle of the politician.

They tax the raw crude as it enters the country. They then tax each product made from that raw crude. (in the case of fuels they tax it way more than the company makes as a built in profit) Of course then there are the state taxes and it is the state taxes that companies get back from the Fed tax. The only way for a long time that biofuels will be competitive will be to keep taxing the petroleum products and heavily subsidize the Biofuels and wind schemes.

Edited August 1, 2010 by luckytxn

[alienlovechild 75]

Direct subsidies of fossil fuels came to $557 billion, the report says.

Doubt that figure even if the U.S. was around a quarter of that in keeping with the U.S. producing a 1/4 of world GDP. Doesn't break it down into what kind of "subsidies" and who got them. I looked at the Bloomberg website and you've to log in to search for articles.

[mawilson 2,133]

Doubt that figure even if the U.S. was around a quarter of that in keeping with the U.S. producing a 1/4 of world GDP. Doesn't break it down into what kind of "subsidies" and who got them. I looked at the Bloomberg website and you've to log in to search for articles.

Most of it is probably China. A Chinaman pays less than $1 per gallon of gasoline, the rest is subsidized by the state.

[lostinblue 1,989]

http://www.taxfoundation.org/news/show/26558.html

State and Federal Tax Collections on Oil Industry Exceed Oil Industry Profits

full study online at http://www.taxfoundation.org/publications/show/26555.html

Washington, D.C., July 27, 2010 - With Members of Congress calling for punitive new tax laws against U.S. oil and gas companies in response to the BP oil spill, the Tax Foundation has released a new analysis showing federal, state and local taxes remitted by the oil companies have exceeded their corporate profits by 40 percent.

"Governments at all levels in the U.S. and abroad are dependent on the substantial taxes paid by oil and gas firms," said Tax Foundation President Scott A. Hodge, author of the new Tax Foundation Special Report, "Oil Industry Taxes: A Cash Cow for Government."

The new study, available at www.taxfoundation.org/publications/show/26555.html, shows that in recent decades, state and federal governments have "profited" far more from the oil industry than companies have.

"Governments have collected $1.95 trillion in taxes from the oil industry since 1981," said Hodge. "That's far more than the profits of major U.S. oil companies during the same period."

[mendeleev 68]

Isn't the write-off a one year only event? The set-aside to cover the spill remediation and compensation will occur in this financial year, so won't their tax-dodge only be a one-year event, too? If not, it should be.

Sorry, Pooky, reality is going to make you mad: under US (and also UK) tax law, BP will be able to take these expenses out for four years. That is, in all likelihood BP will not be paying any US corporate income tax (or its analog in the UK) for four years.

The Financial Times reported on this in some detail (front page news) a few weeks ago, right after Obama met with BP's Chairman.