Energy Subsidies - What Are They and Who Benefits?

Trying to sift through all the reports one can find on energy subsidies can be daunting. What are they really? According to Wikipedia, Energy subsidies are measures that keep prices for consumers below market levels or for producers above market levels, or reduce costs for consumers and producers.

From an industry point of view, those who support the use of fossil fuels and nuclear energy say that renewable energies such as solar and wind cannot sustain themselves financially without government help. Advocates of alternative and renewable energies insist that the government all along has supported those other types of fuels.

It all comes down to the fact that all types of energies are subsidized. None of them - fossil fuels, nuclear, renewable or any other alternatives can operate without the assistance of research grants, loan guarantees, tax preferences etc. While this is well and good, the question that remains is, in order to solve the various problems that need to be dealt with for all the energy types, which energy subsidies are needed?

Since, according to the US Information Administration in 2008, there really isn't a clear-cut definition of what a subsidy is, it can be hard to determine what is and what is not, a subsidy. People get confused with the whole issue, and because like any government program, there are costs involved along with benefits, the term, "subsidy" can end up with a derogatory connotation.

Keeping this in mind, reports have been generated which try to calculate amounts of subsidies and their beneficiaries. In 2004, some estimates were calculated to range from $27 - 64 billion dollars per year. These included tax incentives, polluted site clean-ups, research and development grants, gas and oil royalty relief, and military protection of oil supply lines. These, admittedly, were only estimates.

In 2007, Earth Track did a study on the Organization for Economic Cooperation and Development federal subsidies. They estimated $49 - 100 billion dollars a year, broken up as follows:

Conservation - 2.1%
Fossil Fuels - 66% or more
Ethanol - 7.6%
Nuclear - 2.4%
Other Renewables - 7.5%

Later on, in 2008, the Department of Energy did their own study and came up with only around $16.6 billion as a total. Once again, this is only an estimate.

Depending upon which side of the energy fence one sits, subsidies can be defined and described in different ways. Advocates of renewable energies say that tax preferences for traditional energy sources are permanent provisions, while the ones for renewable energy have been sporadic for some time. Alternatively, the champions of coal and nuclear power are convinced that subsidy costs involved with renewable energies are much higher than the costs to run the plants on a constant basis.

It seems that the numbers available on subsidies vary widely, can be easily manipulated and used as ammunition for either side of the argument. Just something to keep in mind.

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