Wind Energy FAQs: Federal Energy Subsidies

US Federal Subsidies for Energy. 1918-2015

In this post we show the level of federal subsidies which are directed towards different energy sectors by the U.S. Government. In doing so we look at two major studies

The Joint Committee on Taxation (The U.S. Treasury) – AWEA: 1947-2015.

In  2016, the American Wind Energy Association (AWEA) released what they termed “the most comprehensive review of energy incentives to date“. Their summary, of a U.S. Treasury analysis, showed that wind energy still accounts for an extremely small share of all U.S. federal energy incentives. That analysis, of all available data from government and other sources, shows that for every dollar spent on federal energy incentives, wind energy receives less than 3 cents.

A very significant point noted by AWEA – many incentives for conventional energy sources (oil, gas, coal and nuclear) are written into the permanent tax code. This makes them far less visible than short-term incentives for renewable energy which must be brought up for extension, and debate, nearly every year.

The extensive and fractious debate, in November and December of 2017, over the fate of the supposedly fixed four-year phase-out of the wind energy Production Tax Credit which had been agreed at the end of 2015 on a bi-partisan basis, provides an obvious example.  It is telling that while that debate was ongoing, the billions in permanent tax incentives for the oil and gas industry did not even merit mention when they were re-confirmed within the Tax Cuts and Jobs Act – signed by the President in late December.

As Senator Charles ‘Chuck’ Grassley (Republican – Iowa) has noted “Opponents of renewable energy want to have this debate in a vacuum. They disregard the many incentives and subsidies that exist for other sources of energy, and are permanent law.”

Bankruptcy as a Bailout.

Subsidies can be much more subtle than direct support – as illustrated by this fascinating paper – Bankruptcy as Bailout: Coal Company Insolvency and the Erosion of Federal Law – from the ‘Harvard Law School Forum on Corporate Governance and Financial Regulation’.

It notes that almost half of all the coal produced in the United States is mined by companies that have recently gone bankrupt and goes on to note that those bankruptcy proceedings have undermined federal environmental and labor laws. In particular, coal companies have used the Bankruptcy Code to evade congressionally imposed liabilities requiring that they pay lifetime health benefits to coal miners and restore land degraded by surface mining. Using financial information reported in filings to the Securities and Exchange Commission and in the companies’ reorganization agreements, the authors show that between 2012 and 2017, four of the largest coal companies in the United States succeeded in shedding almost $5.2 billion of environmental and retiree liabilities. These regulatory debts constituted 22% of the total debt discharged.

DBL Partners: Federal Subsidies to Energy – 1918-2009. In 2011, DBL Partners, a San Francisco-based venture capital firm, released a paper (‘What would Jeffereson do?’) which compared the level of U.S. federal government support for renewables, with support for earlier energy transitions (oil and gas, nuclear and biofuels).

Their conclusions: “Our findings suggest that current renewable energy subsidies do not constitute an over-subsidized outlier when compared to the historical norm for emerging sources of energy.”

The following chart is drawn from material within that paper – and it contains lots of other useful material;