Posts Tagged by subsidies
How Subsidies Can Drive Energy Innovation
| October 17, 2011 | Posted by Craig Shields under Fossil Fuels |
The other day, a friend referred to the $70 billion provided annually to the fossil fuel industries as a “mosquito bite,” i.e., a negligible bit in the scheme of things. That is certainly one way of looking at it.
But here’s another. $70 billion is 7000 times $10 million. What seems like a better way to drive energy innovation in a world in such desperate need? Transfer $70 billion in wealth each year from U.S. taxpayers to the oil companies? Or give 7000 deserving clean energy entrepreneurs a $10 million head-start in developing their technologies?
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Fossil Fuels and Renewable Energy Sources – Some Business Considerations
| November 15, 2010 | Posted by Craig Shields under Fossil Fuels |
I often think about how the energy industry’s financial analysts view the fundamentals that apply to market valuations. Just now, I was reading some of the discussion at SeekingAlpha.com on ExxonMobil that attempts to get to the underlying buy/sell recommendations, and I note that the conversation is fairly bullish across the board.
In particular, though there is widespread agreement that the “easy oil is gone,” there is almost no recognition of a concerted move to get off of oil as a civilization. Moreover, the concept of “peak oil” (i.e., that the supply of oil will soon start to diminish) means that the price will soar, and that only companies with the scale of ExxonMobil (vs. the wildcatters of yore) will have the capability to play effectively. But there is precious little talk of the impact of electric transportation, or renewable energy in any of its forms.
I’m trying to figure out what that means. Here are a few points of speculation: Read More
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Should We Subsidize Building Cheap Little Cars that No One Wants?
| September 24, 2010 | Posted by Craig Shields under Electric Vehicles |
In the news on the electric vehicle front is Terry McAuliffe, prolific political campaign fund-raiser and close friend of Bill Clinton. On Tuesday, McAuliffe will announce to world leaders at the Clinton Global Initiative a commitment to invest $1 billion to build neighborhood electric vehicles in economically depressed areas of the United States to spur the economy and create green jobs.
So how much appetite do we Americans have for cramped, cheap little cars that go 25 MPH? I’d say it’s just a hair’s breadth this side of zero. This enterprise will not succeed, but the only reason that it is even worthy of a conversation is the huge incentives that Mr. McAuliffe and his super-powerful buddies intend to ram through Congress. I.e., taxpayers will be forced once again to open up their wallets to make feasible a business that would have been laughed out of any corporate board room I’ve ever been in.
There is so much good that the public sector can – and must — do at this precious moment in time. But these actions must be disciplined, well-conceived, and free of undue influence. This example has none of these characteristics, and will justifiably raise the ire of an electorate that is already pretty fed-up with wasteful government spending.
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Renewable Energy and Job Creation
| September 10, 2010 | Posted by Craig Shields under Renewables - Business |
As I’ve mentioned in previous posts, I’m in the process of studying the size and shape of job creation that will come as a welcome by-product of the migration to renewables.
How this sits in the constellation of benefits to renewables depends on whom you ask. But regardless of the level of importance that job creation has compared with national security, fiscal responsibility, the health and safety of the world’s population, and stemming the long-term ecological damage wrought by extracting and burning fossil fuels, it’s got to be in there someplace.
Yet job creation is a very complicated subject, as it comes with so many moving parts:
- What percent penetration of renewables are we talking about? What type? In what time-frame?
- How are market forces affected by the actions of Congress (e.g., removing/perpetuating subsidies that keep the price of oil artificially low, creating incentives for renewables, state legislatures enacting renewable portfolio standards)?
- What’s happening outside the US, where many countries are taking aggressive action to move to renewables?
- What are the strategies of the corporate giants like GE and Siemens in this global economy? From here, it looks like they don’t care where the green jobs are; if the US misses the boat, that’s too bad. Is that true?
- What brown jobs will be lost (e.g., coal mining) simultanously to the build-up of green jobs? Do we have the political stomach to deal with any job loss?
- What will be the impact of all the green job training in the community colleges?
I’ve become particularly interested in the issue of subsidies, as they seem to be so critical in forming the climate in which private investors will climb on board the clean energy bandwagon. But because macroeconomics isn’t my strength, I’m going to have to speak with a great number of economists, analysts, and political pundits to get this right.
It appears that the reason this is so complicated is that subsidies take many forms, some of them (deliberately?) hidden:
- Construction bonds at low interest rates or tax-free
- Research-and-development programs at low or no cost
- Assuming the legal risks of exploration and development in a company’s stead
- Below-cost loans with lenient repayment conditions
- Income tax breaks, especially featuring obscure provisions in tax laws designed to receive little congressional oversight when they expire
- Sales tax breaks – taxes on petroleum products are lower than average sales tax rates for other goods
- Giving money to international financial institutions (the U.S. has given tens of billions of dollars to the World Bank and U.S. Export-Import Bank to encourage oil production internationally, according to Friends of the Earth)
- The U.S. Strategic Petroleum Reserve
- Construction and protection of the nation’s highway system
- Relaxing the amount of royalties to be paid – apparently, we get about 40% of revenues from oil on public land vs. 60% – 65% in most other countries
- Not forcing the industry to deal with the “externalities” – healthcare costs, long-term environmental damage, etc. — costs that are becoming increasingly clear and subject to quantification
If anyone has a suggestion for people I should interview in this regard, please let me know.
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From Guest Blogger Adam: Celebrate Today!
| February 2, 2010 | Posted by adam under Renewables - Business |
I am new to the Blog section here so I will stick my toe in the water first with a short article about an event that happened this morning. Mr. Obama in announcing his proposed government budget for the 2011 spending year will end some $36.5 billion in subsidies for oil and gas companies, saying it would help fight global warming.
I almost dropped my coffee when I heard him say this on CNN! The changes would take effect on January 1, 2011, and save $36.5 billion over 10 years, according to the budget proposal.
Of course the Petroleum industry issued a statement immediately as follows:
“With America still recovering from recession and one in 10 Americans out of work, now is not the time to impose new taxes on the nation’s oil and natural gas industry,” said Jack Gerard, president of the American Petroleum Institute.
“Imposing new taxes would reduce our nation’s energy security by discouraging new investment in domestic oil and natural gas production and refining capacity and pushing those investments — and American jobs — abroad,” he added.
Hogwash! What is wrong with this statement above is there has NOT been a single new oil fefinery built in the USA in 25 years while this tax subsidy was in place and now that there is the threat of it being removed, BIG oil is saying there won’t be any new investment in oil refineries??
What they are really saying is that it is a different future we are talking about – not just changing how we get energy, but changing what we do with it. However, it means not only a radically different structure of the economy, but a change in who runs American industry. And this is what the Big Oil companies are fighting to the death. They want to keep the same people in charge who have driven things to crisis, because they are the people who they put in charge. The same bankers, industrialists, politicians, writers, lobbyists, and assorted other elites, who have wildly thrown away a generation on an orgy of consumption.
Today should be celebrated news for those of us who embrace the Electric Revolution and finally see some light at the end of the tunnel. In future articles I will attempt to prove how Edison and Tesla were right, and how Ford and Standard Oil were wrong, and how the future of energy will shift away from the refining & burning of cheap Oil to the generation & storage of cheap Elecricity through renewable energy sources.
Until next time – celebrate today!
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Renewable Energy and the Job Market
| January 18, 2010 | Posted by Craig Shields under Renewables - Business |
I spent a bit of time on the website of the Bureau of Labor Statistics in preparation for today’s post, looking at some numbers surrounding employment in the US. Here are a few approximate numbers that I feel are relevant:
Unemployed people looking for work with skills appropriate to (or who could be easily trained for) designing and building renewable energy systems: 3 million
Highschool and college graduates entering the workforce over the coming five years with these skills who will find it hard to find work given the current and foreseeable economic climate: 12 million
People working in fossil fuel industries, e.g., coal miners, who may be well advised to look for work elsewhere as the world moves — at whatever pace — to clean energy: 2 million
Total of above: 17 million
Now, let me offer this high-level summary of the subsidies bestowed onto Big Energy in the US. It is estimated that the US oil and gas industry receives anywhere from $1 billion to $35 billion a year in subsidies from taxpayers. What, you ask? Don’t we know that number with any greater degree of accuracy? No. The exact number is extremely hard to nail down — even for those who try to do it honestly and objectively — given the 10-or-so different programs (loans, deliberately lax legislation and enforcement, tax breaks at many different levels, etc.) that could be referred to as subsidies for fossil fuels. But it’s substantial by any account.
And in some cases it’s more egregious than others. For example, we taxpayers pay up to 90% of the cost of building nuclear power plants; the nuclear industry couldn’t stand on its own for a nano-second. And to me, the mega-billion dollar subsidy for corn ethanol is even more galling. As I’ve written abundantly elsewhere, corn ethanol will down in history as one of the biggest rip-offs ever perpetrated on the American public.
So here’s a simple suggestion: if we’re going to subsidize something, why can’t it be something that contributes to the public good? Why does it have to cause cancer, jeopardize national security, promote terrorism, stimulate global warming, or cause a dangerous waste situation that will last hundreds of thousands of years?
Why not consider this: PULL the subsidies for oil, coal, corn ethanol and nuclear. Create a level playing field, and see how long fossil fuel businesses last in a fair, competitive environment (about 10 minutes).
Or, if you want to do something progressive, direct that money to renewable energy. Where do you think we’d be right now in the maturation of — you pick it — solar thermal, hydrokinetics, wind, etc. – if we had had the wisdom and the courage to send that money into research and development of those technologies, as opposed to merely making Big Energy even Bigger?
Let’s make a change here. Per the numbers above, there are 17 million people who will thank us immediately — not to mention the billions of other people on earth today — and those of future generations — who will be beneficiaries as well.
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Renewables Vs. Coal – Can't We All Just Get Along?
| October 4, 2009 | Posted by Craig Shields under Renewables - Politics |
Frequent contributor Sonny Carri wrote a long and eloquent comment about the coal industry, which I summarize here:
Let’s work to get them on board, not be an adversary. Change requires coming together, not schism.
Very thoughtful stuff as always, Sonny. In response, let me say that I honestly don’t see change without push-back; I see entrenched interests that are braced for the fight of a lifetime, and I doubt there is any sincere interest in “coming together” whatsoever. It’s funny you mention this, as we’ve had numerous internal discussions about not positioning the HyPEG as a replacement for coal, so as not to create any more enmity than possible. After going ’round and ’round on the subject, I just don’t see this. It’s not that I’m a combative person by nature; I’m not. It’s just this: The coal industry may be evil (or whatever you would call “profits first, people a distant second”), but they’re most definitely not idiots. In fact, big energy has hired some of the brightest minds on the planet — and guess whom they’re gunning for?
As I may have told you, I moderated a panel at the AltCarExpo out here in CA, and I stayed on the floor both days, talking ultimately with hundreds of people. Most telling to me were conversations I had with expatriated Europeans about electric vehicles, several of whom told me, “Sorry, not for me. As long as your power here in the US is so heavily rooted in coal — and even worse, nuclear — EVs really aren’t green at all.” Now that’s not completely correct, but it sure does show the difference between the Europeans — who are working hard to clean up the energy business — and us in the US, who, while we may we working hard, have yet to make much progress.
Let’s just call a spade a spade, and get everyone to pay the true cost of his power source. I don’t want subsidies for hydrokinetics; I just want coal to pay the true cost of ripping up our planet and poisoning our people. Once that’s in place, I’m happy to just let the chips fall where they may.
