Oil Subsidies = Job Killers

Fossil-Fuel Subsidies Are the Real Job Killers

Friday, April 13, 2012 by Grist.org
by May Boeve and Brendan Smith

How many lobbyists does it take to defend billions in subsidies for one of the most profitable industries in the world? 786. That’s the size of the army that oil and gas companies maintain in Washington to strong-arm Congress into bankrolling an industry that is cutting jobs and literally fueling the climate crisis. This army is bigger than Congress itself, which has only 535 members.

Last year, Democrats on the House Natural Resources Committee decided to investigate Big Oil’s jobs claims— and it turns out the industry has gone on a firing spree in recent years. They discovered that despite generating $546 billion in profits between 2005 and 2010, ExxonMobil, Chevron, Shell, and BP reduced their U.S. workforce by 11,200 employees over that period. In 2010 alone, the top five oil companies slashed their global workforce by 4,400 employees — the same year executives paid themselves nearly $220 million. But at least those working in the industry as a whole get paid high wages, right? Turns out that 40 percent of U.S oil-industry jobs consist of minimum-wage work at gas stations.

With job numbers like these, it is no wonder the fossil-fuel industry needs to spend millions ensuring they are not branded as “job killers.” As Rep. Ed Markey (D-Mass.) said, “Oil companies that make record profits and then cut American jobs strain their own credibility when they claim to be huge job-creators.”

And it gets worse. In what must rank as one of the greatest boondoggles in history, Big Oil is leveraging its taxpayer subsidies to rake in profits that, in the words of The New York Times, are “being continuously recycled to win the support of pliable legislators [and] underwrite misleading advertising campaigns.”

There is also a bigger, far more insidious way that Big Oil is killing jobs and undermining our economy: The industry remains hell-bent on denying climate change and obstructing climate action.

But the planet appears to be running a campaign of its own to persuade Americans that the oil lobby is leading us ever closer to economic ruin. Over the last year alone, hurricanes, floods, and droughts have had a devastating effect on American jobs. After tornadoes hit the area around Tuscaloosa, Ala., in April of last year, more than 6,000 people applied for disaster-related unemployment benefits. In Vermont, the number of workers filing unemployment claims went from 731 before Hurricane Irene to 1,331 two weeks afterwards. For the U.S. economy as a whole, 2011 was a historic year for expensive weather-related disasters, costing taxpayers $52 billion.

Consider one of the centers of U.S. oil production: Louisiana. Economists have been studying the long-term economic effects of Hurricane Katrina [PDF] in hopes of modeling the risks for the rest of the nation’s coastal regions. They found that Katrina wiped out 129,000 jobs in the New Orleans region — about 19 percent. Three years later, in 2008, 47,000 of the jobs lost in Katrina had returned, but 82,000 had not — and that doesn’t even consider the tens of thousands of new jobs that likely would have been created had there been no Katrina.

Our nation is in desperate need of jobs. Instead of bankrolling an industry that is laying off workers and threatening our economic future, why not take the billions in subsidies going to oil companies and invest instead in a sector that both creates jobs and protects the planet? It will be money well spent: According to the Political Economy Research Institute at the University of Massachusetts–Amherst, investment in a green infrastructure program would create nearly four times as many jobs as an equal investment in oil and gas.

Big Oil has spent millions positioning itself as the ultimate job creator, while branding those of us pushing to end fossil-fuel subsidies as “job killers.” But we are the ones fighting to put people back to work and ensure that we have a sustainable economy for generations to come. The oil and gas industry may have an army of 786 lobbyists, but we tally in the hundreds of thousands. This is the year we are coming to take our money back, create jobs, and protect our planet.

Big Oil’s Banner Year: Higher Prices, Record Profits, Less Oil

by Daniel J. Weiss, Jackie Weidman, Rebecca Leber
Think Progress on Feb 8, 2012

Top Five Oil Companies Made $1 Trillion in Profits from 2001 Through 2011

General economic theory holds that companies will produce more of a good if its price is higher, or if it receives subsidies. Funny that these rules didn’t seem to apply to Big Oil in 2011, when the highest oil price since 1864 and $2 billion in subsidies to the five largest oil companies—BP, Chevron, ConocoPhillips, ExxonMobil, and Royal Dutch Shell—yielded lower oil production than in 2010. But these five oil companies combined made a record-high $137 billion in profits in 2011—up 75 percent from 2010—and have made more than $1 trillion in profits from 2001 through 2011.[1] This exceeds the previous record of $136 billion in profits in 2008.

Here are some more highlights from the big five’s activities in 2011:

• They produced 4 percent less oil and “oil equivalent” in 2011 compared to 2010.

• They spent a total of $38 billion, or 28 percent, of their profits to repurchase their own stock.

• They are sitting on more than $58 billion in cash reserves as of the end of 2011.

• They spent $1.6 million on campaign contributions and $65.7 million on lobbying efforts.

• For every $1 spent on lobbying in Washington, the big five received $30 worth of tax breaks.

Let’s dig a little deeper into this mystery to see why these companies are making more money while Americans see less oil and pay more at the pump.

Where the money goes

In spite of these high profits and oil prices, oil-equivalent production fell from 2010 levels for four of the big five oil companies. Shell’s profit, for example, increased by 54 percent from 2010 to 2011 while its oil and natural gas production decreased by 3 percent during the same time period.

So if the big five companies are not using their additional earnings to increase production, what are they spending their money on?

The answer: They’re buying shares of their own stocks and investing in politicians to maintain the policies that led to their enormous profits over the past decade.

Instead of heavily investing in job creation or production, the big five used $38 billion, or 28 percent of annual net income, to repurchase their own stocks. This practice enriches shareholders but it doesn’t add to oil supplies or investments in alternative fuels or other new technologies.

These companies also cling to tax breaks while maintaining $58 billion in cash reserves. This is nearly 30 times more than the estimated $2 billion in annual special tax breaks that these companies receive.

Tax breaks, but not more jobs

ExxonMobil, the most profitable of the big five, paid an effective tax rate of 17.6 percent (from 2008–2010 data), which is 3 percent less than what the average American family paid. But Exxon and other oil companies that receive these tax breaks do not pass benefits on to consumers. Instead, their board members, executives, and shareholders are the ones that profit.

These companies, along with the American Petroleum Institute—their political arm—fight relentlessly to keep their tax breaks intact by threatening economic and energy damage. API claims that eliminating tax loopholes for the oil and gas industry would “lose jobs … and energy production.” Yet higher oil prices and profits, combined with huge reserves and tax breaks, yielded lower, not higher, employment and oil production.

Last year, the Democrats on the House Natural Resources Committee released Profits and Pink Slips: How Big Oil and Gas Companies are Not Creating U.S. Jobs or Paying Their Fair Share.

This report revealed:

Despite generating $546 billion in profits between 2005 and 2010, ExxonMobil, Chevron, Shell, and BP combined to reduce their U.S. workforce by 11,200 employees over that time.

Nor are many of these net revenues used for oil production. The report found that “among the Big 5 oil companies, less than 10 percent of profits are reinvested into exploration of new oil deposits.”

The report also concluded that:

The oil and gas industry is a mature and highly profitable sector that is no longer in need of generous tax breaks or royalty free drilling. The $43.6 billion in tax subsidies that the industry is set to receive over the next decade will not help consumers with rising energy costs.

One place where oil companies have no trouble spending money, however, is in Congress. Last year the big five spent $65.7 million on lobbying efforts, successfully persuading their congressional friends to retain tax breaks. Both the House and Senate had votes to scale back these tax breaks, and both proposals were defeated.[2]

And Big Oil’s lobbying expenditures were quite a bargain. For every $1 the big five spent on lobbying in D.C. last year, they effectively received $30 in subsidies disguised as tax breaks. This is equivalent to a 3,000 percent return on every dollar they invested in strong-arming Congress.

More than $1.6 million was spent on campaign contributions in 2011 from just four of the top five oil companies. And more than 90 percent of these campaign contributions were made to Republican candidates or committees. But that doesn’t even include their undisclosed contributions to the U.S. Chamber of Commerce, the American Petroleum Institute, or other organizations that also support tax breaks for Big Oil.

In the spirit of giving, three of the five Big Oil CEOs—Rex Tillerson of ExxonMobil, John Watson of Chevron, and Jim Mulva of ConocoPhillips—contributed an additional $75,000 to GOP candidates and committees.

Enough is enough

Two days after his State of the Union address last month, President Obama spoke in Aurora, Colorado, about American-made energy. He reiterated his call to eliminate tax breaks for Big Oil:

We subsidized oil for a very long time, long enough. It’s time to stop giving taxpayer giveaways to an industry that’s never been more profitable.

Seventy-four percent of Americans agree with the president’s desire to eliminate tax breaks for the oil and gas industry.

Instead of benefiting oil companies that reward senior executives, board members, and stockholders, these taxpayer funds should be invested in projects that benefit all Americans. A University of Massachusetts study found that investment in clean energy creates anywhere from two to four times more direct and indirect jobs compared to the same investment in oil and gas production.

But let’s put these tax breaks in context. Ending the $2 billion in annual tax breaks for the big five oil companies could pay for:

• The salaries of 36,000 high school teachers earning an average of $55,000 per year

• Pell Grants for more than 500,000 aspiring college students

• Sixty-seven thousand home solar energy systems costing an average of $15,000, which would reduce carbon dioxide pollution by 175,000 metric tons annually

Last September while addressing economic growth and deficit reduction, President Obama noted that as we cut federal program funding to reduce the budget deficit, “Either we gut education and medical research, or we’ve got to reform the tax code so that the most profitable corporations have to give up tax loopholes that other companies don’t get. We can’t afford to do both.”

After a year of near-record profits and a decade of more than $1 trillion in total profits, the least the five huge oil companies can do to help our nation is to relinquish their unnecessary and ineffective tax breaks.

Endnotes

[1] In 2010 BP suffered a net loss of $4 billion due to its huge expenditures related to the BP Deepwater Horizon oil disaster. If BP is excluded from profit calculations in 2010 and 2011, the four remaining companies had a 36 percent increase in profit.
[2] On March 1, 2011, the House voted 249-176 to defeat a “Motion to Recommit [that] would repeal oil and tax production tax breaks for major integrated oil companies.” On May 17 the Senate voted 52-48 on a motion to proceed to the Close Big Oil Tax Loopholes Act, S. 940. Sixty votes were required to end debate and proceed to the bill, so it failed.

Why Obama Is Wrong About Natural Gas

Sunday, March 4, 2012 by Rolling Stone
by Jeff Goodell


Speaking in New Hampshire yesterday, President Obama signaled that he will not go wobbly on energy during the upcoming campaign (climate is another story). He made a strong case for his commitment to the clean-power revolution, and vowed to end $4 billion in subsidies for Big Oil and Gas. "You can either stand up for the oil companies, or you can stand up for the American people," Obama said. "You can keep subsidizing a fossil fuel that’s been getting taxpayer dollars for a century, or you can place your bets on a clean-energy future." He also showed off this chart, which illustrates how America’s dependence on foreign oil has gone down every year since Obama took office.

Cutting subsidies and reducing our dependence on foreign oil are the no-brainers of energy policy, the kind of initiatives that Tea Partiers and Treehuggers both love. In that sense, it's classic Obama; the president is highly skilled at taking uncontroversial policy initiatives and making them sound like bold, revolutionary ideas.

But I want to highlight one sentence from yesterday's speech that is dangerously misinformed. It's about natural gas, a subject that Obama has been pretty high on recently. In his State of the Union speech in January, he blew a big wet kiss to frackers and shale gas drillers everywhere, while promising to "develop [America’s gas reserves] without putting the health and safety of our citizens at risk." Yesterday, Obama touted the economic benefits of investing in clean-energy technology: "Because of the investments we’ve made, the use of clean, renewable energy in this country has nearly doubled – and thousands of Americans have jobs because of it."

Then he said this: "We’re taking every possible action to develop a near 100-year supply of natural gas, which releases fewer carbons." By "carbons," I assume he is coining a new phrase for "carbon dioxide pollution." That’s O.K. He's the president; he can make up new words. But there are at least three other things wrong with this sentence.

1. It suggests that natural gas is a clean, renewable form of energy. O.K., he doesn’t say that explicitly, but the suggestion is there. So let’s be very clear: natural gas is a fossil fuel. It’s 350 million years old (give or take). It needs to be extracted from the ground, which, thanks to the fracking boom, we now know has many adverse environmental consequences, from contaminated wells to the industrialization of rural areas. It also needs to be burned to create heat or electricity, which creates air pollution. Compared to coal, which generates almost half the electricity in the United States, natural gas is indeed a cleaner, less polluting fuel. But compared to, say, solar, it’s filthy. And of course there is nothing renewable about natural gas. 

2. It implies that 100 years of natural gas is a sure thing. It is not. The whole question of how much gas we have – or oil or coal, for that matter – is fraught with uncertainty. It depends on factors like price and demand and whether new technologies can be developed to get at hard-to-extract gas, and whether or not you care that we blast and drill our way through suburbs and National Parks. Chris Nelder over at Slate has a good primer on this. As Nelder points out, when you look at actual proven reserves, we have only about 11 years worth of gas. If that's true, it raises a whole lot of interesting questions about future energy investments. I mean, if T. Boone Pickens wants to invest hundreds of millions of his dollars to convert vehicles to natural gas, that’s up to him – but why invest big public dollars in a fuel that might not last much more than a decade? 

3. It argues that switching to natural gas will reduce the risk of global warming. True, burning natural gas – aka methane – releases about half as much CO2 as an equivalent amount of coal. But the problem is that when it comes to trapping heat, methane is about 21 times as potent as CO2 (although is stays in the atmosphere a much shorter time). And as it turns out, a lot of methane leaks out into the atmosphere in the course of producing natural gas. Exactly how much, and with what effect, is hotly debated. Some studies have shown that natural gas could, in fact, be worse for the climate than coal. But even if you don’t factor in leakage rates, shifting to natural gas is not going to begin to stop global warming. As a new study by climate scientist Ken Caldeira and tech billionaire Nathan Myhrvold argues, shifting to natural gas "cannot substantially reduce the climate risk in the next 100 years." I know wonky papers can be a drag to slog through, but this one is important and well worth a read.

So rather than being a "bridge fuel" to the future, as many natural gas boosters like to call it, natural gas may turn out to be, as climate blogger Joe Romm puts it, a "bridge fuel to nowhere." Obama, of course, is never going to say that. But a little less wide-eyed boosterism would be welcome.

Americans Have A Right To Know Who Drove Up Gas Prices

August 20, 2011 06:00 PM
Sen. Bernie Sanders Leaks Oil Trading Data

By Susie Madrak

This is amazing, and although the article doesn't confirm it, the data must reflect market manipulation or Bernie wouldn't have leaked it:

WASHINGTON (Reuters) - Oil trading data that exposed the extensive positions speculators held in the run-up to record high prices in 2008 were intentionally leaked by a U.S. senator, sparking broader concern about industry confidentiality as Congress moves on Wall Street reform.

Senator Bernie Sanders, a staunch critic of oil speculators, leaked the information to a major newspaper in a move that has unsettled both regulators and Wall Street alike.

In a June 16 e-mail reviewed by Reuters, a senior policy adviser to Sanders discusses how his office received private data with the names and positions of traders and forwarded it exclusively to a Wall Street Journal reporter.

The e-mail, which also attaches two files with the data, was sent to Public Citizen's Tyson Slocum asking him to review it and speak with the newspaper about his observations.

In a statement from Sanders provided to Reuters, Sanders said he felt the data needed to be publicly aired.

"The CFTC has kept this information hidden from the American public for nearly three years," he said. "This is an outrage. The American people have a right to know exactly who caused gas prices to skyrocket in 2008 and who is causing them to spike today."

The leaked information has sparked concern at the Commodity Futures Trading Commission, which is legally prohibited from releasing confidential information that identifies trader positions and identities.

The leak also raises broader questions as U.S. regulators gear up to collect massive new amounts of private data from market players on everything from swaps and hedge funds to blueprints for how large financial firms can be liquidated. The breach of data could make Wall Street less reluctant to hand over sensitive information if they fear it is not appropriately safeguarded.

"This type of incident will have a chilling effect on derivatives trading in the U.S. because market participants will be reluctant to take the risk that their positions will be exposed to the public-and their competitors," John Damgard, president of the Futures Industry Association, said in a statement sent to Reuters.

Or to the Justice Department. But I wouldn't worry about that, Mr. Damgard. All you have to fear is the cold, hard light of day.

Big Oil's Free Ride

Monday, May 23, 2011 by OtherWords
Instead of working for the American people, many lawmakers are shilling for Big Oil.
by Kate Colarulli

Over Memorial Day weekend, tens of millions of Americans will take road trips, emptying their wallets at the pump.

The oil industry hardly needs the boost this year. Just in the first quarter of 2011, oil companies posted billions of dollars in profits. They're raking it in while working families are shelling out their earnings to pay at the pump. On top of those massive profits, the oil industry also benefits from tax breaks of $4 billion each year.

Outrageously, Big Oil believes that it somehow deserves this special treatment. ConocoPhillips CEO Jim Mulva recently went as far as to call repealing oil industry tax breaks "un-American."

Adding insult to injury, lawmakers in the Senate have been unable to get the 60 votes they need to end these tax breaks. GOP leaders blocked altogether a recent attempt to bring up the issue for a vote in the House of Representatives. At a time when Americans are struggling to support their families, put food on the table, and fill up their gas tanks, giveaways to Big Oil make no sense.

As Congress continues to pass bills favorable to Big Oil — from accelerating the issue of off-shore drilling permits to shelling out oil industry tax breaks — we continue to see signs that our leaders are more interested in helping campaign contributors than average Americans.

According to the Center for Responsive Politics, House members who voted to continue oil subsidies received, on average, five times more money in 2010 from oil and gas interests. Instead of working for the American people, many of these members of Congress are shilling for Big Oil.

Public support for ending oil industry subsidies is overwhelming. A recent NBC/Wall Street Journal poll found that 74 percent of voters support eliminating oil company tax breaks. It's clear that we need leaders who will stand up to Big Oil and support the American people's call to eliminate its tax loopholes.

Obama Pushes for Increase in Domestic Oil Production

by: Margaret Talev, McClatchy Newspapers
Saturday 14 May 2011

Washington - President Barack Obama is responding to voter frustration over high gasoline prices and oil executives' criticism of his domestic drilling policies by announcing steps to "increase safe and responsible oil production here at home."

In his weekly Saturday address, the president reiterated that he's launched a task force to look at whether any fraud or market manipulation is contributing to gasoline costing more than $4 a gallon. He also renewed his call to eliminate oil companies' subsidies.

Democrats are pushing legislation to put $2 billion in annual tax breaks for the five largest oil companies instead toward deficit reduction. Republicans oppose the effort.

At the same time, Obama noted that U.S. oil production last year was at its highest level since 2003 and said: "I believe we should expand oil production in America, even as we increase safety and environmental standards."

He said he's taking several steps toward that end, including:

• Directing the Interior Department to conduct annual lease sales in Alaska's National Petroleum Reserve
• Creating a new inter-agency group to streamline Alaska drilling permits
• Expediting evaluations of oil and gas in the mid- and south-Atlantic
• Extending leases in Gulf of Mexico areas affected by last year's temporary moratorium after the BP oil spill

Two administration officials who spoke on condition of anonymity under ground rules set by the White House, noted that Republican lawmakers have supported some of the concepts Obama is now embracing. Drilling in the Arctic National Wildlife Refuge, however, remains "off the table," one official said.

Phil Flynn, an energy trader at PFG Best in Chicago, said what Obama is proposing is "going to open up some more lands for drilling, which is a positive." At the same time, Flynn said, "obviously it's a political move."

"The oil companies' executives' biggest complaint was 'Hey, we want to drill more but we've been thwarted by this administration,'" Flynn said. "It's a political response to that argument so that when he goes on the election trail he can say, 'Hey I opened this up.'

"On the one hand he looks like he's doing them a favor. But now he's going to frame it to say he's taking away tax breaks."

Flynn said the steps won't bring down prices overnight, but that if Obama could negotiate a deal that helps get the federal budget under control, it could have a quick impact. "If he got the budget under control, the U.S would not have to borrow as much money," he said. "That would make the dollar stronger and commodity prices lower."

U.S. oil production rose from 4.95 million bpd in 2008 to 5.36 million bpd in 2009, followed by 5.5 million bpd last year, even with the BP disaster in the Gulf of Mexico. The Energy Information Administration forecasts U.S. production to hold at that level this year and rise again next year, to 5.54 million bpd.

How Does Big Oil Gouge Us? Let Us Count the Ways

Thursday, May 5, 2011 by CommonDreams.org

by Paul Buchheit

 

It's not just at the gas pump. The oil companies don't pay much in federal income taxes, either. Over the past five years Exxon has paid at a 3.6% rate (federal tax as a percentage of total pre-tax profits). Chevron was little better at 5.6%. Marathon paid 12%, Conoco Phillips 17%.

They use American research, infrastructure, and national security to make record profits. ExxonMobil, BP, Shell, Chevron, and ConocoPhillips realized a combined 42% increase in profits in the first quarter of 2011. Together, the five biggest oil companies made almost $1 trillion in profits over the past decade.

Goldman Sachs noted that speculation on oil prices is causing the price at the pump to go up. But according to the Huffington Post, the resulting oil company profits "are not finding their way back into the communities from which they came; are not being used to create more jobs; and are not being invested in new equipment and exploration." Instead, the money is going to dividends and stock buybacks. "They're basically enriching themselves," said Daniel J. Weiss, a senior fellow at the Center for American Progress.

The big profits are certainly not being used to create jobs and stimulate the economy, or to pursue alternative energy research. The Wall Street Journal reports that the big five oil firms are holding $70 billion in cash. Meanwhile, they're paying an average of $15 million apiece in annual salaries to their CEOs. Occidental and Chesapeake each paid over $100 million to their CEOs in 2009.

And then we have the continued flow of taxpayer subsidies to the oil industry, totaling about $4 billion a year. We just awarded a $42 million no-bid contract to BP to supply fuel to the Air Force, even as a criminal investigation continues over its Gulf of Mexico ineptitude. Why no-bid? Because the contract was called "an unusual and compelling urgency," which made it a national security issue.

Adding insult to gougery is the attitude of oil company executives, who have apparently convinced themselves of their righteous ways. An Exxon VP referred to his company as "a leading U.S. taxpayer." An American Petroleum Institute spokesman said that "everyday Americans," including teachers and firefighters, benefit from oil industry profits.

What they're saying, in effect, is that it's good not to pay taxes, because that leaves more money to invest in America. Gouging us again, in doublespeak.

Oil Prices: Gouge Us Baby One More Time

Wednesday, April 27, 2011 by GRITtv
by Laura Flanders

Gas prices have been edging up since February, reaching $4 a gallon this Easter, and Republicans are gearing up to make a stink about it. To blame Democrats, that is, for setting things up this way.

Blaming green energy initiatives for driving up prices, House Republicans are planning to hold hearings on a slurry of bills aimed at expanding domestic oil production in response to high gasoline prices. Even the President admits gas prices effect his standing in the polls.

But it should be easy enough to fight back. While the five biggest oil companies report historically high profit earnings, the same GOP that would slash juice programs for poor kids in school stands firm for federal subsidies for big oil.

It's enough to make your head spin. But then again, so is this country's entire relationship with big oil.

Like a marriage from hell. Americans keep getting beaten up environmentally, politically and at the pump. And even as we're beaten up, we shell out: in subsidies, tax breaks, and troops sent around the world to die and kill in defense of the interests of Big Oil.

While Americans keep paying, Big Oil keeps on profiting. The top five companies together made a greasy trillion dollars profit over the last decade. That's Trillion with a T. Yet Republican budgets would lay off the regulators even as they lay on the corporate welfare.

House Republicans marked the anniversary of the BP oil spill by voting unanimously FOR extending oil subsidies again this year.

It'll come as no surprise that for its first round of political contributions for the 2012 cycle, BP handed out a total $29,000 and it went almost entirely to House Republican leaders.

The President’s response so far has been to initiate a task force to investigate illegal commodities trading. But as Public Citizen reports, it's not the illegal but the legal speculation that's most to blame.

And progressive Democrats offer the President a far stronger way to go. Tax dirty energy companies, end corporate welfare, and impose a tax on commodities trading. Instead of getting on the defensive and easing up on drilling the White House should ask Senator Bernie Sanders about his end-to-subsidies bill.

The President needs to take a moral stand against Big Oil for all our sakes, before Drill Baby Drill becomes Gouge Us Baby One More Time.

What Your Representatives Did While You Were Asleep...

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Here are some of the things your House of Representatives did early this morning:

• Voted to strip funding from just about every EPA project, including air quality, emissions, and water pollution monitoring.
• Defunded NOAA
• Stripped funds to administer the Affordable Care Act.
• Eliminated funds for the Intergovernmental Panel on Climate Change
• Continued $53 billion in oil subsidies
• Tried to eliminate Davis-Bacon rules for government projects (that failed)
• Stripped federal workers of their salaries in positions within agencies targeted for defunding

Fossil fuel subsidies are 10 times those of renewables, figures show

New analysis shows that government support for fossil fuel industry is about 10 times that offered to renewable energy firms
guardian.co.uk, Tuesday 3 August 2010

Despite repeated pledges to phase out fossil fuel subsidies and criticism from some quarters that government support for renewable energy technologies is too generous, global subsidies provided to renewable energy and biofuels are dwarfed by those enjoyed by the fossil fuel industry.

That is the conclusion of a major report released late last week by analyst Bloomberg New Energy Finance, which analyses subsidies and incentive schemes offered globally to developers of renewable energy and biofuel technologies and projects.

The report concludes that in 2009 governments provided subsidies worth between $43bn (£27bn) and $46bn to renewable energy and biofuel industries, including support provided through feed-in tariffs, renewable energy credits, tax credits, cash grants and other direct subsidies.

In contrast, estimates from the International Energy Agency (IEA) released in June showed that $557bn was spent by governments during 2008 to subsidise the fossil fuel industry.

Michael Liebreich, chief executive of Bloomberg New Energy Finance, said the study revealed that investors reluctant to finance renewable energy industries because they believe them to be heavily subsidised were operating under a misapprehension.

"One of the reasons the clean energy sector is starved of funding is because mainstream investors worry that renewable energy only works with direct government support," he said. "Setting aside the fact that in many cases clean energy competes on its own merits – for instance in the case of well-situated wind farms and Brazilian sugarcane ethanol – this analysis shows that the global direct subsidy for fossil fuels is around 10 times the subsidy for renewables."

However, the report predicted that the gap between fossil fuel and renewable energy subsidies should "narrow considerably" this year as support for renewable and biofuels increases as a result of green government stimulus packages worth an estimated $188bn, and fossil fuel subsidies operated by countries such as China are cut in line with falling oil prices.

The study said sizeable renewable energy subsidy schemes were emerging, with the US providing $18.2bn in renewable energy and biofuel subsidies in 2009, China offering direct subsidies worth $2bn alongside low-interest loans from state banks, and Germany providing about $19.5bn worth of support through its widely adopted feed-in tariff scheme.

However, the report will further increase pressure on G20 countries to make good on their recent pledge to phase out fossil fuel subsidies – a move that the IEA believes could single-handedly slash global carbon emissions by up to seven per cent.