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Feds should invest in the future, not the past

Posted by Bobby Hayden at Jun 13, 2013 02:30 PM |

The administration needs to do a lot more to accelerate clean energy adoption and pick up the ball on addressing climate change this term. But a good first step is to divest resources from a mature industry that dominates the energy market, sending taxpayer money out of the country and into its own bank accounts.

Feds should invest in the future, not the past

Leah Hochberg

By Leah Hochberg
Business Partnerships Intern

Interior Secretary and Seattle’s own Sally Jewell dubbed last Monday “history in the making” when her Department announced that it will be auctioning offshore leases for wind energy production this summer. The July 31 auction will lease 164,750 acres of land off the coast of Massachusetts and Rhode Island, with a generation potential of 3,400 megawatts. That’s enough to power one million houses.

Not everybody was as optimistic as REI’s former CEO, though. In the cacophony of accusations from the anti-clean energy crowd, one in particular stood out. Louisiana’s Sen. David Vitter summed up the news as the Obama administration “picking energy industry winners and losers.” Sen. Vitter’s likely still sensitive about the Obama administration’s offshore drilling five-year plan, which decreased the amount of sites available for drilling after the massive Deepwater Horizon oil spill in 2010. Sen. Vitter and other fossil-fueled senators (from both sides of the aisle) argue that the federal government is manipulating the market by regulating land leases and they worry that the fossil fuel industry will experience significant economic losses as a result.

 

Powder River Coal

W. A. Parish Power Plant in Thompson, TX, fired by coal from the Powder River Basin. Courtesy of Roy Luck. In the Powder River Basin, federal subsidies have pushed coal prices down to $5-$15 per ton. Try going to your local hardware store to buy 2 tons of dirt for $5

 

Yet the Obama administration and Congress are hardly shortchanging the fossil fuel industry. Fossil fuel companies receive $70.2 billion annually in federal subsidies, more than PepsiCo’s annual profits in 2011. If you look at the average annual subsidies over the course of each industry’s lifetime, the fossil fuel industry has received 13.1 times more subsidies than the clean energy industry since its creation. That massive annual subsidy doesn’t even include the years of public investment in related infrastructure like roads, railways, and pipelines. Nor does it include societal and human costs to public health, environmental damage, or climate change effects that result from fossil fuel extraction, transportation and use.

In comparison, the clean energy industry receives only $12.2 billion each year. And the nature of clean energy means that those other externalities largely don’t exist. All told that’s about one-sixth of the subsidies that are going toward dirty fuels.

With such massive subsidies, one would assume that fossil fuels are dirt-cheap, especially because some companies are buying federal resources for prices that are literally cheaper than dirt. (In the Powder River Basin, federal subsidies have pushed coal prices down to $5-$15 per ton. Try going to your local hardware store to buy 2000 pounds of dirt for $5.) This is one of the reasons why several organizations have recently asked Sally Jewell to impose a moratorium on coal leasing. Even the Interior Department itself reported Tuesday that American taxpayers have lost $62 million as a result of federal fossil fuel subsidies. Even worse, as national markets dry up, the fossil fuel industry is looking to export U.S. resources to other countries while making enormous profits off government subsidies.

Why are we subsidizing other countries’ energy costs?Climate Solutions hopes that Secretary Jewell agrees that we need to take a time out on coal leasing while the agencies review these giveaways.

The U.S. is transitioning off coal (thus why the coal industry is so desperate for a new market for their fuel), and clean energy prices in the U.S. are plummeting. Even with only one-sixth the subsidies of fossil fuels, solar panel prices have decreased by 47 percent since 2011 and wind energy is 90 percent cheaper than it was in the 1980s. Clean energy is becoming cost-competitive with fossil fuels, and as more clean energy projects develop through both private and public investment, the prices will continue to drop.

The Obama administration isn’t playing eenie-meenie-minie-mo to decide which industry gets land leases. It’s doing a good job of investing in innovative industries and phasing out government support for those whose day has passed. Yes, the administration needs to do a lot more to accelerate clean energy adoption and pick up the ball on addressing climate change this term. But a good first step is to divest resources from a mature industry that dominates the energy market, sending taxpayer money out of the country and into its own bank accounts. Those resources should be used to heavily invest in innovative clean energy solutions currently held down by the subsidized dominance of the fossil fuel industry.

Of course, maybe Sen. Vitter’s right and the northeast is the wrong location for offshore wind: I hear there’s a lot of hot air blowing out of Louisiana…

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