Tax money for dirty energy

The Nation has a well-reported story on the state of the art of large-scale renewable electricity generation — the sort of thing that could power a city, not just a house. In summary, it’s not so hot but they’re working on it. Writer Christian Parenti, unsurprisingly in a piece appearing in The Nation, concludes that the best course is major subsidy for green power and major punishment for fossil-fuel-using companies, and unsurprisingly I don’t agree. Still, I’m very struck by the figures Parenti’s dug up for the subsidies the dirty-power industry’s received from the U.S. government:

Petroleum and coal companies received more than $33 billion in direct subsidies between 1992 and 2002. The 2005 energy bill gave the oil and gas industries $6 billion in subsidies while filthy coal will get about $10 billion over the next five years. This public largesse takes the form of everything from R&D support and loan guarantees to accelerated capital depreciation schedules in the tax code.

Meanwhile, renewables have struggled to insure even a basic production tax credit, or PTC, of 1.9 cents per kilowatt hour. This modest incentive was designed to create a stable income for firms willing to risk breaking into the utilities market with new technology. It’s important to stress that this tax credit does not reward construction for construction’s sake; it rewards only the actual delivery of energy to the grid. But this rational little subsidy, initiated in 1992, was never enacted for more than one year at a time, and it was routinely allowed to expire. Last year the PTC was finally renewed for two consecutive years; it will likely be locked in for five or ten years. That has triggered a huge wave of private investment in green utilities.

This is not only unfair, it’s ridiculously short-sighted. The U.S. government subsidizes fossil fuels on security grounds, hoping companies will develop domestic resources that will make the country less dependent on foreign suppliers of oil in particular. If something must be subsidized, it ought to be conservation and high-efficiency technology, which is agnostic about the source of the power it doesn’t use.

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