Given our budget crisis and the ongoing nuclear crisis in Japan gives more leverage to those wanting to check the government hand outs to various energy industry interests, it seems a likely time to challenge and cut energy subsidies.
Energy subsidies are, in effect, taxpayer funds given to energy companies and organizations in the form of favorable tax credits, loan guarantees and direct expenditures.
For example in 2009, the nuclear energy received roughly $239 million in direct subsidy grants, according to Subsidyscope, and that is just one piece of the subsidy pie. The main channel through which nuclear energy is subsidized is through federal loan guarantee programs, such as the Department of Energy’s Title XVII, which passed in the Energy Policy Act of 2005 and approved $18.5 billion in loan guarantees for nuclear reactors, as disclosed in the Green Scissors report.
An Institute for Energy Research graph showed that, in 2007, nuclear energy received under $2 billion dollars in total subsidies, but apparently not including Title XVII loan guarantees in its calculations.
Benjamin Schreiber, the climate and energy tax analyst at the left-leaning environmental pressure group Friends of the Earth, said, “President Obama is clearly in the camp of nuclear energy” and plans to increase the amount of nuclear energy loan guarantees from $18.5 billion to $64 billion in order to fund the construction of new nuclear reactors.
(Few new nuclear reactors have been erected since the 1970s because they are fairly expensive to build without government involvement, a.k.a subsidies, loan guarantees and liability assurances.)
“Nuclear power is unsafe and unclean. It is a security risk. But the idea that we are actually going to subsidize something that could kill thousands of people is ludicrous,” said Schreiber.
The ongoing nuclear crisis in Japan bears witness to that threat and in order to make some good of the dire situation–if that is even possible–people should rethink President Obama’s push for cleaner energy and the development of new nuclear reactors as a part of the mix.
Really, it is tough to argue nuclear energy is entirely low carbon, because fossil fuels are released during uranium mining, transport, enrichment and waste disposal.
But then again, neither is building or running new solar or windmill factories to build these ‘clean’ energy sources of the future or installing them. However, nuclear power does provide a lot of low-carbon energy when the wind does not blow and the sun is not shining.
In March, almost thirty center-right leaning groups appended their signatures to a letter drafted by the National Taxpayer’s Union. The letter asked Congress to not approve any new subsidy programs, to not allow the expansion of existing subsidies, to get rid of existing subsidies and, of course, lower taxes.
The subsidy debate is made more interesting given the Japanese nuclear crisis, but it is the coming fiscal crisis that started this conversation and the future disputed budget deals that keep it going.
Subsidyscope also estimated that out of the total amount allotted to the energy industry in 2009–$25 billion–$18.6 billion was used for direct financial expenditures. The number of direct expenditures in 2001 was under $3.4 billion. The main reason for the dramatic increase in funding is the allocation of money from the America Recovery and Reinvestment Act of 2009, a.k.a the “stimulus bill.” Subsidyscope’s figures may even be a bit modest as the White House website claims $80 billion of stimulus money was given to renewable energy, alone.
With our growing $14 trillion debt crisis, these figures are alarming. Even more alarming is that $13.3 billion of the $25 billion was spent by the Department of Energy, the government branch of energy research and development. An upwards of $5 billion of that was used for the DOE’s “Weatherization Assistance for Low-Income Persons” program, sarcastically called “Cash for Caulkers.” I thought stimulus funds were supposed to stimulate the economy, not create what seems to be new short term entitlement programs.
It looks like energy subsides may receive another hit after the recent threat of a government shutdown. Republicans were headstrong in their goal to slash funds and it looks like energy subsidies might be one area that suffers when the 2011 budget deal was voted on last week.
Back in March, the New York Times energy blog reported that in spite of the nuclear crisis in Japan, the Department of Energy’s nuclear loan guarantee program would continue, but a recent post says that clean energy may face significant cuts in their loan guarantee programs. We don’t quite know yet how this will all end up.
Also, the Environmental Protection Agency, the federal government’s energy branch that is in charge of writing and enforcing regulations, will receive a 16 percent budget cut for the remainder of 2011, affecting many energy projects.
But as Schreiber told me, Obama seems intent upon increasing the amount of nuclear energy funding and his recent 2012 budget proposal affirmed that plan. On Wednesday, the President said during his debt speech at George Washington University, where he introduced his plan to reduce the deficit by $4 trillion in twelve years, that “We will make the tough cuts necessary to achieve these savings, including in programs that I deeply care about. But I will not sacrifice the core investments that we need to grow and create jobs,” which he said included clean energy investments.
In fact, Obama criticized the GOP proposal which called for a 70 percent cut in clean energy spending saying, “These aren’t the kind of cuts that the fiscal commission proposed. These are the kinds of cuts that tell us we can’t afford the America that I believe in and, I think, you believe in.”
With a divided Congress, it will be interesting to see which programs lose funding when the budget deals are signed. Despite Obama’s effort to lessen the amount of money spent on the energy sector, lumping it into a category that only takes 12 percent of the federal budget, there is still a significant amount of programs that will go or get cut.
So, no matter your politics, it may time to reign in the tax funds given to the energy industry. Nuclear energy will continue attract headlines, because of what is happening in Japan, but in reality, even nuclear energy receives just a portion of these government subsidies.
Most energy subsidies go towards other energy sources, such as, oil and coal not to mention the growing agro-energy subsidy monster known as ethanol. All types of subsidies need to be trimmed (or cut) if we are to eventually get out of this fiscal crisis.
