Last week marked the 50th anniversary of Earth Day, a time when many take to social media to celebrate so-called “green” energy and call for broad government support. It’s for the children, after all.
But the real numbers show that we have spent tens of billions of dollars on federal energy subsidies with precious little to show for all that money. That’s particularly true of renewables.
According to new research by the Texas Public Policy Foundation’s Life:Powered initiative, the first comprehensive compilation of energy subsidies for all fuel types over an extended period, federal spending on energy subsidies from the 2010s totaled $127 billion, an average of nearly $13 billion annually.
Over the last decade, wind energy received $36.7 billion and solar received $34.4 billion of our tax dollars. Despite this mammoth expenditure, as well as the billions appropriated in the decades prior, wind and solar still only provide 3% of our energy. Wind has received nearly 40 times and solar nearly 200 times more subsidies per unit of electricity generated than oil and gas — yet the technology is still too unreliable to breach double digits.
Wind and solar face fundamental physical limitations, including unreliability and low energy density, which prevent them from powering our economy. Their growth will be limited without more subsidies, and the government should not continue to prop up these unsustainable technologies at the expense of the taxpayers.
Subsidies simply aren’t achieving their goal: giving renewable energy technology a boost.
Of course, other subsidies are equally unjustifiable. Fossil fuel subsidies were created to favor politically connected businesses or to stave off “peak oil” amid widespread concerns about running out of energy. Many federal subsidies have been created under the false belief that the government could incentivize new technologies or increase domestic energy production to avoid a calamitous shortage of energy that would devastate our economy and quality of life.
America has since achieved energy dominance, and peak oil theory has long since been debunked. Our oil and gas reserves are constantly growing as we discover new resources and learn to extract energy more efficiently.
So did subsidies contribute to our current energy dominance? Not so much. Between 2010 and 2019, the oil and gas industry received $25 billion in subsidies. Given the size of the global industry, which is well into the trillions of dollars, it’s hard to imagine how approximately $2 billion a year in subsidies could be credited with moving the needle. Federal subsidies represent less than 1 percent of total economic activity for the U.S. fossil fuel industry.
Given that fossil fuel subsidies are not essential to keeping the lights on, they are not a responsible use of the American people’s hard-earned tax dollars either.
Subsidies of any nature distort markets — in layman’s terms, they artificially inflate prices for certain goods, create a system of dependence on government, and foster cronyism as corporations seek special treatment on the backs of the taxpayers. All of these hurt consumers, and when it comes to energy, the potential consequences of high prices and less reliable electricity sources on the grid are particularly severe. Free markets function best when consumers and business owners have the freedom to choose their own paths, free from the politicians’ often unwise choices of winners and losers.
The government should not continue to spend the American people’s hard-earned tax dollars on unsustainable renewable technologies that don’t strengthen our electric grid. At the same time, fossil fuel subsidies clearly don’t play a meaningful role in getting the American people access to the energy they need.
Ultimately, the best path forward is to acknowledge the distorting effects of subsidies on the cost and availability of the energy we all depend on every day — and phase them out once and for all.
This commentary originally appeared in RealClearEnergy on April 28, 2020.