Which Energy Industries Would You Subsidize?

Subsidies and tax breaks are a tried and true way of helping a developing industry get up on its feet.

One of the strategies to accelerate a transition to cleaner greener renewable energy sources is to subsidize research development, and production of renewable energy sources, such as wind power, solar power, geothermal, etc.

Free market advocates often say that the emerging renewable energy industry should not be subsidized. What is not widely know though, is that subsidies for well established fossil fuels exceed renewables by almost six to one.

Research by the Woodrow Wilson International Center for Scholars and the Environmental Law Institute reveals that the lion’s share of energy subsidies supported energy sources that emit high levels of greenhouse gases (GHGs). The study, which reviewed fossil fuel and energy subsidies for Fiscal Years 2002-2008, showed that the federal government spent about $70 billion on the fossil fuel industry, and about $12 billion on renewables. As the report points out:

Moreover, just a handful of tax breaks make up the largest portion of subsidies for fossil fuels, with the most significant of these, the Foreign Tax Credit, supporting the overseas production of oil. More than half of the subsidies for renewables are attributable to corn-based ethanol, the use of which, while decreasing American reliance on foreign oil, has generated concern about climate effects.These figures raise the question of whether scarce government funds might be better allocated to move the United States towards a low-carbon economy.

energy subsidies fossil fuel, oil, coal, wind, solar, ethanol
Source: Internal Revenue Service, U.S. Department of Energy (Energy Information Administration), Congressional Joint Committee on Taxation, Office of Management and Budget, & U.S. Department of Agriculture

N.B. Carbon capture and storage is a developing technology that would allow coal-burning utilities to capture and store their carbon dioxide emissions. Although this technology does not make coal a renewable fuel, if successful it would reduce greenhouse gas emissions compared to coal plants that do not use this technology. The production and use of corn ethanol can generate significant greenhouse gas emissions. Recognizing that the production and use of corn-based ethanol may generate significant greenhouse gas emissions, the data depict renewable subsidies both with and without ethanol subsidies.

Fossil fuel extraction is increasingly toxic (e.g. fracking poisons public water systems) and environmentally destructive (e.g. gulf oil “spill”). And fossil fuel production seems to be hitting a Peak Oil wall. As production lags demand, we should expect oil and gas prices to rise precipitously. Subsidizing oil keeps us addicted to it.

Three of the top 5 biggest companies in the world are oil companies (Exxon, BP, Royal Dutch Shell). Rather than subsidize Big Oil profits and foreign oil nations, we should be taxing fossil fuels to reduce their use.  Tax what we want to reduce, and subsidize what we want to increase. Tax what harms us, and subsidize what helps us. Use the taxes to fund R&D and development of a world class alternative energy industry.

Obviously, that means politicians will need to resist the monied special interests of the Big Oil lobby.

What would you like to see your politicians do?

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While Congress Dithers, U.S. Military Speeds Transition to Alternative Energy

The most read article at the NY Times online yesterday was The U.S.S. Prius by Thomas Friedman. The thrust of the article centers around two brutal facts – we are fighting wars for oil, and wars consume a lot of oil. One of the tidbits mentioned toward the end of the article is that a gallon of gas costs up to $400 per gallon by the time it reaches the front lines. Moving beyond the economics, getting fuel to the front lines also costs lives. The U.S. military loses one soldier for every 24 fuel convoys it runs in Afghanistan.

Friedman observes “at a time when a fraudulent, anti-science campaign funded largely by Big Oil and Big Coal has blocked Congress from passing any clean energy/climate bill” the U.S. Navy and Marines are spearheading a strategy to make the military much more energy efficient. Friedman adds, “Unlike the Congress, which can be bought off by Big Oil and Big Coal, it is not so easy to tell the Marines that they can’t buy the solar power that could save lives.

Ray Mabus, the Secretary of the Navy, has crafted a strategy to shift from oil to alternative energy, including, solar and biofuels. On Earth Day this year, the Navy flew a F/A-18 Super Hornet fighter jet powered by a 50-50 blend of conventional jet fuel and camelina aviation biofuel made from pressed mustard seeds.

And while congress favors boondogles like corn ethanol, which uses almost as much energy producing it as it yields:

The Navy will use only “third generation” biofuels. That means no ethanol made from corn because it doesn’t have enough energy density. The Navy is only testing fuels like camelina and algae that do not compete with food, that have a total end-to-end carbon footprint cleaner than fossil fuels and that can be grown in ways that will ultimately be cheaper than fossil fuels.

Mabus has also set a goal for the Navy to use alternative energy sources to provide 50 percent of the energy for all its war-fighting ships, planes, vehicles and shore installations by 2020.

About 60% of the oil we consume is imported from foreign nations – many of those nations are petro-dictatorships. As we shift to alternative fuels and energy, we can reduce our dependance on foreign oil.

camelina oil bio-fuel
Camelina Sativa

Though many people are familiar with solar energy, innovations in the field of biofuels are less well known. Most vehicles run on liquid fossil fuels – gasoline and diesel. Biofuels, such as camelina, provide a cleaner greener alternative to fossil fuels. Camelina Sativa is a member of the mustard family, a distant relative to canola. Camelina can grow on land unsuitable for most food crops, especially arid lands. It has yields that are roughly double that of soy. Camelina can be grown in a rotation with wheat crops. Farmers who have followed a wheat-fallow pattern can switch to a wheat-camelina-wheat pattern, and produce up to 100 gallons of camelina oil per acre, while growing up to 15 percent more wheat. And once the oil is pressed from the seed, the leftover “mash” can be used as nutritious livestock feed.

We consume more oil for transportation than anything else. Innovations in transportation fuels will have the most impact on global energy consumption and associated emissions of climate-changing CO2.

US Oil Consumption Transportation

Oil production is peaking and will become increasingly expensive. It’s time to support our transition to a cleaner, greener alternative energy.

Peak Oil

The U.S. spends more money on potato chips than energy research and development. To restore US scientific and technical leadership, Congress needs to stop bashing science and taking money from Big Oil, and start investing in our energy future.

Recommended Reading

GOP Rep. Bob Inglis On Climate Change by Jay Kimball

Camelina Oil by Sustainable Oils

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German Military Study Warns of Potential Energy Crisis by Jay Kimball

Department of Defense Perspectives on Climate Change and Peak Oil

Farming Wind Versus Farming Corn for Energy

keywords: wind power, wind turbines, corn ethanol, ERoEI

corn field with wind turbines
Farmers can plant crops right to the base of wind turbines (photo: Warren Gretzl, NREL)

If a farmer has 1,000 acres of land, and he/she planted it with corn for making ethanol and erected wind turbines for generating electricity, how much energy will the farmer produce and what are the economics?

Wind Power

A typical wind farm will have about 15 wind turbines per 1,00o acres. Each wind turbine will generate about 500 kW of power (assuming 33% capacity factor). Electricity retails at about 12¢ per kW hour. So 1,000 acres will produce 15 x 500 x .12 = $900 of electricity per hour, which equates to about $8,000,000 per year, representing about 224 trillion BTUs of energy.

Corn Ethanol Power

A typical 1,000 acre corn farm will produce about 7,500 pounds of corn, yielding about 340,000 gallons of ethanol. Ethanol retails at about $1.80 per gallon. So 1,000 acres will produce 340,000 x 1.8 = $612,000 per year, representing about 26 billion BTUs of energy.

Energy Returned on Energy Invested

It takes energy to produce energy. The Energy Returned on Energy Invested (ERoEI) for wind turbines is an impressive, state of the art wind turbines are providing ERoEI of over 50:1.

It takes a lot of energy to produce corn ethanol, which yields a far lower ERoEI of between .8 and 1.65 (see Ethanol’s Energy Return on Investment: A Survey of the Literature 1990-Present by Roel Hammerschlag).


Side-effects of Wind Power and Corn Ethanol Production

Wind turbines are often perceived as an eyesore, marring the land with imposing manmade structures. Flying creatures such as hawks and bats are often killed as they pass through the turbine blades. Wind turbines are noisy, and are best located in rural areas, or at sea. Wind power needs to be located near power transmission resources, it that infrastructure will need to be built.

Corn ethanol yields just a bit more energy than it takes to produce it. It takes about 1,700 gallons of water to produce each gallon of corn ethanol. Corn used for ethanol production is corn not used for food production. As food corn supply is reduced, corn-based food prices rise.


Given 1,000 acres of land, planted with corn and a typical density of wind turbines, the table below summarizes the annual economic and energy value of corn ethanol fuel and wind turbine electricity.

Wind Power Corn Ethanol
Retail Value $8,000,000 $612,000
Energy Yield 224 trillion BTUs 26 billion BTUs
ERoEI 50:1 1.5:1