Time to stop subsidizing ALL energy sources

President Obama and many in Congress are going after tax breaks given to the oil industry. The issue is controversial even among free marketers. Folks at the Cato Institute are generally supportive of Obama’s efforts while my old friends at the National Taxpayers Union oppose Obama’s plans. I generally side with NTU on this one, but I’m wondering, if subsidies are bad, why aren’t President Obama and the Democrats taking on the $60 billion in ethanol subsidies which dwarf the $21 billion in breaks given to oil and gas?

As a believer in the free market, I support getting rid of ALL energy subsidies or special exemptions. But, as the Wall Street Journal points out:

solar energy is subsidized to the tune of $24.34 per megawatt hour, wind $23.37 and “clean coal” $29.81. By contrast, normal coal receives 44 cents, natural gas a mere quarter, hydroelectric about 67 cents and nuclear power $1.59.

Obviously, it is the politically-correct so-called “renewables” that receive a bulk of the subsidies, but, if people want to pay more for politically-correct power — as PNM customers will be soon — they should be able to.

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5 Replies to “Time to stop subsidizing ALL energy sources”

  1. Why aren’t President Obama and the Democrats taking on the $60 billion in ethanol subsidies which dwarf the $21 billion in breaks given to oil and gas?

    Answer: because those subsidies enjoy widespread bipartisan support. Corn is tied to ethanol and farm subsidies are tied to corn. The Republicans have championed farm subsidies for years. As I recall it was a Republican president who made the mandate of ethanol a highlight during one of his state of the union addresses.

    I oppose all subsidies. Also oppose use of ethanol given it has very little benefit. If ethanol is necessary then lets get it from Brazil who process it from sugar cane.

  2. Don’t confuse a subsidy with a tax break. A subsidy takes money from one person and gives it to another. A tax break lets you keep more of your own money instead of paying it to the government in taxes.

    The ethanol fiasco is a subsidy as are all alternative energy schemes. Your PNM bill will go up because PNM is required by law to mix expensive “alternative” sourced electric power with coal power resulting in higher electric costs. The oil companies can deduct certain (intangible) drilling costs instead of depreciating them–that is a tax break. One is like theft and the other is like self-defense.

    The environmentalist and the left hate the oil companies. Don’t play into their anti-capitalist game.

    1. Jim, you are generally right here. Subsidies and tax breaks are different and I apologize for confusing the issue. That said, ethanol is “subsidized” in two ways. There is a federal tax exemption AND a federal mandate. The Reason article that I based the initial portion of my post on used the term “subsidy” as did the authors from the Cato Institute which was somewhat surprising.

      Anyway, I think the title of the posting makes the ultimate point and that is that all energy sources should be treated the same from a tax perspective.

  3. Ethanol production raises the cost of corn for food production and uses an inordinate amount of water from the Ogallala aquifer which is being depleted at an unsustainable rate: http://www.iitap.iastate.edu/gccourse/issues/society/ogallala/ogallala.html
    And as has been mentioned it is not a considerably cleaner fuel.

    One of the problems we are facing is unsustainable growth. In order to maintain a healthy aquifer and to provide water for development we are importing water through publicly funded systems that use a tremendous amount of energy for pumping and filtration. Fees for Santa Fe water users went up I think about 60% for the Buckman direct diversion
    Rather than subsidize these systems it would be better if the individual landowners and developers invest in their own energy generating systems, water collection and 100% return flow greywater and wastewater systems that are independent of the large utilities and governmental oversight we dearly pay for.

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