Energy Incentives For Fossil Fuels Dwarf Incentives For Renewables

An updated study on federal energy incentives confirms that the main beneficiaries of more than $800 billion of federal energy incentives over the past six decades have been the oil and natural-gas industries, according to Management Information Services Inc. (MISI).

The company found that the oil and natural-gas industries together garnered 60% of federal incentives between 1950 and 2010, with 44% of the roughly $837 billion in federal support going to the oil sector.

The report shows that the oil industry has benefited from $369 billion in combined incentives, with natural-gas receiving $121 billion. The study updates earlier MISI research that analyzed federal energy incentives from 1950 to 2006.

The MISI study also shows that, contrary to some claims, federal energy incentives have not gone to nuclear energy technologies at the expense of solar energy and other renewable energy sources. In fact, the incentives are roughly equal.

Of the total incentives provided since 1950, nuclear energy has received 9% ($73 billion), while renewable energy also has received 9% ($74 billion). Coal and hydroelectric energy sources, meanwhile, have received 12% ($104 billion) and 11% ($90 billion) of the total, respectively.

The report identifies six categories of incentives: tax policy, regulation, research and development (R&D) funding, market activity, government services and disbursements.

‘Tax policy has been, by far, the most widely used form of incentive mechanism, accounting for $325 billion (45 percent) of all federal expenditures since 1950,’ the report states. ‘The oil and gas industries, for example, receive percentage depletion and intangible drilling provisions as an incentive for exploration and development. Federal tax credits and deductions have also been utilized to encourage the use of renewable energy.’

Federally funded regulation and R&D funding, at about 20% each, are the second- and third-largest incentives, MISI says. Since 1988, federal spending on nuclear energy R&D has been less than spending on coal research and, since 1994, has been less than spending on renewable energy research.

R&D expenditures for nuclear, coal and renewables expanded greatly after 1975, but this increase was especially marked for coal and renewables, MISI says. Between 1976 and 2006, the federal government spent more than five times as much on coal R&D ($26.1 billion) as it had in the previous quarter century, and more than 10 times as much on wind and solar R&D ($17.3 billion).

‘The common perception that federal energy incentives have favored nuclear energy at the expense of renewable energy such as wind and solar is not supported by the findings of this study,’ says Roger Bezdek, president of MISI.

‘With concern about the price and availability of energy increasing, public interest in the role of federal incentives in shaping today's energy marketplace and future energy options has risen sharply,’ Bezdek adds. ‘That interest has met with frustration in some quarters and half-truths in others because of the difficulty in developing a complete picture of the incentives that influence today's energy options.Â

‘The difficulty arises from the many forms of incentives, the variety of ways in which they are funded, managed and monitored, and changes in the agencies responsible for administering them,’ he continues. ‘It is no simple matter to identify incentives and track them through year-to-year changes in legislation and budgets over the 60-plus years that federal incentives have been a significant part of the modern energy marketplace.’

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