`Dirty fuels' winning the subsidy war

Sun Herald
Sunday 20/9/2009 Page: 55

FOSSIL fuels including oil, natural gas and coal received more than twice the level of subsidies renewable energy sources won from the US Government between 2002 and 2008, the Environmental Law Institute said.

The subsidies, in the form of government spending and tax breaks, amounted to $US72.5 billion ($83.6 billion) for fossil fuels and $US29 billion for renewables, the institute's report published yesterday said. "With climate change and energy legislation pending on Capitol Hill, our research suggests more attention needs to be given to the existing perverse incentives for 'dirty' fuels in the US tax code," said John Pendergrass, a lawyer for the institute.

US President Barack Obama has called for the US to reduce its oil dependence by promoting efficiency measures and investing in alternative energy supplies. The February $US787 billion stimulus package included more than $US60 billion for reducing energy use and supporting renewable programs. The US House of Representatives approved legislation in June that would cap greenhouse gas emissions and require a portion of electricity to come from renewable sources. A Senate panel has also approved a renewable power requirement but the full Senate has yet to take up the climate change or renewable energy measures.

The largest of the subsidies for fossil fuels in the report was a tax credit that oil and natural gas companies can claim for paying royalties to other governments. The institute found that credit totalled $US 15.3 billion. "The major route for providing subsidies is tax incentives, tax breaks," Mr Pendergrass said. Also included in the calculation of subsidies are the Government's strategic petroleum reserve, an emergency oil stockpile available in the event of supply disruptions, and the low-income home energy assistance program, which helps some consumers with heating and cooling costs.

About half the Government's subsidies for renewables go to corn based ethanol, the study shows. The largest of the renewable subsidies was for blending ethanol with petrol, a credit that the institute calculated at $US11.6 billion during the seven years. The institute is a non-profit research group that works to "strengthen environmental protection", its website says. Its board of directors includes representatives from Constellation Energy Group, IBM and Toyota.