Thoughts on renewable energy and energy subsidies

by Liz Salerno, AWEA Director – Industry Data & Analysis

As the national discussion over energy policy begins anew, the topic of subsidies is again being raised by critics of clean, renewable energy sources. A few thoughts from our perspective:

* With the deficit at record levels, hypocrisy has no role in the discussion of eliminating Federal incentives for energy. A level playing field in the energy sector is what the renewable sector is seeking.

* The only energy sources with no sunset on their subsidies and a permanent place in the tax code are fossil fuels. For nearly 100 years, the U.S. government has dumped well over $500 billion into subsidizing fossil fuels, and the subsidies remain permanent. Yet, still unable to stand on its own in the marketplace, the fossil sector defends such subsidies as entitlements.

* The American Petroleum Institute (API) recently commissioned a study identifying over $35 billion in subsidies that the fossil fuel industries automatically receive over the next 10 years. These costs are permanent to the taxpayer, as subsidies for fossil fuels are permanent in the tax code. The subsidies identified include:

Expensing Intangible Drilling Costs (oil, gas & coal) – Enacted: 1916. Status: Permanent in Tax Code: Cost over next 10 years: $10.9 billion

Percent Depletion Allowance (oil, gas & coal) – Enacted: 1926/1932. Status: Permanent in Tax Code. Cost over next 10 years: $9.6 billion

6% Income Deduction under Section 199 (treatment for oil & gas) – Enacted: 2004. Status: Permanent in Tax Code: Cost over next 10 years: $14.8 billion.

The American renewable energy industries have identified long-term, predictable, stable markets as the single most critical factor to growing the sector. Long-term stability and predictability has a track record of great success with the fossil fuel and conventional energy industries. The long-term, permanent incentives afforded to conventional energy sources have helped create strong, large domestic markets. Equal treatment of newer, cleaner, renewable energy resources will bring domestic manufacturing, investment and stable-priced electricity.

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