United States

United States

Election - Rhetoric on subsidy does not tell full story

UNITED STATES: Pre-election rhetoric from many Republicans opposes an extension of the production tax credit (PTC), often suggesting that government should not pick "winners and losers" by subsidising the wind industry.

Last month, Colorado TV station FOX31 asked Republican vice-presidential candidate Paul Ryan if he believes wind energy is a fad. "I believe picking winner and losers in the economy is a fad," Ryan said. "I believe picking select companies for government largesse is not a good idea."

But all forms of energy have long been subsidised by US taxpayers. A 2011 study prepared for the Nuclear Energy Institute found that federal government provided $837 billion for energy development between 1950 and 2010, with roughly 47% involving tax concessions. Oil, at $194 billion, is far and away the tax-break leader, with natural gas getting $106 billion and coal receiving $35 billion. Renewables received $44 billion.

Other incentives, including those involving research and development, regulations, market activity and government services, make up the remaining 53%. In total, oil received $369 billion, or a 44% overall share, with natural gas at 14%, coal at 12% and hydro at 11%. Nuclear and renewables both took in 9% - about $74 billion each.

"Obviously, oil and gas and traditional fossil fuels have been around much longer," said Matt DaPrato a wind-energy analyst at IHS Emerging Energy Research. "It's accurate to say that most of their support mechanisms are very deeply embedded into the tax code."

In other words, although tax credits for wind and solar require renewal every few years, policy on traditional energy sources is constant. Further, virtually no compensation exists for the negative external factors, represented primarily by carbon emissions.

"For the most part, the impacts of carbon aren't recognised in the US," DaPrato said. "Carbon policy could help level the playing field for renewables, but that's quite a speculative leap at this point."

$335 billion - Tax breaks enjoyed by conventional sources in the US, 1950-2010

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