Category — Renewable Energy Subsidies/Debt Reduction

[Gary Hunt, President of Scalable Growth Strategy Advisors, posts on energy issues at  his website, Zap! Crackle! Pop! Disruptive Technology, Global Competition and our Energy Future.]

The drama that raised the national debt ceiling without increasing taxes is sending warning shots across the bow for many industries.  The message for energy subsidies, including the tax credits and treasury tax grants for wind and solar, as well as tax credits for oil and gas companies, could not be clearer.  The gravy train is ending because the Government cannot afford it, and political realities won’t tolerate it much longer.

The debt deal did not cut renewable energy subsidies. But it set up a super committee of Congress that must produce $1.3 trillion in spending cuts by Thanksgiving.  This sets up a ruthless competition between all the special interest causes that now get subsidies or tax supported benefits.

Mothers and grandmothers will be sacrificed by the lobbyists on K Street to keep their subsidies. But which ones might survive, and to what extent?

EIA Study of Energy Subsidies

In November 2010, several members of Congress asked U.S. Energy Information Service to update the study of direct Federal support and subsidies for energy done back in 2008. The request specified that the study include only energy-specific benefits with measurable budget impact.

That updated study found that direct Federal intervention and subsidies for energy have doubled from 2007 to 2010 from $17.9 billion to $37.2 billion.

But the political game played by that narrow definition was to exclude oil and gas tax benefits the President has sought unsuccessfully to cut in the debt deal.  In May 2011, Congress rejected Democrat proposals to cut $21 billion in oil and gas industry subsidies. Crying foul, Friends of the Earth and other environmental groups filed a Freedom of Information Actrequest with EIA demanding an update of the subsidies for oil and natural gas that had been excluded from the updated 2010 report.

The result of this dueling studies dust-up is to make energy subsidies across the board much more visible, much more controversial and thus much more vulnerable in the next round of spending cuts.We can see the set-up taking place.  If oil and gas subsidies are cut one side says, then renewable energy subsidies must also be cut.  But this time, the reality is that both might have to be cut to get to the spending reduction target that avoids even more draconian triggering of across the board cuts that include defense and Medicare. [Read more →]