Welfare costs the U.S. an enormous amount of money every year. As a nation, we have to decide if we want to continue giving out billions of dollars of handouts. The welfare kings and queens need to stop being subsidized at expense of all taxpayers. I’m talking, of course, about fossil-fuel companies.
Imagine you are a banker. I walk into your office and give you this business proposal, “I would like to start a business to make typewriters. I am going to need you to give me money that I won’t repay to offset the price of my typewriters. If you don’t give me extra money, it will hurt the typewriter economy, people won’t write anything, and everyone will blame you for high prices. If you don’t agree to my terms, I will spend millions of dollars to put you out of business.”
Does this sound like a fair plan? This is how our government works with energy subsidies. Special interest money is driving our national energy policy in the wrong direction.
The International Energy Agency (IEA) estimated that global fossil-fuel consumption subsidies could reach $600 billion globally by 2020, which would be 0.7 percent of the global gross domestic product. (The subsidies were $409 billion in 2010). Worldwide, we spend half a trillion dollars to make it seem like the end users aren’t spending as much as they really are on fossil-fuels.
The U.S. paid $21.6 billion in subsidies to oil, gas, and coal industries in 2013. For reference, $23 billion is how much we spent on all humanitarian assistance and international development in 2013, not including military assistance. Proposed cuts to these subsidies have died in Congress. If the proposed cuts had passed, the subsidies could have decreased 4 percent. During the Obama presidency, oil subsidies have gone up 45 percent, according to www.priceofoil.com).
What about the renewable energy companies? They get an enormous amount of subsidies too, right? Companies like Solyndra are targeted as being the fat cat tax dollar wasters. Bloomberg reported, “Fossil-fuel consumers worldwide received about six times more government subsidies than were given to the renewable-energy industry, according to the chief adviser to oil-importing nations.”
What is the argument for fossil fuel subsidies? If we get rid of oil and gas subsidies it will hurt the poor. The IEA reported, “Subsidies are an extremely inefficient means of assisting the poor: only 8 percent of the $409 billion spent on fossil-fuel subsidies in 2010 went to the poorest 20 percent of the population.”
The people receiving most of these subsidies are not the same people choosing between dinner and gas at the pumps.
There is not great return on investment for the tax dollars spent to generate these subsidies for the average working class Americans. Why do fossil-fuel companies get such a large amount of subsidies in the first place? They spend money to make money.
From 2011-2012, fossil-fuel companies donated $329 million to political campaigns and lobbying groups. Since then, they have received $33 billion in federal subsidies. These companies made a nice $32.6 billion profit from their donations and lobbying efforts, according to www.priceofoil.com.
What would happen to the fossil-fuel industry if we got rid of subsidies? The IEA report estimated that global demand for fossil fuels could drop 4.1 percent if it wasn’t subsidized so heavily. Overall, the world would not stop spinning if we had substantial energy subsidy reform.
Instead of augmenting the price of our fuel with borrowed money and tax revenue we should level the playing field and let the best energy win. It is hard to know which energy source will be best to power our economy 10 years from now. Without subsidies, we would at least know the true cost of each option.
Campaign finance reform is the most import issue we face in the U.S. energy arena, as well as other areas of government. Dark money in politics is one of the reasons we end up with out of control subsidies to elite energy groups. If lobby groups couldn’t financially persuade elected officials to the extent they do now, we may end up arguing about energy issues based on their merits. Currently, the biggest lobbyist group gets the most government assistance. By assistance, I mean federal tax dollars.
If you compare 2006 to 2014, election spending has gone up over 25 fold, according to The Washington Post. In that same amount of time, donor disclosure has gone from over 80 percent to about 40 percent. More money is flooding towards our lawmakers with less transparency. Maybe if the corporations who spend millions of dollars lobbying politicians to give them more tax breaks invested that money on their own companies, we would be a more financially healthy country. However, if you can generate $32.6 billion dollars by lobbying Congress, standard business practices to grow your company may be elaborate.
Politicians should be listening to their electorate and developing laws to help them. Instead, they spend an enormous amount of their workweek fundraising for reelection. Without the fundraising, they risk losing in a primary or general election to bigger spenders. By fundraising instead of actually working, they then rely on lobbyists to write their bills for them. Essentially, we pay our Congress to go to fundraising events and turn in bills created by and for special interest groups.
Secretly giving money to someone to persuade them to do something they would not have otherwise done used to be called bribery. It is now politics as usual in the U.S. The more money involved in politics, the more likely we are to end up with subsidies that don’t benefit the average American. There is a movement to make Congress members wear badges, like NASCAR drivers, to show who their sponsors are. At least that way we would know up front where the financial biases exist.
What should we do with the money we spend on fossil fuel subsidies instead of the fossil-fuel welfare structure we have going now? We could invest it in energy efficiency and small businesses with new energy technologies. Somewhere in a garage right now may be the next game changing idea to help us power our economy more sustainably for centuries to come. We should have money available to help brilliant energy startups off the ground, not to help mask the cost of established power sources.
I am in the bag for renewable energies. That is my bias in writing articles about energy. Renewables are our only long-term solution to keep the U.S. running. However, I don’t think any energy source end product should be subsidized. If the money fossil-fuel companies get now was transferred directly to renewable energy companies, we wouldn’t necessarily be that much better off. The best energy will win on a level playing field, hopefully that is a game we can someday watch.
Max Rohr is a graduate of the University of Utah. He is currently an outside salesperson at Shamrock Sales in Denver. He has worked in the hydronics and solar industry for 10 years in the installation, sales and marketing sectors. Rohr is a LEED Green Associate and BPI Building Analyst, and is RPA’s Education Committee Chairman. He can be reached at firstname.lastname@example.org.