Oil & Gas Mythbusters logo

By Lauren Swain, RMC Oil & Gas Communications Specialist

Myth: Renewable energy sources are too expensive compared to fossil fuels. Without large federal subsidies, they are not economically viable.

Truth: Renewables have received only a fraction of the subsidies granted to the fossil fuel industry over time.


Becky English, chair of the Rocky Mountain Chapter Energy Committee, said, “Often it's heard, ‘Renewable energy isn't worthy because it requires government subsidies to survive. It's time for renewables to grow up and compete head-to-head against fossil fuels’ In fact, the federal government and the regulatory structure subsidize fossil fuels to the tune of billions of dollars per year. Unfortunately, government subsidies to fossil fuels and their associated businesses have persisted for decades after the associated technology has needed any boost at all. Meanwhile, in recent years, as with other game-changing technologies, the U.S. government has helped the development of renewables.”

Renewables ignored for decades

For many decades before the 2009 American Recovery and Reinvestment Act (ARRA), or economic stimulus act, went into place, fossil fuels had received billions more in annual federal subsidies than renewable energy sources. And since 2005, oil and gas companies have enjoyed exemptions from the Clean Air Act, Clean Water Act, Safe Drinking Water Act and other federal environmental laws. It is doubtful that the industry could live by these laws and forfeit their subsidies and still deliver a cheaper product than renewables.  And fossil fuels impose huge burdens on taxpayer budgets with the damage they bring to human and environmental health through pollution and greenhouse gasses produced at every stage of their life cycle, from extraction to consumption.

A March 2012 Congressional Budget Office report states that, “from 1916 to the 1970s, federal energy-related tax policy focused almost exclusively on increasing the production of domestic oil and natural gas; there were no tax incentives for promoting renewable energy or increasing energy efficiency. “  According to a recent report by the investment firm DBL, the oil and gas industry alone received over $4.86 trillion in subsidies between 1918 and 2009.

Federal subsidies have allowed the fossil fuel industry to develop its technology and marketing to the point where, currently, taxpayers are supporting some of the most profitable companies in America. Three out of the top five 2012 Fortune 500 companies are energy companies. In 2011, the “big five” oil companies alone made $137 billion in profits. During the first quarter of 2012, these same oil companies earned a combined $33.5 billion, or $368 million per day.

In March 2012, President Obama attempted to address this unjust taxpayer burden by publicly urging Congress to terminate $4 billion in annual oil industry tax credits, but the bill failed in the Senate. In May of this year, Senator Bernie Sanders (D-VT) introduced the End Polluter Welfare Act, S.3080, which would comprehensively abolish fossil fuel subsidies. Despite support from environmental groups, including the Sierra Club, the bill has never passed out of committee.

Unless Congress is willing to act, federal subsidies for oil, natural gas, and coal are on track to cost taxpayers about $113 billion over the next 10 years, and important new incentives for renewables will disappear. A major obstacle to progress is that energy companies are among the largest donors to political campaigns. In 2011, the oil, gas, and coal industries spent a combined $167 million on lobbying the federal government.

To learn more about the political dilemma faced by clean energy advocates, read Sierra Club’s 2012 report, Clean Energy Under Siege (PDF).

New support for clean energy vulnerable

Even in recent years, fossil fuels were subsidized at over twice the rate of renewable energy. From 2002 to 2008, the U.S. Government gave the mature fossil fuel industry over $72 billion in subsidies, while renewables, including ethanol, received about $29 billion.

The 2009 stimulus plan served to subsidize renewables with incentives such as the Production Tax Credit (PTC) for wind and the Investment Tax Credit (ITC) for solar, which began to even the playing field. Government support for clean energy totaled about $16 billion in 2011, down from a peak of $44 billion in stimulus money supporting renewables in 2009, according to the Pew Charitable Trusts and the Brookings Institution.

It is important to note that subsidies for fossil fuels largely take the form of tax breaks and exemptions written into law—they cannot be revoked without an act of Congress. The opposite is true for most subsidies supporting renewables—Congress must take action or the support will be discontinued, putting renewables in a more precarious position. Congress must vote to reinstate the PTC by the end of this year, or it will die. And the ITC is set expire in 2014.

Luckily, the U.S. Senate has passed renewal of the PTC, and we thank our Colorado Senators Mark Udall and Michael Bennet for their active support of the bill. But now, support for wind energy faces a much tougher battle in the House. Please take action and voice your support for renewing the PTC by going to the Sierra Club action alert at this link.

"We'll continue to push every way we know how until the tax credit is extended," Bennet said in a statement. "It is an economic driver that's critical to thousands of jobs in Colorado and tens of thousands of jobs across the country."

Not only Democrats support the PTC, some prominent Republicans have spoken in favor of renewal as well. Despite this, presidential candidate Mitt Romney dared to announce his opposition to a frustrated Colorado public earlier this year. According to the Denver Post, there are about 5,000 jobs in the wind-energy sector in Colorado. Just the fear of terminating the PTC has recently triggered a 20% cut in the workforce at a Pueblo wind-tower plant. A study by Navigant estimates that 37,000 jobs would be lost nationwide if the tax credit isn't extended this year.

The good news is that with the help of the new subsidies, the renewable energy industry has begun to flourish, generating more cost-effective technologies, and creating thousands of new jobs in just the last five years.  Currently, the U.S. wind-energy sector employs about 75,000 people.

“Give renewables just a decade of the billions in support that fossil fuels have received for many, many decades. Then let's step back and say we're closer to a truly level playing field, and a true market,” said English.

Oil & Gas MythBusters is a series of articles by Lauren Swain, RMC Oil & Gas Campaign
Communications Specialist, digging deep for the facts behind industry myths about oil & gas production practices and impacts.

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