Common Tragedies

Thoughts on Environmental Economics

Energy subsidies in the U.S.

Posted by Daniel Hall on April 25, 2008

Have I mentioned recently how absolutely amazing the Energy Information Administration (EIA) is? As much as researchers frequently run into problems getting exactly the data they need to do the analysis they want, it’s pretty remarkable to live in a time and place where such incredibly detailed information about energy in the U.S. is available at your fingertips.

The EIA’s latest feat is this new report on federal energy subsides. I’m pretty sure I’ll be revisiting this report frequently, but on first glance two things stood out.

1. What the heck is “refined coal”? Based on a cursory reading it sounds like coal used to produce synthetic fuels. It is getting a huge portion of federal energy subsidies (check out table ES1): around $2.4 billion of the $16.6 billion total. Part of my confusion though is that the EIA analysis classifies most of this subsidy under electricity generation (so is it a synfuel or coal?) and this makes refined coal the biggest subsidy recipient on a dollar-per-megawatthour ($/MWH) basis (see table ES5): it receives $29.81/MWH, versus $23.37/MWH for wind, $1.59/MWH for nuclear, and $0.44/MWH for (regular) coal. (These are the only electricity generating technologies which receive more than a $0.3B in federal support.)

2. Besides refined coal, who’s the other enormous hog at the trough? Three guesses, and the first two don’t count. That’s right, ethanol/biofuels chewed through $3.2 billion in 2007. The metric used to report subsidy payments here is dollars per million BTUs (table ES6), and ethanol is more than double the nearest competitor at $5.72/mBTU. It’s a little tricky comparing this subsidy level to the subsidies for electricity, since electricity is a more valuable form of energy than heat, but a simple back of the envelope calculation using standard conversion factors suggests that this is in the ballpark (slightly lower) than the dollar-per-output subsidies for wind I listed above.

So, to summarize, just with those two items, one-third of federal energy subsidies are going 1) to the most polluting fuel used today and 2) to a form of liquid food that is driving up world prices and at best is saving us a tiny bit of greenhouse gas emissions. Awesome.

3 Responses to “Energy subsidies in the U.S.”

  1. Dillon Emo said

    Isn’t it just great to know that our government is such a crook. Especially all of the Bush policies, only desinged to stem off better and actually effective policies that McCain and Obama are promising. Of course, those are just campaign promises, so don’t actually really expect the to happen. Well, don’t expect McCain’s to happen, because the liberal party traditionally supports alternative energy and the conservatives do not. Its a pretty bleak world.

  2. Harrison said

    Excellent article!

  3. Charlie said

    I was also curious about refined coal. According to the IRS, refined coal is a solid, liquid, or gaseous product of a high-carbon material that can be used as fuel. This includes synfuels, steel coke, and low-grade coal that has been upgraded to produce more heat and less NOx. The degree to which the subsidy skewed toward electricity production suggests to me that the main beneficiary was a company called Evergreen Energy. This company has a technology that purports to make sub-bituminous and lignite coal more efficient and less polluting. Still, 2.4 billion seems pretty steep. I’m surprised that none of the tax-policy watchdogs have jumped on this one yet.

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