Mr Trump, Tear Down Those Energy Subsidies!

Originally posted at ThisIsEisenhower.com by John Brian Shannon

A hundred years ago in America, the federal government decided to help a new industry take its first baby-steps by legislating oil and gas subsidies which were paid for by increased citizen taxation.

It’s commonly done by governments everywhere and it’s not the worst thing for a nation to do.

Here’s how that works: (1) A new industry appears (2) the government sees economic potential (3) citizens are told they must pay more tax to support the new industry (4) the subsidies continue long after they’re no longer required (5) the subsidies tend to increase over time and expand into other areas of the business (6) until the subsidies reach obscene amounts and the taxpayers revolt.

In short: Subsidies are a ‘good thing’ — until they aren’t

United States - Energy subsidies from 1918-2009. Image courtesy of Nancy Pfund
United States – Energy subsidies from 1918-2009. Image courtesy of Nancy Pfund (PDF)

Energy subsidies accumulate over time

Arithmetic tells us that U.S. oil & gas subsidies total $442 billion from 1918-2009.

It’s worse if you add the additional $80 billion/yr in U.S. oil & gas subsidies paid from 2010-2017, which total $560 billion.

Here’s what U.S. oil & gas subsidies look like when totaled over the entire 1918-2017 timeframe: $1,002,260,000,000.

U.S. oil and gas subsidies since 1918 total one trillion dollars

And U.S. taxpayers paid every penny. That’s a trillion dollars of income tax and fuel tax paid by U.S. citizens to subsidize American oil & gas companies since 1918.

Subsidies are a fine thing for new industries taking their first baby-steps. Wherever the federal government sees economic potential for a new industry, subsidies are the way to grow the opportunity and help stabilize the new industry UNTIL it can stand on its own two feet.

But Mature Industries Don’t Need Subsidies

The problem with oil & gas subsidies is that by 1950 they were 100% redundant. No longer needed. At all.

When mature industries continue to receive taxpayer-funded subsidies long after the original need for them disappears, that revenue goes to support pro-industry advertising, pro-industry organizations and pro-industry politicians.

In that way, some $80 billion/yr in oil & gas subsidies became available for pro-industry causes as it was no longer required to support a new industry taking its first steps.

Note: Not all oil and gas subsidies are bad! Additional subsidies paid for research on ‘cleaner-burning’ fuels via high-tech additives, a transformation that began slowly in the 1970’s and continues — to remove lead from gasoline, and for catalytic converter research in the 1980’s, are two such examples. Billions of dollars were well spent and were very cost-effective. But once the research has been done and the clean-burning fuel goals have been achieved, no reason exists to continue to pay such subsidies.


Except for the dollar amounts, much that applies to U.S. oil and gas subsidies also applies to U.S. nuclear power subsidies.

So let’s skip directly to the nuclear power numbers, shall we?

Simple arithmetic tells us that U.S. nuclear power subsidies amounted to $182 billion from 1947-2009.

It’s worse if you add the additional $102 billion (conservative estimate) in U.S. nuclear power subsidies that were paid by taxpayers from 2009-2017.

Here’s what all (federal) U.S. nuclear power subsidies look like when totaled over the entire 1947-2017 timeframe: $284 billion.

U.S. nuclear power subsidies since 1947 total $284 billion

But if one were to include all nuclear power subsidy costs including; safe storage, disposal, or reprocessing of spent fuel, transportation of spent fuel to other countries for safe storage or reprocessing, the decommissioning of nuclear power sites such as Hanford, the cleanup and cost of replacement electricity due to U.S. nuclear power plant malfunctions, and future reactor design spending, nuclear power subsidies could total $500 billion. Perhaps as much as $1 trillion.

NOTE: That’s not including billions of dollars worth of grants awarded by the federal government for new nuclear power reactor designs to replace America’s aging reactors.
Nor does it include the tens of billions paid to store and defend so-called ‘spent fuel’ which is highly radioactive and useful to terrorists.
Nor does it include reprocessing costs for spent fuel.
Nor does it included shipping costs to ship spent fuel to other countries for storage or reprocessing.
Nor would it include any costs associated with nuclear power plant malfunctions.
Nor would it include any costs associated with nuclear powered US Navy ships.
Due to the sensitive nature of nuclear materials some information is difficult to obtain, therefore, the $102 billion nuclear power subsidies figure used for the 2009-2017 timeframe is an estimate.


Biofuels are a new-ish industry. It’s about where the U.S. oil & gas industry were, in their first 20-years. It’s an industry where subsidies can make a difference to get the thing up-and-running and add stability to the new industry.

Biofuel energy subsidy in the early years was subsidized at $1.00 per gallon, which then declined to $.66 per gallon, but since 2011 has fallen to $.45 per gallon.

Total U.S. biofuel subsidies amount to $31 billion from 1980-2009 and an additional $65 billion from 2010-2017.

For a grand total of $96 billion from 1980 to 2017.

U.S. biofuel subsidies have totaled almost $100 billion since 1980

Note: The original U.S. biofuel subsidies enacted by President Carter during the 1970’s fuel crisis were later expanded to allow U.S. biofuel producers to compete with the much larger and more heavily subsidized Brazilian biofuel producers.


Coal subsidies follow the pattern described in the introduction to this post (subsidy steps 1 to 6) and subsidy costs are in the same neighborhood as oil & gas.

But U.S. coal subsidies in all its forms — including so-called ‘Externalities’ might total half a trillion dollars annually

Here is what a landmark Harvard Medicine study said about the externality costs of U.S. coal:

“Each stage in the life cycle of coal—extraction, transport, processing, and combustion—generates a waste stream and carries multiple hazards for health and the environment.

These costs are external to the coal industry and are thus often considered “externalities.”

We estimate that the life cycle effects of coal and the waste stream generated are costing the U.S. public a third to one-half of a trillion dollars annually.

Many of these so-called externalities are… cumulative.

Accounting for the damages… doubles to triples the price of electricity from coal per kWh generated, making wind, solar, and other forms of nonfossil fuel power generation, along with investments in efficiency and electricity conservation methods, economically competitive…” — Harvard Medicine Full cost accounting for the life cycle of coal (PDF)

This study illustrates the most vexing problem with U.S. energy extraction, refining, processing, storage, end use, and decommissioning of energy sites — energy ‘externalities’. And such externalities aren’t limited to the coal industry.

Energy production externalities (also called ‘Indirect Subsidies’) may cost America $1 trillion per year due to higher healthcare and infrastructure maintenance costs.

Damage to infrastructure arrives in the acid rain falling downwind from fossil fuel power stations, causing damage to bridges, buildings, and roads constructed with concrete (so-called concrete spalling) and causes paint damage on cars and trucks, and is responsible for crop losses downwind or downstream from fossil fuel extraction sites or power stations, and harms aquatic life found in rivers and coastal areas near river outlets.


Terms to remember: Energy ‘kind’ and ‘type’

There are only two ‘kinds’ of energy: Non-renewable and Renewable energy.

There are many ‘types’ of energy: Natural gas-fired, oil-fired, coal-fired, nuclear energy, solar photovoltaic, solar thermal, wind turbine, hydro-electric, ocean thermal, ocean wave, ocean tidal, biomass, wood-burning, and pellet-burning.

United States – The graphic illustrates various kinds of energy. Planetary energy graphic image courtesy of Perez and Perez 2009.
United States – The graphic illustrates various kinds of energy. Planetary energy graphic image courtesy of Perez and Perez 2009.

The trend of large subsidies in a sector like the energy sector, is that subsidies reward less efficient energy producers and punish more efficient producers in relative terms.

“Just pump it Fred, we’re getting our subsidy money per barrel of oil, who cares if it’s #4 sour crude oil? We get paid to pump oil, not look for better quality oil.”

Although there’s a separate ‘oil exploration’ subsidy too.

And let’s not forget the more ‘sour’ the crude oil, the more processing it requires at the refinery, and because #4 sour is very tough on oil refinery maintenance budgets, it further increases costs at the gas pump.

The more oil you pump of whatever quality, the more subsidy money you get — and that isn’t the way to maximize the efficiency of money in the energy market.

The oil industry delivers an easy example, but every energy subsidy scheme changes the behavior of the principals involved towards lower quality energy, whether it’s subsidized non-renewable energy or subsidized renewable energy.


In the primary energy segment (electricity and district heating) the type of energy varies by region.

Hydro-electric, coal-fired, and nuclear power are astonishingly costly to build and couldn’t have been built without massive subsidies. And even with huge subsidies for R&D, construction, millions of acres of land grants, generous tax incentives and more, some of those energy types still require small per kW/h subsidies to compete in the marketplace. In their favor, all of these have been extremely reliable primary energy producers for decades, but are mature industries that no longer require subsidies as financing such projects in the 21st century is considered routine. But it wasn’t always so.

In secondary energy (transportation) oil and gas infrastructure is also costly to build and the necessary infrastructure couldn’t have been built without massive subsidies. Yet, with sufficient refinery capacity already available there is little need for new refinery capacity, and today’s fuel prices support easy financing for future capacity additions.

Especially for vertically integrated oil companies that own their oil concessions (oil fields) their own distribution system (pipelines, or rarely, rail) and their own refineries, these can thrive during times of low crude oil prices.

Removing oil & gas subsidies would cause oil companies to become vertically integrated with no loss in profits. But why bother, when there’s no incentive due to a high subsidy scheme?

That won’t be the only change. Every subsequent change to the business would necessarily be designed to improve the overall efficiency of the company, sans-subsidies. That’s been missing since 1918.

By leveling the playing field for all kinds and types of energy, the most efficient energy kind and type will become king, and energy investors will earn more profit. (Because profits are earned on the ‘spread’ — the difference between what energy costs to produce and what it can be sold for. Subsidies make markets significantly less efficient and muddy the waters)

In summary: Removing energy subsidies will cause every energy producer to concentrate their efforts on the most efficient kind and type of energy in their region of the country, instead of choosing their energy kind and type by how many subsidy dollars they can capture via their energy choice.


President-elect Donald Trump, please tear down these subsidies!

And let the marketplace determine the most efficient energy.

Federal energy subsidies should return to their proper place. That is; When the federal government sees a new industry with economic potential; To invest, subsidize, and promote that new industry using taxpayer dollars for only as long as it remains a new industry. And not one day longer.

Markets are perfectly efficient when left to their own devices. Massive, taxpayer-funded subsidies for mature industries only serve to warp the markets and punish the most cost-efficient U.S. energy producers.

People either believe in free markets or they don’t

We can’t say we believe in free markets AND THEN massively intervene in the market with humongous, taxpayer-funded energy subsidies for some kinds and types of energy, but not other kinds and types energy.

With the greatest respect Mr. President-elect, I urge you to allow all U.S. energy producers to compete in a free market by phasing-out energy subsidies for every kind and type of energy over the next five years.

European Union to cut energy use 30% by 2030

The Big Power Plan: European Union to cut energy use by 30%

The European Commission has unveiled its big power plan, aiming to slash energy use in the bloc 30 percent by 2030.

“Europe is on the brink of a clean energy revolution. And just as we did in Paris, we can only get this right if we work together. With these proposals, we have cleared the way for more competitive, cleaner energy in Europe.” — European Commission

Cutting waste, better integrating renewable energy and phasing out subsidies for coal-fired electricity generation are all part of the vision. But wind and solar energy producers will no longer have priority for selling to the… Continue reading European Union to cut energy use 30% by 2030

New Start-Up Award Created by German Energy Agency

by John Brian Shannon | October 31, 2016

Energy Start-Ups in Germany to Receive Leadership and Robust Assistance

Under the leadership of Germany’s Frank-Walter Steinmeier, Minister of Foreign Affairs and Sigmar Gabriel, Minister of Economic Affairs, a new and exciting organization has been created to assist startups in Germany’s energy and environment space.


With three separate, but interlocking components; (1) THE START UP ENERGY TRANSITION (2) THE PROJECT (3) THE START UP ENERGY TRANSITION AWARD this organization works to facilitate and empower persons, groups, organizations and companies to excel at their maximum potential in the energy sector of the German economy.

The FIRST GLOBAL START-UP AWARD for VISIONARIES and VANGUARDS fighting against climate change. It attracts innovative start-ups and supports them in making their visions become a key success factor for the worldwide energy transition. To support this, we will organize the

The START UP ENERGY TRANSITION TECH FESTIVAL to stimulate new business models by connecting the best of all interdisciplinary stakeholders. Start-ups from around the globe will work together with customers and investors to improve their products and to kick-off new ideas.

And we created the START UP ENERGY TRANSITION NETWORK to ensure a continuous exchange of the best ideas and talents among the participants and our partners and sponsors. We want this network to accelerate co-operations and drive innovation within the international debate on climate change.

The FIRST GLOBAL START-UP AWARD for VISIONARIES and VANGUARDS will officially launch on the 22nd and 23rd of November during the DENA congress with the first annual awards ceremony taking place in March 2017 in Berlin.

German Energy Agency Assists Energy Start-Ups

The German Energy Agency (DENA) is looking for start-ups interested in participating along with other organizations that want to be involved as sponsors, ambassadors, media and network partners.

For more information


Renewable Energy dena Start Up Energy Transition Award - Banner_Startup_Energy_700x116px


kleef&co are proud to serve as Network Partners to the German Energy Agency.

U.S. World Leader In Clean Energy, Electric Vehicles

America Leads World In Clean Energy, Electric Vehicles, and High Energy Consumption

The U.S. leads the world in investment in Electric Vehicles (EV) and clean energy Next 10 Green Innovation Index, International Edition for the first time analyzes and ranks the economic and energy performance of the world’s 50 largest greenhouse gas emitting nations.

While the U.S. ranks high in investment in clean energy and electric vehicle ownership, it… Continue reading U.S. World Leader In Clean Energy, Electric Vehicles

How renewable energy impacts the oil industry

Upon initial investigation, some might say that the oil crisis has negatively impacted the energy market as a whole, making alternative sources of energy such as renewable energy look far less appealing.

The Different Worlds of the Oil Industry and the Renewable Energy Industry

However, advances in energy have rendered different market segments with varying energy sources that no longer compete directly against one another. For example, the primary function of oil is related to transportation — while renewable energy is mainly used for electricity. Therefore, the uptake in renewable energy hasn’t contributed to the dwindling value of oil.

Oil is seemingly unaffected by the market success of other energy sources. To counteract decreasing oil prices, firms are manipulating supply in hopes of raising prices — yet this short term plan will not be enough for the oil industry to bounce back. Despite the decline of crude oil price, firms such as oil and gas services company UnaOil continue to expand operations in oil rich fields, however the company’s strategic base in North Rumaila may not make a difference in the prediction that oil’s next crash will be permanent.

Unrelated to Renewable Energy: The ‘Beginning of the End’ for the Oil Age

Though the impending final collapse of oil are based on educated guesses, the rate of value decrease illustrates the oil industry’s recovery from the next crisis may be difficult. The ultimate proof of oil’s ill fated future according to Seeking Alpha is in the prices; what was once $120 per barrel is now just under $50. A devaluation by more than half, must surely confirm the oil industry’s concerns.

What does this mean for alternative and green energy sources?

Those currently working with renewable energy claim that the oil catastrophe is motivating people to go green. Compared to the volatility of oil value, renewable energy appears to be more stable and with fewer price spikes. But the current situation makes it clear that a switch to greener energies is not a solution for oil depletion, rather, it serves as a reminder about our treatment of the environment.

Robin Mills, author of The Myth of the Oil Crisis suggests the fundamental need to reduce greenhouse gas emissions is an issue more pressing than ever.

Renewable Energy. Wind turbines.
While oil is related to transportation, renewable energy is related to electrical power generation — therefore, renewable energy isn’t a contributor to the oil price fall.

The problem with renewable energy is its need for greater funding — thus in order for them to draw investors, renewable energy developers need to lower costs and expand into providing heat for homes and industrial processes. Considering that aircraft (for one example) don’t have any alternative to oil, much of our global transportation system is still dependent on oil, which is why renewable energy must do more than merely supply electricity to stay competitive in the new energy paradigm.