Lopsided Energy Subsidies Favor Fossil Fuels. It Is Past Time For A Change.

By Nick Lawton, Staff Attorney

Lopsided energy subsidies in the United States and around the world favor fossil fuels over renewable energy, despite the fact that environmental costs from fossil fuels continue to grow and the price of renewable energy continues to decline. Governments at all scales should take action to reverse this trend by enacting policies that support swift, smart development of renewable energy.

As I wrote about recently, energy subsidies are nothing new. In fact, governments have subsidized every form of energy generation in order to ensure plentiful, affordable electricity. Historically, most subsidies flowed to fossil fuel industries, such as coal-fired power plants. Today, though, we understand the environmental costs of burning fossil fuels to generate power, and it is increasingly clear that renewable energy offers a better solution. In short, historical fossil fuel subsidies have become obsolete, and it is high time for governments to get rid of them.

A new working paper from the International Monetary Fund (IMF), How Large Are Global Energy Subsidies, quantified the amount of global energy subsidies in 2013 at $4.9 trillion, or 6.5% of global GDP. The working paper reveals that externalities—damages to the environment and public health—constitute the vast majority of energy subsidies, roughly $4 trillion. In other words, the greatest subsidy for energy does not come in the form of direct spending or tax breaks, but instead reflects the failure to put a price on the damages that fossil fuels cause to public health and the environment.

The public pays the price of these environmental and health externalities. We pay in the form of environmental cleanup costs. For example, a coal ash spill in Virginia’s Dan River is estimated to have damaged the environment to the tune of $50 million.  However, the state is proposing that Duke Energy (which spilled the coal ash) pay only $2.5 million—leaving the people of Virginia and the United States holding the bag for the vast majority of any later cleanup costs. We also pay in the form of medical bills: Harvard’s Medical School calculates that in Appalachian communities, the annual public health burden from coal is roughly $75 billion per year. And in the most extreme cases, we pay with our lives. A study from the Clean Air Task Force revealed that in the United States, fine particle pollution from power plants led to 7,500 deaths in 2014.

Coal power provides the best example of an extremely harmful technology that continues to receive enormous, obsolete subsidies around the world. The IMF’s working paper reveals that coal remains the most heavily subsidized energy technology in the world, due mostly to the failure to price and pay for its devastating environmental and health consequences. Roughly three-quarters of coal’s externalities reflect local harms from air pollution, while the remaining quarter reflects coal’s contribution to climate change. In the United States, scientists from Harvard’s Medical School calculated in 2008 that coal imposes externalized costs of between $350 billion and $530 billion annually.

Renewable energy offers a far better way to generate affordable, plentiful, clean energy. Wind and solar power are proven technologies with decreasing costs.  According to Lazard’s Levelized Cost of Energy Analysis-Version 8.0, over the last five years the cost of wind power has declined by 58% and the cost of solar has plunged by 78%. Meanwhile, renewable energy generation is on the rise. U.S. Wind and solar energy generation has tripled since 2008, and continue to grow much more quickly than fossil fuels. However, despite plunging prices and growing energy generation, renewables accounted for only 13% of U.S. energy in 2014, while coal accounted for 39%, according to the U.S. Energy Information Administration. Moreover, coal and other fossil fuel technologies continue to receive heavy subsidies in the United States, while policies promoting renewable energy are continually under attack.

Critics of renewable energy often argue that the sector receives inappropriately large subsidies. These critics are wrong. In many ways, the federal government and state governments continue to subsidize fossil fuels more heavily than renewables. For example, federal law allows fossil fuel companies to operate as a special type of business called a “Master Limited Partnership,” (MLP) which offer very significant tax benefits for corporations and their investors. According to Oil Change International, tax avoidance through MLPs cost the United States $13 billion between 2009 and 2012.  Renewable energy companies cannot operate as MLPs. And although renewables do receive federal tax credits such as the Production Tax Credit and the Investment Tax Credit, these renewable tax credits face significant problems that MLPs do not. Congress has allowed the Production Tax Credit to lapse four times since 1999, devastating the wind energy industry each time. MLPs, in contrast, do not lapse. Meanwhile, a recent report from MIT, The Future of Solar Energy, shows that most solar developers must woo investors with huge tax appetites in order to take advantage of the Investment Tax Credit, a process that consumes “a significant fraction” of the credit’s value in transaction costs.

State-level support for fossil fuels continues as well. In Mississippi, for example, a coal-fired power plant that aims to capture some carbon emissions is currently slated to cost $6.2 billion, roughly three times what it was projected to cost. Now, Mississippi Power, the utility building the plant, is requesting a huge rate increase to cover these high costs. As a result of this new, dirty power plant, Mississippi’s ratepayers may see their energy bills rise by between 22% and 41%. In contrast, Renewable Portfolio Standards—which have been the most effective U.S. policy for promoting renewable energy—have raised rates on average less then 3%. Yet these effective and economically efficient renewable energy policies are constantly under attack.

It is well past time for governments at all levels to rescind support for fossil fuels and instead choose to support renewable energy. So long as we continue to prop up obsolete technologies, public health and the environment will continue to suffer. Renewables, in contrast, offer an inexhaustible source of clean energy. The choice is clear. What the world needs now is the political will to make the right decision.

Wind Power Purchases Will Benefit the Tennessee Valley

By Amelia Schlusser, Staff Attorney

In the 1980s, TVA set out to build a number of nuclear
power plants that never entering into operation, including
the partially completed Bellefonte plant pictured here. 

The Tennessee Valley Authority (TVA) is the nation’s largest public power system. TVA’s 34 gigawatts of electricity generation capacity supplies power (via distribution utilities) to 9 million customers in seven states, including Alabama, Georgia, Kentucky, Mississippi, North Carolina, Tennessee, and Virginia. The federally owned corporation currently owns a diverse mix of energy resources, including coal, nuclear, natural gas, hydro, wind, solar, and biomass generation. However, TVA’s draft 2015 integrated resource plan (IRP) calls for the company to forgo investing in new coal and nuclear and instead invest in new natural gas and purchase renewable energy output to meet future demand.

TVA currently purchases wind power from nine wind farms in Tennessee, Illinois, Iowa, and Kansas. The company’s draft 2015 IRP calls for TVA to increase its wind power purchases between the late 2020’s and early 2030’s. The decision to purchase additional wind power would benefit the Tennessee Valley’s residents and ratepayers. Wind power has no emissions, and thus does not contribute to air or water pollution. Moreover, by offsetting the need for fossil fuel-fired generation, wind power helps to reduce power sector greenhouse gas emissions. According to Lazard’s 2014 Levelized Cost of Energy Analysis, wind power is currently the lowest cost generation resource available, and thus can help to insulate ratepayers from future cost increases related to fuel price volatility or carbon regulation.   

Environmental stakeholders have praised TVA’s draft IRP for taking “significant steps in the right direction.” However, Senator Lamar Alexander (R-Tenn.) opposes TVA’s proposal to purchase additional wind power. Senator Alexander has long been an outspoken opponent of wind energy policy at the federal level. In 2014, Alexander published an op-ed in the Wall Street Journal titled “Wind Power Tax Credits Need to Be Blown Away.” More recently, the senator raised a number of criticisms against TVA’s decision to invest in new wind power. However, Senator Alexander’s arguments are flawed, inaccurate, and misleading, and highlight the senator’s unwillingness to support clean, low-cost electricity generation. The following discussion addresses Senator Alexander’s criticisms and attempts to set the record straight on the benefits of wind power.

1. Wind Power is Less Expensive Than Other Resources

When the total costs associated with developing and operating a wind power facility are levelized on a per megawatt-hour basis over the resource’s lifetime, wind power costs far less than new coal or nuclear generation, and may even cost less than new natural gas plants. According to Lazard’s 2014 Levelized Cost of Energy Analysis, the unsubsidized levelized cost of onshore wind power average between $37 and $81 per megawatt-hour (MWh). In contrast, the levelized cost of a natural gas combined cycle unit falls between $61 and $87 per MWh, the levelized cost of coal ranges from $66 to $151 per MWh, and the levelized cost of nuclear power ranges from $92 to $132 per MWh (new nuclear plants are estimated to cost $124 per MWh).

Wind power is therefore the lowest cost electricity generation resource currently available.  However, in opposing TVA’s draft 2015 IRP, Senator Alexander argues that wind power is more expensive than other generating resources, including nuclear power. The senator’s assertion that wind power is more expensive than nuclear power is factually inaccurate—when costs are averaged over facility lifespans, a megawatt-hour of wind power costs far less than a megawatt-hour of nuclear power.  According to Lazard’s estimates, even a high-cost onshore wind facility costs less than the lowest cost nuclear plant. TVA’s proposal to purchase additional wind power is therefore economically prudent, and Senator Alexander’s criticism is unwarranted.

2. Wind Power Supports Clean Air and Water

Wind power is a clean, sustainable form of electricity. Wind turbines have no air emissions and are not reliant on non-renewable fuel supplies. In contrast, conventional generating resources, such as coal, natural gas, and nuclear facilities, are powered by non-renewable fuel resources and have the potential to pollute our air and waterways. While power producers have made significant progress in reducing emissions of certain air pollutants from fossil fuel-fired power plants, commercially available pollution control technologies are currently unable to significantly reduce carbon dioxide emissions from these facilities. Wind power can enable electricity producers to reduce aggregate emissions from conventional generating facilities and help mitigate the climate impacts of fossil fuel generation.

Coal-fired power plants emit dangerous air pollutants, including carbon dioxide, sulfur dioxide, nitrogen oxides, arsenic, mercury, and particulate matter. Natural gas-fired power plants also emit carbon dioxide, nitrogen oxides, sulfur dioxide, particulates, and mercury, though at much lower concentrations than coal plants. However, natural gas extraction also emits methane, which is a potent greenhouse gas.

Nuclear power has no direct air pollution emissions. According to EPA, however, nuclear power plants are fueled by nonrenewable uranium, and uranium mining, enrichment, and transport generates fossil fuel emissions. Nuclear power generation also uses large quantities of water, and wastewater discharges can release heavy metals and salts into local waterways. Finally, nuclear plants must replace and dispose of spent fuel every 18 to 24 months, and the safety of long-term radioactive waste disposal is highly uncertain.

On a per-capita basis, additional wind power will help TVA reduce its aggregate pollution impacts. However, Senator Alexander argues that because the Tennessee Valley’s air quality has improved dramatically over the last three decades, wind power will not provide additional benefits for the region. This argument downplays the fact that air pollution levels have decreased due to the implementation of stringent pollution controls at fossil fuel-fired power plants. Over the past 30 years, TVA has spent $5.9 billion on air pollution controls, and is currently investing an additional $1 billion in control equipment for one Tennessee coal plant. Moreover, modern pollution controls do not prevent all pollutants from entering the ambient air, and fossil fuel plants still create significant health risks for local communities.

TVA has made great strides in reducing air pollution in the Tennessee Valley, and additional wind power should assist the corporation in further reduce emissions while keeping pace with rising electricity demands. The citizens of Tennessee will benefit from TVA’s renewable energy purchases, and Senator Alexander should support the power authority’s decision to purchase additional wind power.

3. Wind Turbines Help Protect the Environment

Electricity generation was historically—and largely continues to be—a dirty, destructive industry. As the discussion above noted, fossil fuel-fired power plants emit a number of pollutants that contaminate our air and water, and nuclear facilities generate radioactive wastes that must be carefully contained into perpetuity. On a more subjective level, power plants are obtrusive, imposing facilities that may generate localized light and noise pollution. Power plants can also be significant eyesores, particularly when emissions from multi-story smokestacks are visible from many miles away.

In contrast to conventional power plants, wind farms are fairly innocuous and unobtrusive. Wind power has no emissions, and therefore does not contribute to local air or water pollution. While the turbines themselves are quite tall—some models exceed 400 feet—many power plant smokestacks are much taller. A 2011 Government Accountability Office review of coal-fired power plants found that the United States has 207 smokestacks between 500 and 699 feet tall, 63 stacks between 700 and 999 feet tall, and 14 stacks taller than 1,000 feet.

It’s no secret that Senator Alexander doesn’t like wind turbines. However, in a 2014 op-ed he argued that wind turbine height, blinking lights, noise, and associated transmission “destroy the environment.” This argument reflects an unsettling lack of awareness of the environmental impacts of conventional electricity generation. Anyone who would equate the minor annoyances of wind power with environmental destruction has presumably never witnessed the degradation caused by mountain top removal, pipeline failures, or nuclear accidents.

By criticizing TVA’s proposal to purchase additional wind power, Senator Alexander appears disconnected from the interests of his constituents. I would wager that a vast majority of Tennessee’s residents would prefer to live next door to a wind farm rather than a coal or nuclear power plant.

When the falsehoods and misrepresentations are stripped away from Senator Alexander’s arguments, the senator’s criticisms of wind power actually serve to highlight the deficiencies of conventional baseload power generation. Wind power is cleaner and less expensive than conventional coal or nuclear power, and protects ratepayers from the risk that electricity costs will increase over time due to fuel price volatility or carbon regulation. TVA’s proposal to purchase additional wind power makes sense for the residents and ratepayers of the Tennessee Valley, and it is irresponsible for Senator Alexander to undermine this decision through false or misleading assertions.  

The US Should Eliminate Fossil Fuel Subsidies

By Nick Lawton, Staff Attorney

As I have blogged about for the last several months, legislatures in various states are considering repealing or weakening their Renewable Portfolio Standards. The most common argument for these proposals is that renewable energy mandates function as subsidies, and that government should not be in the business of subsidizing energy sources. This op-ed from the Heartland Institute typifies the argument. The problem with this argument is that it completely ignores the fact that all forms of energy generation are the products of heavy government subsidies and regulatory choices. Current policies that promote renewable energy through mandates or subsidies are not at all historically unusual. In fact, in comparison to fossil fuels, renewable energy receives too little funding: fossil fuels have received far greater subsidies than renewable energy, and continue to do so.

The U.S. government has subsidized every form of energy generation for more than a century. According to a study of energy subsidies from DBL Investors, federal subsidies in the United States over the last century have totaled at least $700 billion. During this period, subsidies for fossil fuels have dwarfed subsidies for renewable energy in every important metric. On an annual basis, fossil fuels received nearly $5 billion each year from 1918 to 2009. Meanwhile, the annual subsidies for renewables from 1994 to 2009 were merely $370 million. According to the investor report, renewable energy subsidies have also grown more slowly than most other energy subsidies. In the words of the DBL Investors report, “Renewable subsidies trail all others by a significant margin,” and even at their highest level, renewable energy subsidies “barely equaled the lowest subsidy years” of fossil fuels.

The historical trend of subsidizing fossil fuels more heavily than renewables is continuing to this day. The Guardian recently reported that “the world’s biggest and most profitable fossil fuel companies are receiving huge and rising subsidies from US taxpayers.” In contrast, Congress has allowed the Production Tax Credit, which promotes wind energy, to expire four times in the last fifteen years. As the American Wind Energy Association reveals, each expiration has caused investment in the industry to decline between 76% and 92%. 

Ohio offers a good example of the disparity between fossil fuel and renewable energy policies. The Guardian reports that the state of Ohio offered Marathon Petroleum a 15-year tax credit worth $78.5 million, even though Marathon posted a profit of $2.4 billion. (The Republican Governor John Kasich was the top recipient of oil and gas campaign donations in that same year.) Nominally, this special tax credit for Marathon aims to retain and create jobs. Meanwhile, Ohio became the first state to freeze its Renewable Portfolio Standard in 2014. The state’s RPS freeze has led to devastating consequences for the solar industry, despite the fact that the solar industry was one of the nation’s top job creators in the same year.

It is terrible public policy to favor fossil fuels over renewable energy even as the climate changes and sea levels rise. It is well past time to end fossil fuel subsidies and promote far greater investment in renewables. Christina Figueres, the director of the U.N. Framework Convention on Climate Change, has said that fossil fuels are an unwise investment, according to ClimateWire. Meanwhile, the World Bank has proposed a strategy for the world to achieve carbon neutrality by the end of the century, a key part of which is ending subsidies for fossil fuels. The United States has an opportunity to lead the way. A group of seven U.S. Senators has proposed a national renewable portfolio standard. This policy would set a floor for renewable energy in the nation but still allow states to implement more rigorous standards. Congress should act quickly to pass this legislation and should eliminate U.S. fossil fuel subsidies.

Republican Presidential Candidates: The Climate May Be Changing, But That Doesn’t Mean We Should Stop Burning Fossil Fuels

By Amelia Schlusser, Staff Attorney

The National Oceanic and Atmospheric Administration (NOAA) recently reported that average atmospheric carbon dioxide (CO₂) levels exceeded 400 parts per million (ppm) for the entire month of March. Pieter Tans, lead scientist for NOAA’s Global Greenhouse Gas Reference Network, explained that this is a significant milestone, because it marks the first time that anthropogenic greenhouse gas emissions have caused global CO₂ concentrations to rise by more than 120 ppm over pre-industrial levels.

Rising CO₂ concentrations are having a significant impact on the global climate. A new study published in the journal Nature Climate Change found that over the past ten years, global sea levels rose faster than previous research had indicated. The ice sheet in West Antarctica is melting, and new research indicates that the ice sheets in East Antarctica are beginning to melt as well. These two ice sheets have the potential to cause global sea levels to rise by more than 20 feet, and thanks to the effects of gravity, the United States could experience a 25% greater rise in sea levels. The impacts of climate change are being felt on a more localized level as well. For example, California is suffering from crippling and historic drought, and the U.S. Forest Service recently found that approximately 12 million forest trees have died in that state over the last year.

The so-called “debate” over climate change is grounded in ideological convictions rather than scientific evidence. The science is overwhelmingly conclusive—the climate is changing, and the last decade was the warmest on record. There is also an overwhelming consensus among the scientific community that anthropogenic greenhouse gas emissions are contributing to the current warming trend. According to NASA, “97 percent or more of actively publishing climate scientists agree: Climate-warming trends over the past century are very likely due to human activities.” Conservative politicians, however, have been slow to accept the conclusions from the scientific community. Earlier this year, the U.S. senate passed a measure stating that “climate change is real and is not a hoax.” However, only five Republican senators voted in favor of an amendment stating that “climate change is real (and) human activity significantly contributes to climate change.”

With the Environmental Protection Agency poised to finalize the Clean Power Plan this summer (and thus regulate CO₂ emissions from existing power plants), it seems inevitable that climate change will be a prominent issue in the 2016 presidential debate. Hillary Clinton recently clarified that she believes climate change is a real threat and the government should do “whatever it takes” to convince Americans that it’s in their best interest to take action to reduce emissions.

Republican presidential contenders, however, have persisted in denying that human activity is contributing to climate change. New Jersey Governor Chris Christie, who has not officially announced his candidacy, recently made headlines by announcing that he believes in human-driven climate change. Other prominent GOP candidates have adopted more skeptical positions. The following discussion summarizes the climate change positions of the current contenders for the GOP presidential nomination.

Republican Presidential Candidates: A Turning Point for Climate Change Acceptance?

According to ClimateWire, New Jersey Governor Chris Christie acknowledged that he believes climate change is real and caused by human activities. Christie, who has not officially announced his candidacy, called for the nation’s leaders to support “strong solutions to reduce carbon pollution.” However, Gov. Christie also withdrew New Jersey from the Northeast’s Regional Greenhouse Gas Initiative in 2012, describing the plan as “completely useless.”

In January, former Arkansas governor Mike Huckabee expressed his opinion that Islamic extremism poses a greater risk to the United States than climate change. However, according to Greenwire, Huckabee recently voiced his support for renewable energy, and stated that Americans “shouldn’t demonize renewable fuels.” Nevertheless, Huckabee’s energy plan also calls for the United States to lift prohibitions on crude oil and natural gas exports and eliminate regulations restricting oil and gas exploration on federal lands. 

A few GOP candidates acknowledge that the global climate is changing, but believe that the economic costs associated with mitigation efforts would outweigh the potential climate benefits from reducing greenhouse gas emissions. Former Florida Governor Jeb Bush is admittedly “concerned” about the changing climate, but explained that he is more concerned about “our ability to compete in an increasingly competitive world.” The potential presidential contender further argued that the United States can continue to reduce emissions by relying on natural gas. Senator Marco Rubio (R-Fl.) believes in climate change, but is skeptical that human activity is responsible for warming temperatures. In an April interview, Rubio stated, “I believe the climate is changing because there’s never been a moment where the climate is not changing.” However, the Florida senator questions whether efforts to reduce emissions would have any effect on the climate, and argues that regulations to mitigate climate change “would have a devastating impact on our economy.”

Other GOP contenders fail to view climate change as a significant threat to American citizens. Senator Ted Cruz (R-Tx.)  believes that climate change is real, but he argues that the science indicates that the earth has not warmed “significantly” in the past 17 years.  He also claimed that “the global warming alarmists are the equivalent of the flat-Earthers.” Rand Paul, on the other hand, questions whether climate change is actually occurring. As Grist’s Ben Adler reported, Sen. Rand Paul (R-Ky.) is a climate change denier who thinks the science surrounding climate change is inconclusive and argues that reports of sea level rise and drowning polar bears are merely “alarmist” rhetoric.

Former Texas Governor Rick Perry is perhaps the most outspoken climate change denier in the pool of potential GOP presidential contenders. Perry has consistently denied the existence of human-driven climate change, even after he issued a proclamation in 2013 stating that Texas’s “drought conditions have reached historic levels and continue to pose an imminent threat to public health, property, and the economy.” In a 2014 interview, Perry argued that labeling CO2 as an air pollutant would do a “disservice” to the country and the world, and that reducing coal consumption would “strangle our economy.”

While it’s refreshing to see some conservative lawmakers acknowledge that the global climate is indeed changing, it appears that the bulk of the GOP’s presidential contenders still place greater weight on industry interests and ideological agendas than scientific consensus. The inability to accept that human activity contributes to climate change is likely politically motivated—according to a Gallup poll, 40% of conservative Republicans believe that climate change will never have negative impacts on the planet. From a statistical standpoint, therefore, Republican candidates will have a better chance of winning their party’s nomination if they deny that human activity contributes to global warming.

However, this strategy may work against the GOP during the general election. New polling data from Yale and Utah State University found that in every single county in the United States, a majority of Americans believe that CO₂ should be regulated as an air pollutant. Most Americans now acknowledge that climate change presents a serious threat, and they may be less inclined to vote for a presidential candidate that refuses to take accountability for our collective impact on the global environment.