Energy Subsidies: Fossil Fuels vs Renewable Energy (Clean Technia)

Essay by S. Tom Bond, Retired Chemist & Resident Farmer, Lewis County, WV

Subsidies, where the government provides funds to advance the interests of some industry, are the best thing the petroleum and coal industries have going for them. They are, in fact, payments to increase profits, the motivation for business. The fossil fuel industry gets $20 billion a year. Sounds like a lot of motivation!

That figure comes from Dirty Energy Dominance: Dependant on Denial. The global warming we are experiencing is being subsidized by our government. The result of a second study published by the Stokholm Environmental Institute in a peer reviewed journal includes this in the abstract:

“This study finds that, at recent oil prices of USD 50 per barrel, tax preferences and other subsidies push nearly half of new, yet-to-be-developed oil investments into profitability, potentially increasing U.S. oil production by 17 billion barrels over the next few decades.

“This oil, equivalent to 6 billion [long tons] of CO2, could make up as much as 20% of U.S. oil production through 2050 under a carbon budget aimed at limiting warming to 2 °C. Our findings show that removal of tax incentives and other fossil fuel support policies could both fulfil G20 commitments and yield climate benefits.

The abstract is available here.

It’s a really good investment for the companies, too. A few hundred million dollars in lobbying and candidate support, and the return is $20 billion. That’s a many-fold return.

It is clear that the big pipelines are not about helping Americans (most of us, that is). Adequate shipping capacity is in place to meet present demand. On the one hand, they are intended to allow more gas to be used for electrical generation when cleaner and cheaper renewables are just around the corner, and to provide liquid natural gas for export. The former not only screws up the atmosphere, but the economy, too. Oil and gas extraction are a mature industry, capital intensive and high return to capital.

For each dollar spent, solar and wind energy projects create twice as many jobs as coal or natural gas, economists at the University of Massachusetts, Amherst, calculated in 2009. That includes more jobs in manufacturing and construction, and more jobs at an average hourly wage of $24.50.

On the other hand, the intention is shown by the fact roughly 60 percent of the new L.N.G. export capacity worldwide is being built in the United States, which only began exporting large supplies last year, giving Washington a new tool for its foreign policy toolbox and raising the country to the top tier of exporters, which includes Qatar, Australia and Russia.

What the U. S. oil and gas industry plans is to crowd Russia especially, but also Qatar and Australia oil and gas companies. Russia has vast supplies of conventional gas that can be shipped through pipelines as gas. They are doing it now through the Nordstrom pipelines which go from Russia to Germany through two parallel 48 inch pipes with 1.5 inch walls and working at about twice the pressure in the proposed ACP and MVP pipelines.

American gas companies intend to frack their gas, which involves manufactured chemicals, involves all that trucking of water and chemicals, and takes new pipelines to carry it to the ocean, where it will be liquefied, then transported on special ships with pressurized containers, and finally converted back to gas at the destination. Huge costs to produce and carry. How can they compete with Russian gas just pumped out of the ground and sent to the customers through pipelines? Subsidies! And pipelines paid for by U. S. gas customers!

The energy return on energy invested, commonly called EROI is lower, too. Manufacturing the chemicals for fracking, the extra pipe needed by the whole scheme off fracking for export and carting all the materials too and from the actual drilling site pushed the EROI ratio lower. At some point it becomes uneconomical.

A recent study, “Long-Term Estimates of the Eneregy-Return-on-Energy-Invested of Coal, Oil, and Gas Global Productions” points out that when the historic EROI’s are calculated, it shows since the early 20th century we are using more energy to produce each fuel.

The aggregate of all fossil fuels maxed in the 1960’s and has declined since. Other studies show that the decline in fossil fuels has played a part in the world slowdown of economic growth and national debt to gross domestic product ratios.

It’s time for society to change to another form of energy.