American energy subsidies down, oil and gas drop by 20%

Big increase in American energy subsidies to solar power

Washington is spending less on American energy subsidies and re-directing more toward the rapidly growing solar industry, according to a new report.

American energy subsidies

Source: EIA, Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2013. Note: LIHEAP is the Low Income Home Energy Assistance Program.

The US Energy Information Administration says that between fiscal year 2010 and 2013 the share of tax expenditure in total financial interventions and subsidies declined from 46 to 42 per cent, while the share of direct expenditures grew from 39 to 44 per cent, reflecting a move from subsidies for renewable liquid fuels such as ethanol to subsidies for renewable electricity, particularly solar power.

Between 2010 and 2013, the total value of direct federal financial interventions and subsidies in energy markets decreased 23 per cent from $38.0 billion to $29.3 billion dollars, reflecting changes in both the type of subsidies offered and fuels that received support.

Federal subsidy support for fossil fuels declined from almost $4 billion in 2010 to $3.4 billion in 2013. Within those fossil fuel subsidies, support for coal declined by less than  per cent, but support for oil and natural gas declined by almost 20 per cent.

Since 2010, the government has eliminated the Volumetric Ethanol Excise Tax Credit (VEETC) for fuel ethanol, and biofuels’ share of total renewable energy subsidies fell from 4 per cent in 2010 to 12 per cent in 2013.

American energy subsidies

Source: EIA, Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2013 Note: RUS is the U.S. Department of Agriculture’s Rural Utilities Service.

The federal government also revised tax credits for the growing solar power industry, allowing subsidy applicants to receive grants in lieu of tax credits.

These grants, known as Energy Investment Grants or Section 1603 grants for the tax provision in the Recovery Act that established them, were one of the few energy subsidy programs created by the Recovery Act that still had a substantial budgetary impact by 2013.

The Section 1603 grants increased nearly $4 billion between 2010 and 2013, while electricity-related tax expenditures for renewables doubled from $1.9 billion to $3.8 billion. Electricity-related subsidies, primarily directed towards fuels and technologies used for electricity production, increased in both absolute and percentage terms between 2010 and 2013, reflecting increases in both direct expenditures and estimated tax subsidies.

Wind subsidies increased by less than 10 per cent, going from $5.5 billion in 2010 to $5.9 billion in 2013.

Solar subsidies increased the most, both in absolute and percentage terms, going from $1.1 billion to $5.3 billion in 2013, with declining solar costs and state-level policies also supporting additional growth.

With lower adoption of tax credits for home efficiency improvements and the declining need for the Low Income Home Energy Assistance Program with an improving economy, support for conservation and end-use programs was at $7.9 billion in 2013, down from $15.6 billion in 2010.

EIA has updated a report on federal subsidies to the energy industry, covering the 2013 fiscal year. The most recent prior report reviewed subsidies in 2010, at or near the height of spending related to the American Recovery and Reinvestment Act of 2009 (more commonly known as the Recovery Act).

EIA’s updated study focuses on direct federal financial interventions by the federal government that provide a financial benefit with an identifiable federal budget impact and are specifically targeted at energy markets.

Within this scope are:

  • Direct expenditures (cash payments directly to market participants)
  • Tax expenditures (reductions in tax payments)
  • Investment in research and development (R&D)
  • Financial support to federal power marketing administrations (PMAs)
  • Credit subsidies to recipients of federal loan guarantees

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