Should fossil fuel subsidies be axed?

Obama took office amid a storm of pro-renewable energy hype and a vision of drastically reducing the United States' reliance on foreign energy and fossil fuels.

The 44th President announced his plans to make the US the world's leading exporter of renewable energy in the near future. The new government had been gradually investing more and more money into advanced vehicle technologies, including the development of plug-in hybrid and full battery electric vehicles, even before Obama's stimulus package pumped huge amounts of stimulus capital into green industries.

Yet, despite the renewable energy sector's undoubted progress, it still faces a tough battle against traditional fossil fuels with a new study highlighting the startling gap between Federal subsidies for oil and gas and renewable energy. Is it now time for Federal subsidies for the oil and gas industry to be reined in?

The Estimating US government subsidies to energy sources 2002-2008 report, released by the Environmental Law Institute (ELI), has found that fossil fuels benefited from government subsidies totalling more than $72 billion between 2002 and 2008, compared to just $29 billion received by the renewable fuel sector.

The study showed that, of the $72 billion pumped into the oil and gas industry, most of which was written into US Tax Code as permanent provisions, only $2.3 billion was spent on carbon capture and storage technology. The Federal subsidies are justified by the claim that, without them, the prices for petroleum and gas would shoot up leaving many families unable to fill up their car or heat their homes on a regular basis.

What must also be considered is the relative sizes of the two sectors. When taking this into account the funding figures for the renewable sector may actually represent a larger percentage than the fossil fuel industry, but the ELI have not commented on whether they plan to release data in non-absolute terms.

However, ELI were quick to use their findings to accuse the US government of not doing enough to influence actions and sentiment towards climate change. It claims the subsidies, coupled with a lack of sufficient incentives to develop renewable energy, only serves to confuse cross-state energy policies.

ELI believe that greater government intervention in renewable energy will help make industries, such as the electric car sector, become wholly sustainable and not just "mask" the carbon problem. At present, electrification of the car only displaces the carbon dioxide emission problem - instead of the emissions coming the exhaust pipe, they instead come from the coal-powered manufacturing plants. More investment would mean electricity can be produced in a sustainable manner, such a through wind, solar, tidal, hydro or geothermal power.

The authors of the report also believe the average consumer will benefit from great Federal subsidies in green industries as things like more carbon-efficient cars, without internal combustion engines and no conventional transmission, will be more economical for drivers.

The renewable energy sector also presents the opportunity for "new" employment, one of the main reasons Obama has invested so much during the recession. Five years ago, the New Economics Foundation (NEF) reported that a switch to renewable energy could help lift millions out of poverty and help alleviate global warming. The switch is currently taking place, but it may be possible for the Obama administration to further facilitate the switch.

Initial high cost outlays by the government will lead to a less expensive, sustainable future for America's energy. The "cap-and-trade" bill would help to push people towards renewable energy, but the best way to make the change is to pull them. People need to be encouraged towards a green future rather than forced out of the traditional sectors, and greater subsidies for renewable energy is the way to do this.

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