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[greenyes] Federal subsidies to energy worth $37-$64 billion in 2003
Dear Colleagues:

The National Commission on Energy Policy (NCEP) has just released a paper I did for them last year providing a rough estimate of US federal energy subsidies in 2003. Titled "Federal Subsidies to Energy in 2003 - A First Look," it represents the first assessment of US federal subsidies to energy in years.

Energy prices have direct links to recycling markets in a number of ways. First, virgin material production is often energy-intensive, and subsidies to energy undermine the market value of the energy that recycling saves. Second, government policies are increasingly subsidizing energy conversion of recyclable materials, putting them in direct competition with recycling. This is also true with subsidies to landfill gas, which improves the competitive position of landfills relative to recycling and source reduction. Subsidies to energy are orders of magnitude above those provided to recycling.

I hope you find this paper of interest.

Sincerely,

Doug Koplow

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1) US FEDERAL SUBSIDIES TO ENERGY IN 2003

The paper may be accessed at:

http://www.earthtrack.net/documents.asp?docUrl=FedSubs2003.pdf

The document is also available on the NCEP website, but is bundled with many other technical support papers, resulting in a slower download:

http://www.earthtrack.net/documents.asp?docUrl=http://www.energycommission.org/ewebeditpro/items/O82F4883.pdf

FINDINGS:

a) MAGNITUDE. Annual federal support to the energy sector in 2003, based on a review of roughly 75 programs/tax breaks, were worth between $37 and $64 billion in 2003. In comparison, all of the programs proposed by NCEP in their final report recommendations were expected to cost an average of $3.6 billion per year, a mere 5 to 10 percent of the fiscal subsidies now in place.

Among the largest sources of subsidy identified in this review were:

- Defending oil shipping lanes in the Persian Gulf;

- Improper accounting for inventory holding costs at the Strategic Petroleum Reserve;

- Subsidized construction and maintenance of water infrastructure heavily used by coal and oil;

- Federal spending on energy research and development;

- Accelerated depreciation of energy-related capital assets;

- Underaccrual for reclamation and remediation at coal mines and oil and gas wells;

- The energy share of federal spending on climate change research;

- The ethanol exemption from the excise fuel tax;

- Payments to deal with black lung problems in coal miners.

b) EXCLUSIONS. The $37-64 billion range actually represents a LOWER bound. The available timeframe for research did not allow all areas to be examined in detail. Important sources of subsidies to energy sectors, such as credit programs (Export-Import Bank, Rural Utility Service, US funding to the World Bank) and energy-related externalities were excluded. New subsidies to the energy sector enacted in PL 108-357, the "American Jobs Creation Act," or proposed in pending in various forms of the energy bill were likewise not evaluated. Further refinements such as estimating benefits to specific energy types will require additional work.



_______________________________
Doug Koplow
Earth Track, Inc.
2067 Massachusetts Avenue - 4th Floor
Cambridge, MA 02140
www.earthtrack.net
Tel: 617/661-4700
Fax: 617/354-0463

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