A Closer Look At Fossil And Renewable Energy Subsidies - powerearth.net A Closer Look At Fossil And Renewable Energy Subsidies - powerearth.net

A Closer Look At Fossil And Renewable Energy Subsidies


A Closer Look At Fossil And Renewable Energy Subsidies

The International Monetary Fund states that fossil fuel costs are increasing at an approximate rate of $10 million every minute. The majority of these subsidies seek to locate new reserves of oil, coal, and gas. None of them have the least concern for the fact that there must be some left inside the earth. The first drilling oil started as a full-fledged start-up industry in the year 1890s. The cost of it was equivalent to $500 per barrel in today’s rate. This observation was made my UC San Diego’s James Hamilton. He published his findings in his study entitled Oil Prices, Exhaustible Resources, and Economic Growth. The oil and gas industry achieved its first federal tax break during its first year itself.

A Closer Look At Fossil And Renewable Energy Subsidies
A Closer Look At Fossil And Renewable Energy Subsidies

Permitting And Leasing Inequalities

The state-level policies started increasing their expenses for the developers of renewable energy. They did it by giving permission onerous for upcoming projects. For instance, there was no such permission for fossil fuels in California. But with the state policies, there came a high bar for renewable energies.

In California, granting permission for solar farms can be a multi-million-dollar process for around three years. On the other hand, for fossil fuel companies, it is a quick process. The land leasing prices are also more for solar and wind energy as compared to fossil fuels. The costs of land leases for gas and oil were the same as the 1920s in 2009. It was the time when the BLM was in the process of setting new market rates for renewable energy.

A Closer Look At Fossil And Renewable Energy Subsidiesp
A Closer Look At Fossil And Renewable Energy Subsidies

Call For Permanent Renewable Subsidies

Reversing the permanent subsidies in tax code is somewhat impossible. Therefore, some advocates prefer sticking to a practical notion of joining hands with them rather than getting into a fight. In 2015, the PTC of the coal industry in producing coal was $6.71 per ton. The PTC for wind industry was $0.023 per kWh, which keeps on shuffling quite frequently. The renewable sector does not attract investors for the fact that they don’t have a permanent tax code. Such uncertainties contribute towards making the subsidies less effective. The renewable investment would have been a more predictable business if there were permanent ITC and PTC. Some investors take the risk of buying or investing in renewable projects, but with a doubtful proposition. They are never sure whether their plans would yield desired results or not.

A Closer Look At Fossil And Renewable Energy Subsidies
A Closer Look At Fossil And Renewable Energy Subsidies

The Advantage Of Fossil Fuel Industry

The government provides permanent subsidies for fossil fuels. Although the burning of fossil fuels is harmful to the overall environment, their business is stable. The scheme of permanent grants contributes to a stable and predictable environment for investments. It is a significant drawback in the case of the renewable energy industry.
The best way to bring a balance between both these markets is by creating an equal level of competition. Just like fossil fuels, the government should take steps in implementing permanent subsidies for renewable energies too. The other way of equalizing both these markets is by removing the scheme of durable subsidies for fossil fuels. Let there be equality and the same level of competition.

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