energy subsidies

Case Study: the United States• The U.S. government has long played a significant role in using

targeted energy subsidies to drive economic development.• From 1950-2010 … $831 billion (in 2010 dollars).

• The oil industry received $369 billion.• The natural gas industry received $121 billion.• The coal industry received $104 billion.• The hydro-power industry received $90 billion.• The nuclear industry received $73 billion.• The renewable energy industry received $74 billion.

Case Study: the United States• Today, U.S. spending on energy subsidies comprises 5-10% of the global

total and includes.• Direct expenditures to producers or consumers.• Tax expenditures.• Research and development.• Federal electricity programs supporting federal and rural utilities.• Loan and loan guarantee programs.

• Total spending on energy subsidies has decreased under the Obama Administration.• This reflects the energy development priorities of the Obama Administration• $37.9 billion in FY2010 to $29.5 billion in FY 2013 to $24.226 billion in FY 2014.

Why Are Subsidies Likely to Stay?• Some of the energy subsidy programs are rigid line items in the

federal budget.• Nuclear power plants.• Direct investments in updating power grids.• The federal program supporting rural utility development.• Massive federal energy development programs.

• Tennessee Valley Authority.• Bonneville Power Administration.

A Track Record of Success• Historically,• Economic development

• The Tennessee Valley Authority• The oil boom

• Today,• Widespread political support.• Allowing the U.S. to become “energy independent.”• The Shale Gas Revolution.• The growth of the renewable energy industry in the US.

• Putting the U.S. on track to meet its obligations under the United Nations Framework Convention on Climate Change.

Works Cited• “Estimating U.S. Government Subsidies to Energy Sources: 2002-

2008.” Environmental Law Institute. 2009.• “Direct Federal Financial Interventions and Subsidies in Energy in

Fiscal Year 2013.”U.S. Energy Information Administration. 2015.• “Empty Promises: G20 Subsidies to Oil, Gas, and Coal Production.”

Oil Change International. 2014.• “Today in Energy.” U.S. Energy Information Administration. 2013.

Case study: Indonesia• Subsidized fuel since first oil-price shock in 1970’s• "Citizens should benefit from domestic production of oil, coal, and

other energy sources through their cheap prices"• Increases economic growth, reduces poverty, and secures continued

energy supply

Big changes since 2012• 2014 decline in oil-price used to cut back subsidies on gasoline and diesel• Energy subsidy budget for 2016 is 4 billion USD• Some subsidies still in place (e.g. on diesel and kerosene). Asian

Development Bank says that these subsidies• are an expensive means of supporting low-income households• risk restricting public expenditure on education, health services, and infrastructure• encourage excessive consumption through low energy prices which increases

emissions

• On the whole Indonesia has done good: 36 billion 4 billion in 4 years

• Oil prices rise (no subsidies) —> fuel prices increase in Indonesia• Regular people’s lives affected and could slow growth in the short term• Jokowi might return to subsidies to mitigate this effect• Would pressure budget; taxes would have to be raised or expenditures

reduced – would reduce long-term growth prospects

• International pressure to remove all subsidies (CO2 emissions would decline)• The effect on the poor could, to some extent, be mitigated by

investment in the welfare system• Best option: phasing out subsidies in small steps• Political will? Short-term winnings might trump long-term winnings