The Sierra Club sent out the following request on one of their mailing
lists:
> Hi all,
> Businessweek wants to do a big piece exposing coal subsidies, both federal
> and state. We are working to pull together some of this information for
> them, but I thought many of you might already know how much Big Coal is
> getting in your state.
> If you do, please send any information you have to Lyndsay Moseley at
> [EMAIL PROTECTED] She's kindly offered to compile the
> numbers for us.
> Thanks in advance for your help on this,
> ginny
> ---------------------
> Virginia Cramer
> Associate Press Secretary
> Sierra Club
> tel: 804-225-9113 x 102
Here are some attempts to answer this. If you can add to this, please
do.
This is a notoriously difficult question, because such subsidies are
often indirect and buried in the infrastructure, and lots of specific
knowledge is necessary to disentangle them.
The justification of energy subsidies lies in having cheap energy. To
achieve this, Beers and Moor list the following on their p. 48:
Direct grants to cover losses of coal mines, support to low-income
households to purchase fuels for heating and cooling; all sorts of tax
breaks for energy users; loans at low interest rates; allowing public
energy companies earning a lower than market rate of return; limited
financial liability for the nuclear industry and R&D support for
nuclear fusion programmes; domestic purchase obligation for coal;
deficit payments to miner pension funds to compensate for the cost of
Black Lung Disease and early retirement; end-user energy prices at
rates below market level; and, a recent phenomenon, the non-payments
of tax bills and bail-out operations of public companies.
These subsidies lead to secondary distortions since they encourage
investment to take advantage of these subsidies. And since energy is
so cheap, this leads to other market failures: energy inefficient
appliances and buildings.
The "Free Lunch" books has some interesting details about energy
markets -- especially the deregulated ones, with some hints that
utility regulation can also be gamed. For instance: if a regulated
utility is owned by the same conglomerate as its unregulated power
suppliers, it may buy electricity at inflated wholesale prices, as
documented in "Free Lunch" p. 191 regarding TXU.
Here is another one, my own idea: regulated utilities are allowed to
maintain ample excess capacity for peak loads, and this prevents them
from going over to a smart grid and real time pricing. Flat rate
pricing is a subsidy to the peak users which may have been technically
unavoidable in the past but no longer is.
I have the hunch that the more details you know the more blatant it
becomes. We need more experts about the specifics of all that stuff!
If you broaden the concept of subsidies so that those who have
expenses because of an externality (pollution) subsidize those
who generate the externality, you get additional higher
figures for subsidies.
Here is a last thought: the main thrust of the argument should
not be that big bad coal gets too many subsidies but that
energy is kept too cheap by subsidies.
Here are some books about this:
author = {OECD},
title = {Environmentally Harmful Subsidies: Challenge for Reform},
publisher = {OECD Publishing},
year = 2005
author = {Myers, Norman and Kent, Jennifer},
title = {Perverse Sububsies: How Tax Dollars Can Undercut the
Environment and the Economy},
publisher = {Island Press},
year = 2001
author = {Johnston, David Cay},
title = {Free Lunch: How the Wealthiest Americans Enrich Themselves
at Government Expenses (and Stick You with the Bill)},
publisher = {Portfolio (Penguin)},
year = 2007
author = {van Beers, Cees and de Moor, Andre},
title = {Public Subsidies and Policy Failures:
How Subsidies Distort the Natural Environment, Equity and Trade, and How to
Reform Them},
publisher = {Edward Elgard},
year = 2001
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