Earth Day Green -- The Color of Money
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On Earth Day, attention naturally turns to all things green – as in money.
Pocketbook issues are at the center of a number of new reports that assess the impact of efforts to combat climate change and promote the development of renewable sources of energy. One report shows government subsidies taking a big jump in recent years with renewables such as solar and wind getting a proportionately large share of the money.
The Environmental Defense Fund has come out with a document that studies the studies out there on the economic cost of a cap-and-trade system to cut emissions of greenhouse gases. Perhaps coming as no shock, the organization concludes that “a clear consensus” among the models demonstrates such a market system “is consistent with long-term economic growth.” The overall cost of capping the gases would amount to less than 1 percent of household budgets over the coming two decades, according to the EDF, which supports market approaches to the problem (see press statement here; text of study here).
Release of the analysis comes as the U.S. Senate is readying to take up the Lieberman-Warner Climate Security Act, which would establish a cap-and-trade system in the country. It also comes against a background of other reports issued by the government and business organizations showing potentially significant economic impacts from such a system (see Climate Law Update story here).
Environmental groups have previously noted that reports on the economic footprint of efforts to combat global warming have failed to take into account the cost of not acting. Nathaniel Keohane, director of economic policy for Environmental Defense, reiterated that point in the group’s statement:
“It’s important to keep in mind that these forecasting models compare climate policy to a business-as-usual case that doesn’t take the costs of climate change into account. If we fail to take action on global warming, the future will be anything but business as usual. The most expensive policy by far is to do nothing at all.”
Elsewhere, the statistical arm of the U.S. Department of Energy has released data showing that federal subsidies and support to all forms of energy hit $16.6 billion in 2007, more than double the comparable figure from 1999. The document, from the Energy Information Administration, analyzed money going into direct federal spending, tax incentives, research and development and such programs as the Tennessee Valley Authority and the Bonneville Power Administration.
It found that the percentage of the subsidies and support going to renewable energy rose from 17 percent of the total to 29 percent in 2007, as assistance for natural gas and petroleum declined. About 41 percent of all the subsidies were related to electricity production. The report also noted that despite the increased subsidies energy production in the United States stayed virtually unchanged (access report documents here).
Additionally, the report also found some major differences in the power produced per dollar spent on subsidies. For instance, it showed that by far the highest per-megawatt-hour subsidies went to coal-based synthetic fuels, wind and solar. Synfuels received nearly $30 per MW hour, while solar topped $24 and wind got more than $23. On the other end of the scale, coal, natural gas, biofuels, geothermal and hydroelectric all came in at under $1 per MW hour, while nuclear was at $1.59. The report noted that wholesale electricity costs averaged about $53 a MW hour in 2006.
The report noted, however, that the apparent disparities are driven by the amount of electricity generation across the fuel types. Baseload generation technologies such as coal and nuclear produce nearly 70 percent of the power, a fact that tended to reduce their subsidies and support per unit of electricity. The document also cautioned that it was only a snapshot of a particular time:
“Some electricity sources, such as nuclear, coal, oil, and natural gas, have received varying levels of subsidies and support in the past which may have aided them in reaching their current role in electricity production. The impacts of prior subsidies, some of which may no longer be in effect, are not measured in the current analysis.”
Meanwhile, an industry analysis showed energy efficiency improvements could cut the need for some, but not all, new generation over the next two decades. The study, released by the Electric Power Research Institute and the Edison Electric Institute, reported that electricity demand was expected to rise 30 percent by 2030 (see press statement here).
