Big Green Energy is the Real Corporate Welfare Queen


A reader directed me to Big Oil: Corporate Welfare Queen Number One. Blue Gal on the liberal blog Crooks and Liars linked to Jim Hightower’s piece Big Oil’s Gusher of Subsidies. It appears what these two liberal bloggers are talking about are tax deductions and provisions available to all companies, not just oil companies. (No mention that Obama would like to give foreign oil companies tax breaks and subsidies while penalizing domestic producers.)

So, who is the big corporate welfare queen? Is it really big oil, or is it big green energy? Look at this chart.

See the slice called “Industry Specific?” That’s the portion of tax breaks targeted to specific industries. Guess who benefits the most from those industry specific breaks. Bingo! Big green energy.

The Tax Foundation: The next largest category is “Industry-Specific Preferences” with a budgetary cost of $19.6 billion in 2011. The majority of these industry-specific provisions, some $11 billion in total, benefit companies engaged in renewable energy activities—the biggest of which is the alcohol fuel credit ($8.85 billion)—and energy production activities—such as the energy production credit ($1 billion). These large tax benefits renewable energy firms are actually tax penalties on the oil and gas industry because wind and solar energy are substitutes for oil and gas.

And as far as those “subsidies for oil companies?”

So where are the “subsidies” to the oil and gas industry? They are to be found in the category “Changes to Depreciation Rules.” Over the years, lawmakers have enacted numerous changes to the standard depreciation rules—which require firms to write down an investment over time—in order to persuade firms to invest in activities that Congress thought were not receiving enough investment capital.

The majority of these provisions benefit companies engaged in oil, gas, minerals, and renewable resource activities. The total value of benefits available to oil and gas firms is about $2.8 billion while those available to mining and timber firms is less than $1 billion.

Okay, so oil companies are doing what other companies are doing and writing off depreciation over time. Big deal? My husband does that every time he invests in a new tool. It’s not like the government is actually writing them checks to conduct business. And I’m not talking about allowing them to keep more of their earnings the way Paul Krugman characterizes not raising taxes. I’m talking about the government giving these green energy firms our money. (Or money borrowed from China that our kids will have to pay back.)

Just Google “green energy US funding” for a look at how much money is being shelled out to the greenies. It’s impossible to add it all up, and the worst part, these corporate welfare queens still have their hands out. Not only do they want our tax dollars, they also want cap and tax to pass so they have a competitive advantage over the oil companies. (Why do you think companies like BP have gotten in on the green action?) The Wall Street Journal reported in July that CEOs were “plead[ing] for more money from Washington.”

After the 2005 and 2007 energy bills and the 2009 stimulus that converted the Department of Energy into the largest venture capital firm in the world, and amid the R&D tax credit, the many purse-strings for windmills and plug-in cars, fuel-economy mileage rules, renewable portfolio standards for utilities in 30 states, no-interest loans and the rest of the five-year plans, what else do CEOs want?

Now that you mention it, they want “a suite of policy reforms that will stimulate market demand for these new inventions.” The old line was that a carbon price would drive such green innovation. The new logic is that we’ll never get these new inventions without one more “largest investment in basic research funding in history,” and that without cap and trade no one will buy them.

As it happens, some of these captains of industry have sunk billions of dollars into blue-sky energy investments that can’t succeed without the crutch of subsidies, mandates and carbon taxes. So now they’re asking Congress to make taxpayers pay twice—in higher energy costs under cap and tax, and to finance their investments via a $160 billion-plus program over 10 years at a time when the federal deficit as a share of GDP is already at Greek levels.

There’s good reason the greenies have their hands out. Heritage reported earlier this month:

The question is, what will happen to these green jobs, now that subsidies are disappearing? Unfortunately, these subsidies can not be described as investments—they are a lifeline for an industry that has yet to sustain itself at competitive levels. For example, according to an article in The New York Times, budget cuts on solar panel investments in Germany led to “a serious risk of major job losses in the industry as China, in particular, proved to be a cheaper and very willing supplier.”

As the subsidies are removed from these green energy industries, they collapse because they were developed in a bubble where market demand and price signals were softened. This inevitable confrontation with reality demonstrated that the industry doesn’t have the tools to survive unaided. But removing the subsidies enables those resources to be put to better use.

That would be bad news for the green companies, but good news for the private sector.

Let’s hope that the inverse of Dr. Calzada’s research is true: for every subsidized job that goes away, 2.2 economically sustainable jobs are created. The United States should learn from Europe’s failed green subsidy policy and refrain from following in its footsteps.

The only oil companies in the ranks of “Corporate Welfare Queen Number One” would be those who are in on the green revolution.  Unfortunately, at the present time there’s no indication that the US is learning from Europe’s failed green subsidy policy.