Picking Losers: Free Markets be Damned: the Coal Must Roll

June 1, 2018

locomotive

So remember all that stuff that Republicans have always said about how encouraging new technologies is “picking winners”,  we need to honor the invisible hand of free markets,  the pillars of our economic system,  yadda yadda?

In the face of the greatest economic opportunity of any generation, when the US is placed to lead the world – technological, economically, and morally – the ruling party’s default mode is greed, propping up the Old Order, and insuring the advantage of the powerful.

In the end, it’s Big Donors Uber Alles.

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Bloomberg:

Trump administration officials are making plans to order grid operators to buy electricity from struggling coal and nuclear plants in an effort to extend their life, a move that could represent an unprecedented intervention into U.S. energy markets.

The Energy Department would exercise emergency authority under a pair of federal laws to direct the operators to purchase electricity or electric generation capacity from at-risk facilities, according to a memo obtained by Bloomberg News. The agency also is making plans to establish a “Strategic Electric Generation Reserve” with the aim of promoting the national defense and maximizing domestic energy supplies.

“Federal action is necessary to stop the further premature retirements of fuel-secure generation capacity,” says a 41-page draft memo circulated before a National Security Council meeting on the subject Friday.

The plan cuts to the heart of a debate over the reliability and resiliency of a rapidly evolving U.S. electricity grid. Nuclear and coal-fired power plants are struggling to compete against cheap natural gas and renewable electricity. As nuclear and coal plants are decommissioned, regulators have been grappling with how to ensure that the nation’s power system can withstand extreme weather events and cyber-attacks.

Although the memo describes a planned Energy Department directive, there was no indication whether President Donald Trump had signed off on the action nor when any order might be issued. The document, dated May 29 and distributed Thursday, is marked as a “draft,” which is “not for further distribution,” and could be used by administration officials to justify the intervention.

Energy Department representatives did not immediately respond to an emailed request for comment.

The issue is a priority for some of the president’s top supporters, including coal moguls Robert E. Murray and Joseph Craft of Alliance Resource Partners, who donated a million dollars to the president’s inauguration. The move would be one of the most direct efforts by Trump to make good on campaign promises to revive the nation’s shrinking coal industry.

Trump administration officials have contemplated action for more than a year. After the Energy Department conducted a reliability study last year, Energy Secretary Rick Perry proposed a rule that would have compensated coal and nuclear plants for their ability to store months’ worth of fuel on site. Federal regulators shot down the idea in January.

That didn’t quell requests for help. A FirstEnergy Corp. subsidiary requested immediate intervention from Perry’s agency in late March. That plea followed the Akron, Ohio-based company’s announcement to shut three nuclear power plants that feed the grid operated by PJM Interconnection LLC, the largest in the country. FirstEnergy Solutions filed for bankruptcy within days of its emergency request.

Opponents of the new plan contend bailouts are a solution in search of a problem. They argue there are many ways to back up the grid that won’t cost ratepayers billions of dollars. A coalition of natural gas and renewable power advocates told Perry that “power plant retirements are a normal, healthy feature of electricity markets,” and therefore there is no emergency that would justify Energy Department action.

Representatives of FirstEnergy and Murray Energy Corp. did not immediately respond to emails seeking comment.

For the climate-concerned, keeping nuclear plants in operation while renewables come on line is at least justifiable – but futile if the price is a dead man’s throttle on coal burning.

Vox:

Researchers at Oil Change International (OCI) set out to quantify the level of US fossil fuel subsidies, but before we get to their results, a few important caveats.

OCI is only counting direct production subsidies. As they acknowledge, that leaves out a great deal.

For one thing, it leaves out the annual $14.5 billion in consumption subsidies — things like the Low Income Home Energy Assistance Program (LIHEAP), which helps lower-income residents pay their (fuel oil) heating bills. (There are better ways to help poor people, but let’s leave that aside for now.)

It also leaves out subsidies for overseas fossil fuel projects ($2.1 billion a year).

Most significantly, OCI’s analysis leaves out indirect subsidies — things like the money the US military spends to protect oil shipping routes, or the unpaid costs of health and climate impacts from burning fossil fuels. These indirect subsidies reach to the hundreds of billions, dwarfing direct subsidies — the IMF says that, globally speaking, they amount to $5.3 trillion a year. But they are controversial and very difficult to measure precisely.

Finally, OCI acknowledges that its estimates of state-level subsidies are probably low, since many states don’t report the costs of tax expenditures (i.e., tax breaks and credits to industry), so data is difficult to come by.

All of which is to say: OCI has produced about the most conservative possible estimate of the subsidies received by fossil fuels in the US. These are solely production subsidies — taxpayer money that goes directly to producing more fossil fuels.

So what’s the verdict?

Adding everything up: $14.7 billion in federal subsidies and $5.8 billion in state-level incentives, for a total of $20.5 billion annually in corporate welfare.

Of that total, 80 percent goes to oil and gas, 20 percent to coal. On the right, subsidies are broken down by stage of production. Extraction gets the most.

How does this compare to renewable energy subsidies? In terms of permanent tax expenditures, fossil fuels beat renewables by a 7-1 margin:

 (The primary federal tax supports for renewable energy — the investment and production tax credits, respectively — are not permanent. They are set to phase out over the next five years, and are politically vulnerable in the meantime. But if you include them, Stephen Kretzmann of OCI confirmed for me over email, permanent fossil tax breaks still win, at $7.4 billion to $5.6 billion.)

If you ask people in fossil fuel industries, their support staff in conservative think tanks, or fossil-state politicians, they will tell you why these fossil fuel production subsidies are necessary. It’s always been this way. They’re more than paid back by tax revenue. Other industries get them too. (For the record: More than half the $20 billion is available to fossil fuels alone). They create jobs. They’re important for national security. Tax expenditures aren’t subsidies at all, if you think about it. Etc.

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5 Responses to “Picking Losers: Free Markets be Damned: the Coal Must Roll”


  1. […] via Picking Losers: Free Markets be Damned: the Coal Must Roll | Climate Denial Crock of the Week […]

  2. Andy Lee Robinson Says:

    They will fail. A horse can only be flogged so much before it dies.

    Looks like America has had is day and the rest of the world is now looking East for leadership and innovation.
    China is where it is at now. The innovation in renewables and electronics technology for EVs and renewable applications is staggering.

    I said years ago that China is gonna wup America’s ass.
    Let’s hope that Trump is just a temporary speed bump on the road to the future, and not a crevasse.

    • dumboldguy Says:

      Sorry, but there is a saying in this country among those of certain political persuasions—“No horse is ever too dead to beat”. It’s usually applied when there are a few more pennies to be wrung out of something by the greedy rich at the expense of the greater good.

      And nobody is going to whup anyone’s ass—except Mother Nature, who is going to land big-time on the human species, and, unfortunately, all the other critters that will be caught up in the Sixth Extinction.

  3. neilrieck Says:

    Americans are always banging on about “free markets”, “the invisible hand”, and misquoting Adam Smith so I find it a little odd when some politicians think that promoting coal is a good thing even when market forces say otherwise. Many politicians who are so clueless that they don’t realize the biggest pressure on coal and oil is not from renewable energy but from the activities of fracking. I was thinking about “clueless” last week when the Canadian federal government announced that they would create a crown corporation in order to takeover the trans mountain pipe line between the provinces of Alberta and British Columbia after the American companies behind it pulled out; so the federal government is putting up the money ($4.8 billion) while assuming all the risk. Now even after this announcement I do not see investors rushing in to “help out” which makes me wonder if the investment community already thinks this investment is a waste of time and money while the politicians move blindly forward.

  4. Sir Charles Says:

    The so-called “free” market will always end up in a couple of oligarchs dictating the rules. That’s always been the final stage. But as long as people still buy into this “land of the free” fairy tale and the myth that everyone would have the chance to become a member of the elite, nothing will change.


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