| August 3, 2011 |  |
Energy Information Administration Report Undercounts Subsidies to Coal, Oil, Natural Gas and Nuclear Energy
Renewables and Energy Efficiency Shortchanged by Flawed EIA Methodology
WASHINGTON (August 3, 2011) — The Energy Information
Administration’s (EIA) latest report on federal
energy subsidies, released on Monday, underreported direct and indirect federal
subsidies to the nuclear and fossil fuel industries, creating an inflated view
of the subsidies that benefit renewable energy and efficiency programs,
according to the Union of Concerned Scientists (UCS). Although the agency concedes
that its methodology failed to account for all subsidies that benefit
conventional energy sources, its consistent underreporting over the years has enabled
advocates of fossil fuel and nuclear technologies to falsely claim they benefit
from very few federal energy subsidies compared with renewable energy
technologies.
“Thanks to reporting omissions, the nation’s most highly
subsidized, polluting industries will be able to use the EIA’s flawed analysis to
claim they receive far fewer subsidies than emerging, clean energy technologies,”
said Ellen Vancko, manager of the UCS Nuclear Energy and Climate Change Project.
“Recent independent analyses show that nothing could be further from the
truth.”
The problem with the EIA’s methodology stems from the fact
that the agency adopted a “snapshot” approach to measuring subsidies by only
looking at a single year: 2010. By doing that, Vancko pointed out, the agency
failed to count the massive federal subsidies that the fossil fuel and nuclear
industries have enjoyed for decades—benefits they presumably will continue to
receive unless Congress acts to limit them. Conversely, relatively new
subsidies for wind and other renewables will only last for a finite period—10
years—after those facilities begin operation.
Most of the
support for efficiency and conservation projects, meanwhile, came through
stimulus grants. These are one-time bumps in spending, unlikely to be
repeated given the fiscal constraints the country now faces. Congress
chose the grants as attractive targets for stimulus spending because they were
initiated quickly, supported many small scale projects—often at the household
level and often by small firms—and resulted in permanent cost-savings for lower-income
citizens.
The EIA also failed to count subsidies that are available to
the oil, gas, coal and nuclear industries that they have not as yet utilized. For example, Congress has enacted numerous
large new subsidies in recent years, such as loan guarantees and production tax
credits, that would especially benefit new coal and nuclear plants, but because
these facilities have not yet been built, the EIA did not include the subsidies
in its calculations. As a result, the EIA missed the enormous influence these
programs have on the economics of new energy investments.
Last year, UCS calculated
the benefit of new, uncounted subsidies for new nuclear reactors under the
Energy Policy Act of 2005 at as much as $5 billion per reactor. Meanwhile, a February
2011 UCS report, “Nuclear
Power: Still Not Viable Without Subsidies,” showed that nuclear power has
benefitted greatly from subsidies since its inception more than 50 years ago—and
the EIA report left them out as well. “Extremely generous existing and new
subsidies mask nuclear power’s considerable costs and risks,” said Vancko, “yet
they are not accounted for in EIA’s latest report.”
This is not the first time that the EIA has produced a flawed
analysis. A 2010 report by Doug Koplow of Earth Track, “EIA
Energy Subsidy Estimates: A Review of Assumptions and Omissions,” for
example, identified numerous omissions in the EIA’s 2007 federal subsidies report
that undercounted billions of dollars in direct and indirect subsidies to
conventional energy sources. Koplow identified a number of problems with the EIA’s
methodology, ranging from using a limited number of sources to ignoring many energy
sector subsidies.
“In combination, problems of estimation and omission in
EIA’s work render a picture of subsidies that has more to do with the scope and
manner of its research than with the actual impact of policies in place,” the
report concluded. Although Koplow provided the EIA with a list of detailed
recommendations to correct these deficiencies, the agency’s methodology in its
new report closely tracks what it used previously.
“We need to address climate change quickly and in the most cost-effective
manner possible,” Vancko said. “This requires a logical and economic transition
away from carbon-intensive fuels and an accurate accounting of the subsidies
provided to all energy sectors. The EIA needs to improve its energy subsidies
accounting work if we are to properly evaluate the distortions that existing
policies cause. Any future work the EIA carries out on the topic of energy
subsidies must be free of political interference, include a systematic and
consistent assessment of all types of subsidies over a long period of time, and
ensure that the analyses are done with greater transparency and broader public
input.”
The Union of Concerned Scientists puts rigorous, independent science to work to solve our planet's most pressing problems. Joining with citizens across the country, we combine technical analysis and effective advocacy to create innovative, practical solutions for a healthy, safe, and sustainable future.
