Renewable Energy Subsidies & Fossil Fuel Phase-Out

American pulp and paper companies have begun increasing their use of fossil fuels in order to become eligible for a renewable-energy tax credit, while also reaping millions of dollars in tax rebates. The renewable-energy tax credit in question was originally meant to encourage transport companies to blend fossil fuels with alternative fuels to power their vehicles.

Three recent reports by the Global Subsidies Initiative (GSI) survey subsidy policies for biofuels in China, Malaysia and Indonesia. The reports marks a shift in focus for the GSI’s “Biofuels At What Cost?” series, from biofuel subsidy policies in OECD countries—which account for the lions share of global government support for biofuels—to that of certain developing countries that have stood poised to capitalize on heightened interest in these renewable fuels.

The United States House of Representative narrowly passed legislation last month that would increase incentives for renewable energy production, while removing tax breaks for the so-called ‘Big Five’ oil companies, as well as firms controlled by foreign governments such as Citgo (Venezuela).

Norman Myers, an environmental scientist, is the author of the book Perverse Subsidies: Tax $s Undercutting our Economies and Environments Alike. He is currently completing a new book called How Institutions Block Our Road to Sustainability. He also serves as a member of the High-Level Advisory Group of the Global Subsidies Initiative. The GSI reached Mr. Myers at his home in Oxford, England.

A study released by the Rand Corporation, a nonprofit think-tank, argues that it would be better for the United States to meet a 25% renewable energy standard by adopting a tax on fossil-fuels rather than providing subsidies for renewable energies. The study, “Impacts on U.S. Energy Expenditures and Greenhouse-Gas Emissions of Increasing Renewable-Energy Use”, compared a tax on fossil fuels, subsidies for renewable energies, and a revenue-neutral tax-and-subsidy mechanism.

Last month, Oxfam GB launched an emergency appeal for East Africa. Oxfam’s last call for emergency help for the region was in 2006, and there have been countless others before, precipitated by drought, conflict or, like now, both. But this time, something is different. There is food on shelves, but people can’t afford it.

The nuclear power industry in the United States has relied on government intervention and support for over fifty years, raising critical questions. Is this the best use of public funds to promote sustainable energy production?

Heeding complaints by the European biodiesel industry, the European Commission (EC) has launched an inquiry into U.S. biodiesel subsidies which are alleged to have resulted in dumping of U.S. biodiesel into the European market. At the centre of the controversy is a Volumetric Blenders Tax Credit adopted by the U.S. in 2004 which grants a tax credit of US$ 1 per gallon - or over US$ 300 per ton - of biodiesel blended in the United States.