It’s Time to Convert Fossil Fuel Subsidies to Renewable Energy Subsidies
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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowWhile international organizations have called for the phase-out of fossil fuel subsidies, including the G20, the International Energy Agency, and the Organization of Economic Cooperation and Development (OECD), the U.S. has actually increased its fossil fuel subsidies. According to Forbes, the United States is subsidizing fossil fuels to the tune of $649 billion annually- nearly ten times what the U.S. spends on education.
This figure may even be low, because calculating the true value of indirect subsidies is difficult. For example, “soft” subsidies- like special accounting methods, foreign tax credits, and deeply discounted lease terms- that allow fossil fuel companies to frack and mine on federal lands for far less than the fair market value of the land lease- are hard to calculate.
There is no rational justification for continuing to subsidize one of the most lucrative- and destructive- industries in the world. Subsidies to fossil fuel industries are accelerating adverse health, environmental, and climate impacts around the world and at home. The annual cost of these impacts are estimated at $5.3 trillion globally, which means the U.S. is paying hundreds of billions to subsidize an industry that inflicts trillions in damages. What’s truly galling is that reducing these subsidies “would have lowered global carbon emissions by 28 percent and fossil fuel air pollution deaths by 46 percent, and increased government revenue by 3.8 percent of GDP,” according to the Environmental and Energy Study Institute.
Drinking, Passing, and Renaming the Kool-Aid
In what could easily be mistaken for a headline from The Onion, the U.S. Department of Energy (DOE) has even started referring to fossil fuels as “molecules of freedom,” and is officially calling natural gas “freedom gas.” Assistant Secretary of Fossil Energy Steven Winberg released a statement stating, “I am pleased that the Department of Energy is doing what it can to promote an efficient regulatory system that allows for molecules of U.S. freedom to be exported to the world.”
Perhaps this Trump-driven paean is why NIPSCO has been careful to disavow any climate-based rationale for its own decision to switch to renewables and shutter coal production by 2028. As NIPSCO President Violet Sistovaris announced the shift away from coal, she took pains to avoid even the appearance that it was based on climate or environmental concerns.“We’re going from coal-fired generation to lower-cost cleaner energy sources that will result in $4 billion in cost savings… It’s not politically driven or environmentally driven. It’s lower cost.”
OK, so don’t acknowledge the black carbon elephant in the room, because there’s also this pretty green elephant in the room covered in dollar signs. Minimally, NIPSCO’s profit-based rationale for retiring its coal-fired plants by 2028 makes plain why the U.S. must stop subsidizing fossil fuel and reinvest that money in renewable energy instead- because renewable energy is a sounder investment.
Even as this administration insists climate science isn’t real, its respect for corporate profits should compel a similar reinvestment from fossil fuels to renewable energy. Using the domestic steel industry as an example, domestic steel could face a major competitive disadvantage if foreign researchers patent emerging technologies for renewables-based steel production before we do. For example, researchers in Germany and Sweden are intensely pursuing the development of hydrogen-based steel, and they are heavily subsidized. If we don’t provide similar federal subsidies in the form of research support to the domestic steel industry, U.S. steel could lose competitive pricing once those alternative technologies are refined and implemented abroad.
Additionally, given the costs of wide-scale industrial conversion to renewable energies, (one estimate puts it at roughly the equivalent of a regime change war), the U.S. must provide federal resources to convert the heaviest carbon-producing sectors of the U.S. economy (ammonia, concrete, steel, and ethylene), because no company or sector can afford to do it alone and still remain competitive. We need to take that $649 billion subsidy from fossil fuels- where it burns quickly like gas through a V12 engine- and deliver it to heavy industry such as domestic steel for R&D and infrastructure upgrades over the next 20 years. The U.S. must take this simple step to prevent steel from facing a competitive disadvantage from foreign steel produced from renewables, which is not a question of if, but of when.
Dirty Steel Import Ban
While we’re supporting our domestic industry with properly subsidized R&D into renewable production technologies, we can also move from draconian one-size-fits-all tariffs to carbon-specific import bans. It’s no secret that steel manufactured in China, Poland, S. Korea, India, Turkey and South Africa produces a far larger carbon footprint than similar steel produced domestically. This means that whenever we import steel from those countries, we inflict a double-whammy on ourselves: we hurt domestic steel, and we accelerate climate change at the same time.
I think the U.S. should explore an import ban of all heavy metal and industrial products whose foreign production results in greater carbon output than domestic production of the same material. Simply put, if foreign manufacturers make the same product, but produce more carbon emissions than U.S. manufacturers of the same product, let’s just say no. Such a ban would help domestic steel while encouraging foreign interests to cut their carbon emissions.
Although some might assail the move as hypocritical, it’s becoming clear that European countries will soon start threatening the U.S. with carbon tariffs because of our lack of meaningful climate policies. Instead of waiting, or escalating the tariffs standoff, I suggest that we turn it around and refine the argument by introducing product-specific carbon-based import bans sooner rather than later. Shifting import bans to reflect carbon output of global competition would also be an excellent way to unify the American public. The left wants to fight climate change, and the right wants to protect domestic industry. A carbon based import ban offers an historically rare opportunity to unify the objectives of both sides of the political aisle, and it’s worth exploring for that reason alone.
Sabrina Haake (D) is seeking the Democratic nomination to represent Indiana’s 1st District in the U.S. House of Representatives.