Government aid to reduce energy costs
Energy subsidies are measures that keep prices for customers below market levels, or for suppliers above market levels, or reduce costs for customers and suppliers. Energy subsidies may be direct cash transfers to suppliers, customers, or related bodies, as well as indirect support mechanisms, such as tax exemptions and rebates, price controls, trade restrictions, and limits on market access.
During FY 2016–22, most US federal subsidies were for renewable energy producers (primarily biofuels, wind, and solar), low-income households, and energy-efficiency improvements. During FY 2016–22, nearly half (46%) of federal energy subsidies were associated with renewable energy, and 35% were associated with energy end uses. Federal support for renewable energy of all types more than doubled, from $7.4 billion in FY 2016 to $15.6 billion in FY 2022.
The International Renewable Energy Agency tracked some $634 billion in energy-sector subsidies in 2020, and found that around 70% were fossil fuel subsidies. About 20% went to renewable power generation, 6% to biofuels and just over 3% to nuclear.
Overview of all sources of energy.
If governments choose to subsidize one particular source of energy more than another, that choice can impact the environment. That distinguishing factor informs the below discussion on all energy subsidies of all sources of energy in general.
Main arguments for energy subsidies are:
Main arguments against energy subsidies are:
Types of energy subsidies are below. ("Fossil-fuel subsidies generally take two forms. Production subsidies...[and]...consumption subsidies."):
Overall, energy subsidies require coordination and integrated implementation, especially in light of globalization and increased interconnectedness of energy policies, thus their regulation at the World Trade Organization is often seen as necessary.
Support for new technology.
Early support of solar power by the United States and Germany greatly helped renewable energy commercialization to reduce greenhouse gas emissions worldwide, but may not have helped local manufacturing. Support for nuclear fusion continues, although it is not expected to be commercially viable in time to contribute to countries net zero targets. Energy storage research is also supported.
References.
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