Tuesday, May 20, 2014

Big Bad Subsidies

The argument goes like this: our Big Bad Government gives away Tons of Money to Big Bad Oil Companies, and that if only they would give that money to Little Renewable Companies instead, we'd be on our way to green nirvana.

In today's episode of Green Myth Busting, let's have a detailed look at that claim.

Well, it's really pretty hard to find numbers on how much our various levels of government subsidize fossil fuel extraction. I recently came across this, though.There's a link in there to Canada, with a report and with actual data. So I had a look. In keeping with the theme of my blog, I'm just going to look at what affects me here, locally, in BC. So that is, BC provincial subsidies as well as the Federal ones.

[coal subsidies in BC, from the OECD report on Canada]

So, BC taxpayers hand over $25.2 million in subsidies (and I'm including supporting Geoscience BC, which is a non-profit) to fund the production of coal. From the BC Government's own statistics, that works out to about $0.91 / tonne of coal produced. 

I should note that 70-90% of this coal is of a metallurgical grade: it is used to make steel. It is high-grade, and too expensive for most buyers to burn for electricity generation. And, since I've already noted that we can't have solar panels or wind turbines without steel, is it fair to target these subsidies? 

Also note that the lion's share of the subsidies is in tax breaks from the Feds, and it's important to note that some of these tax breaks ("accelerated capital cost allowance", "flow through share deductions" ) would also be given to other businesses. Like windmills, for instance. So are these really subsidies that we should be getting angry about? Anyways, on we go, assuming "yes" to both those questions...

Here's the table for petroleum. Now we're into some bigger money. But, most of the tax breaks are federal, and those are mostly to the benefit of Alberta producers, who produce 99% of the oil in Canada. So I suppose I should really only count 1% of those Federal subsidies as going to BC. Then, I've subtracted out those subsidies that go to consumers in the form of fuel tax exemptions. Fair? That would make BC subsidies about $27 million in total, or about $3.40 per barrel of oil produced (here in BC).

[petroleum subsidies in BC, from same OECD report]

...and finally, let's look at natural gas. BC produces about 35% of the natural gas in Canada, the rest is in AB. So again let's split the Federal tax credits along these lines, shall we? That gives us about $180 million in subsidies, or about a nickel per cubic foot of gas produced.

[subsidies to natural gas production in BC and yeah, you know where it's from]

Right. So there you have it:

a buck per tonne of coal,
$3.50 per barrel of oil, 
a nickel per cubic foot of gas.

Works out to about $230 million, here in BC. I am not at all sure that this sum of money would bring about green nirvana. Supporting wind or hydro power here in BC is not without controversy. For electricity sources, a typical subsidy would be a guaranteed feed-in tariff, that would be a few cents per kWh or something. In fact, we can look this up since BC Hydro is the single buyer of 99% of the electricity in this province.

Let's do that math...if 1 bbl oil has the approximate energy content of 1600 kWh, our $3.50/bbl subsidy works out to about $0.002 per kWh. Note that this is very, very much smaller that BC Hydro's current "standing offer" of about $100/MWh for clean energy. $100/MWh is about $0.100/kWh, in other words, BC Hydro currently subsidizes clean energy at a rate 50 times higher than we subsidize oil.

Conclusion: We are already subsidizing clean energy at a rate 50x that of oil. It has not brought about green nirvana. The problem isn't lopsided subsidies favouring fossil fuels. The problem lies elsewhere, with the clean energy sources themselves, which are much more expensive than hype would have you believe. 

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