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Ryan: Subsidies Are Already Too Great

Updated: 11:06 a.m.

Congress appears poised to rush through the most sweeping change to our nation’s energy policy in generations. The rhetoric sounds great: a profusion of “green— jobs, finally making “big oil and gas— companies pay their fair share in taxes, and even saving the planet.

But the reality is much different. Absent from this debate is a clear assessment of America’s current energy and environmental policies. Before we adopt the gusher of new spending and taxes Congress is considering, here are some facts Americans should take into account.

First, U.S. taxpayers already provide heavy subsidies for renewable energy, and have for years. The federal government pays solar and wind producers more than $20 for every megawatt of power they produce — a near 40 percent subsidy rate that costs taxpayers upward of $1 billion annually.

Subsidies and direct spending for other renewable energy sources, conservation and aid programs cost taxpayers another $15 billion. These include a 51-cent-per-gallon subsidy for biofuels, a $380 million tax credit for energy-efficient homes, $227 million for weatherization programs, and $2 billion for the Low Income Home Energy Assistance Program. The energy-related portion of the Department of Energy’s budget costs an additional $24 billion; and this year, another $39 billion was added to the economic “stimulus— bill for energy projects.

All told, Congress has already committed American taxpayers to almost $80 billion for energy projects.

Second, the oil industry is not getting the “free pass— some claim. According to the Minerals Management Service, the government collected $24 billion in 2008 from offshore drilling — enough to pay for all of the DOE’s energy programs. This revenue came from only the federal waters currently open for exploration.

Many experts believe significant new energy reserves — and corresponding revenues — can be found in areas currently off-limits. Revenue from onshore energy development adds another $5.4 billion to the federal coffers, and income taxes paid by U.S. energy companies brought in another $85 billion in 2007.

In short, American oil and gas companies pay the government more than $100 billion annually — enough for our entire energy budget, and then some. But the administration wants these companies to pay an additional $31 billion to cover their “fair share.— These costs would likely be passed on to consumers in the form of another hidden energy tax.

Apparently, consumers aren’t paying their fair share, either. The crown jewel of the Democrats’ energy plan, the cap-and-trade tax scheme, claims it can slow global warming, but only by making energy more expensive for everyone. This Byzantine mechanism would increase what Americans already pay for energy by a whopping $846 billion.

So, what would we get in return for this $846 billion tax hike? Ironically, the answer is less energy and a smaller economy. Groups ranging from the Brookings Institution to the Heritage Foundation to the Environmental Protection Agency all agree the economy would be smaller under cap-and-trade than without it. This is no accident. By design, cap-and-trade makes energy more expensive, reducing airline flights, trucking services, steel, cement and every other commodity that uses energy. Fewer goods and services mean fewer jobs.

What about the environmental benefits? According to some studies, the cap-and-trade scheme might move global temperatures — by a fraction of a degree, by the end of this century — a movement so small it might not be measurable. Meanwhile, for every ton of carbon we avoid, China, India and Russia will produce many more. Going it alone without these countries won’t help the environment. But it will put the U.S. economy at a competitive disadvantage.

I don’t believe most Americans would choose to pay more money in exchange for less energy, a smaller economy and an all-but-nonexistent benefit to the environment. Common sense rejects this choice. A better approach would be to make energy cheaper, not more expensive; to facilitate an economy operating at full potential, not below it; to encourage domestic production of oil and gas in an environmentally responsible manner, not demonize it; and to embrace clean nuclear technology, not ignore it. These are the common-sense principles for a 21st-century energy economy that Republicans will strive for.

Rep. Paul Ryan (R-Wis.) is the ranking member of the House Budget Committee and serves on the House Ways and Means Committee.

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