EIA Energy Subsidy Estimates: A Review of Assumptions and Omissions

Attributed Authors: Doug Koplow, Earth Track, Inc. Published: Mar 2010
 

This Review provides the most detailed look to date at gaps in federal tracking of energy subsidies.  In addition to evaluating the research approach used by the US Energy Information Administration (EIA), the Review assesses how key assumptions and omissions in EIA's work resulted in a substantial undercounting of federal energy subsidies and an inaccurate portrayal of subsidy distribution across fuels.  EIA estimates are also placed in the context of other assessments of domestic energy subsidies conducted over the past thirty years.

With energy subsidy reform increasingly viewed as a central tenet of any climate change mitigation strategy, ensuring accurate information on the size and distribution of energy subsidies is critical. 

Key factors affecting EIA's results included a restrictive research mandate; inappropriately narrow inclusion rules on subsidy policies, sometimes inconsistently applied; and a variety of valuation issues (see table below).  In combination, these problems resulted in estimates that have more to do with the research method than with the actual policies in place. 

Related documents:

Complete Review
Executive Summary only
Extracted table comparing EIA subsidy estimates to other subsidy research
Review of "price gap" approach commonly used internationally to measure energy subsidies
Earlier reviews of EIA subsidy estimates:  20011993.


Expected Bias Resulting from EIA Subsidy Definition and Valuation Conventions

Issue

Scale of impact/year

Issue understates subsidies to:

Use of point rather than range estimates

$5.3 billion for subset of tax expenditures alone

Oil, gas, nuclear, coal, efficiency

Use of revenue-loss rather than outlay-equivalent metric for tax subsidies

Billions

Oil, gas, wind, biofuels

No marginal analysis of new and expanded subsidies

Billions

Clean coal, nuclear

Use of current account rather than actuarial balance on trust funds to assess subsidy level

Billions

Nuclear, fossil (to a lesser extent)

Omission of subsidies related to insurance and publicly provided market oversight

Billions

Nuclear, coal, hydroelectricity

Omission of minimum purchase requirements such as Renewable Fuel Standard

Billions

Liquid biofuels; renewable electricity if federal RPS enacted

Omission of support to bulk fuel transport infrastructure

~1–2 billion

Oil, coal, and, to a lesser extent, ethanol and liquefied natural gas

Omission of support to energy security

>$10 billion

Primarily oil, with some benefits as well to nuclear and natural gas

Omission of subsidized credit through export credit agencies and multilateral development banks

Unknown

Oil, gas, coal, renewables, new nuclear

Omission of use of tax-avoiding corporate forms

Unknown

Oil, gas, coal

Omission of lease-related subsidies

>$1 billion

Oil and gas, synfuels

Inadequate reflection of subsidies to public power

>$1 billion

Coal, natural gas, nuclear, hydroelectricity

Omission of most accelerated depreciation to energy

Billions

Oil, coal, natural gas, wind, biofuels, new nuclear

Omission of most energy-related tax-exempt bonds

Billions

Coal, natural gas, wind, biofuels

 

 

Tags: EIA US energy subsidy comparison