Subsidies and energy costs

See also Aircraft Aviation Fuel Efficiency of Energy Use, Economic Concerns and Engines Kerosene Subsidies and Energy Costs Supply and Demand and Energy Prices Transportation, Evolution of Energy Use and. 

See also Economic Externalities Market Imperfections Subsidies and Energy Costs. 

New subsidies often outlive the public policy purpose that they were intended to address. The better-designed subsidies contain sunset provisions that require explicit action to reauthorize them after a certain time. Subsidy and externality policies arc often interrelated. It may be politically difficult to tax an energy source with high external costs, but much easier to subsidize a competing energy source with low external costs. Such second best solutions arc often implemented when political considerations block the preferred option. 

Solar installations are often supported by federal and state subsidies, and many power companies allow these systems to be connected to their electricity grid so that the excess power generated can be sold to the power company for a credit (the electric meter is running backward), which "electricity credit" can be used later when solar energy is not available. In Europe, the highest amount of support paid is in Germany. In the United States, California supports each installation with about 25,000. In New York, the state pays 49-70% of the cost in New Jersey, support is 3,800/kWp and in Connecticut, 25,000 per installation. 

The cost of the current energy infrastructure is already sunk, which increases the barrier to new technologies that require new infrastructure. In addition, selected components of the current energy structure benefit from economic subsidies and favorable regulation. 

Various preferential interventions in the form of taxes, subsidies, and regulations also influence consumer prices, and hence consumer behavior. At the same time, however, the cost of important external effects, such as the stress on the global climatic system or lower national security, are also excluded from the prices that influence consumer trade-offs. And if the full cost of the mine-to-waste cycle needed to provide an energy-based service does not appear in the price of that service, then it will be consumed inefficiently. 

One must generally be careful in using cost estimates from different countries with different taxation and subsidy structures. In particular, one should be concerned over use of current energy costs for estimating break-even costs of new technologies. 

The private price projections used are those implied by the National Energy Plan of 1977 as expressed in various DOE reports. The social prices were derived from the private prices by correcting for taxes and subsidies and by adding pollution and foreign dependence costs where appropriate. The homeowner s real opportunity cost of capital was 1% and the real social opportunity of capital was 8%, Table I shows the public benefits of the solar technology with and without the storage R D activity for each time period. The present value of the total benefits of the storage R D activity under these circumstances is S. 7 billion. 

Crude oil and gasoline price increases FCV cost reduction Value of emissions reduction Subsidies and R D funding and timing FCV fuel economy improvements Energy and capital cost improvements for hydrogen generation... 

A financial analysis procedure specifically devised by Mossman (1989) for comparison of OTEC price estimates with other energy somces allows a valid comparison to be made of the relative commercial attractiveness of energy production methods. It establishes uniform guidelines to estimate the sales price that would return an acceptable profit for investors in alternative energy production systems. The Mossman procedure eliminates distortions and misunderstandings caused by failure to include the effects of government subsidies or hidden costs that differ widely among the various options. 

Most of the increase in production occurred during-the 1979/80-1984/85 period and was contributed by growth in fertilizer production in Eurasia. Economic and political reforms are responsible for the recent decline in production, Specifically, depressed demand, removal of subsidies, the high cost of energy and raw materials, and low capacity utilization resulting from outdated technology and poor maintenance have contributed to decreased production. Sudden withdrawal of governmental support without the provision of an alternative and adequate financial and institutional support also contributed to this process. 

This approach of recycling for re-use seems eminently sensible and simple. However, when the re-sale value of the recycled products and the costs of conversion and extra energy required are compared, there are, in reality, very few recycling operations which are economically feasible and around which sustainable businesses can be developed. Society must be willing to provide a continuing subsidy or to find some more cost effective form of re-use. The approach outlined above turns out in practice to be very complicated. 

With reference to economic resources, new financial strategies are needed to run universities in a similar way as enterprises. University budgeting today requires to make visible the real costs of infrastructure including personnel, materials, energy etc.. It also needs to show the proceeds, fees, subsidies and grants. The traditional budgeting approaches do not really fit into the 21 Century any more. 

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