Subsidy Briefs, June 19, 2014

1)  Toronto Hydro looks to implement power subsidies on steroids to large consumers.  Trying to cut down power bills?  Use less energy has long been the solution.  But if Toronto Hydro gets its way, every customer would pay a flat rate for as much power as they could consume.  Small power consumers would pay more (the utility still has to cover big fixed costs, after all), while power hogs would see bills go way down. The logic escapes me here.  Perhaps somebody has been studying gasoline pricing in Venezuela too long, or maybe bar hopping with Toronto Mayor Rob Ford. 

Were the utility located in a place where nobody else could use the power, and absent a big push to boost consumption, the water would simply be spilled over the dam, perhaps there might be some logic to the proposed approach.  But in a real world, where not only can the hydro power be shipped to customers far and wide, but the ability to control when the power is generated makes the resource even more valuable as a way to firm intermittent renewable supplies, the idea is pure bonkers.  Criticism has been fierce, so hopefully the proposal will die a quick death.

2)  Truth in advertising:  overly rosy fuel efficiency estimates for Ford Hybrids trigger consumer rebates.  Where's mine?  OK - so you bought a hybrid looking to save fuel and it turns out the the test EPA uses to measure fuel efficiency isn't very accurate and you need to buy more gasoline than you'd been led to believe.  Fair?  For sure not.  And Ford is going to pay 200,000 drivers up to $1,050 each to compensate for the mistated operating costs.  Cutting gasoline demand as promised would have been the best route, but at least customers are getting compensated for their extra costs. 

The thing is though, none of the gasoline cars I've ever owned have met their EPA mileage ratings either.  None.  Not on highways, and not in the city.  Not when new and not when broken in.  So where is my check?  I'm not holding my breath here, but the basic point is that if we want efficiency metrics to help direct markets, we ought really to be able to trust the measures on which our purchase decisions are made.  We are clearly not there yet.  And DOE's recent effort to compare gasoline and electric vehicles doesn't seem to get us much closer. 

3)  Navy still looking to outbid other markets for biodiesel supplies; not hard to do at close to $100 per gallon.  Biodiesel from waste oil and grease can be sustainable, but is quite limited in supply.  Other sources of supply are far less green, and sometimes positively disastrous:  global biodiesel demand, for example, remains a significant source of deforestation in Indonesia and Malaysia. 

But limited sustainable feedstocks haven't stopped the US Navy from "greening" its fleet through biodiesel procurement.  The most recent is a solicitation to buy at least 37 million gallons of drop-in biofuels, what appears to be the single largest bulk biofuels purchase ever.  Though the Department of Defense says it will purchase the biofuel blends only if they are cost-competitive, this procurement is valued in excess of $3.5 billion.  So unless there is something horribly wrong with the facts published in this article by Domestic Fuel, we are approaching $100 per gallon.  Only in the Defense Department could that possibly be viewed as "cost-competitive." 

4)  US Environmental Protection Agency Administrator Gina McCarthy admits carbon rule details in part crafted to help keep uneconomic nuclear reactors operating.  Is this a surprise?  Only that they were so forthright in acknowledging the policy driver.  The subsidies themselves are not surprising at all:  the nuclear industry is a finely-honed subsidy machine.  No surprise either that this issue received prominant coverage in a Chicago newspaper.  (Thanks to Michael Mariotte of NIRS for calling my attention to this article).

5)  Louisiana Dreaming:  The Bobby Jindal corporate cash machine continues.  Whenever somebody tells me that government subsidies are a Democratic tendency, I always point them to Bobby Jindal and the state of Louisiana.  Both parties love and live on government pork, they simply use it for different things.

In Louisiana, the subsidy news hooks change, but provision of massive subsidies remains remarkably constant over time.  Most recently, it was revealed that the cast of the highly lucrative show Duck Dynasty is also tapping into $70,000 per episode in state subsidies.  The film industry is probably even better than the nuclear industry in ginning up subsidies for every move it makes, and that is saying alot.

But Louisiana subsidizes pretty much everything, and big recipients are always the fossil fuel industry.  In 2012, I documented how two-thirds of tax-favored federal bonds to rebuild after Hurricane Katrina were captured by the oil and gas industry, and evaluated a slew of other subsidies to that sector as well.  Tax breaks give away the vast majority of the state's corporate tax base, and their most recent tax expenditure budget runs 406 pages (though at least they have one, unlike Wyoming). 

In my 2012 blog posting on the Jindal largesse, a google search for Jindal incentive returned 1.2 million hits.  I had a moment of panic today when I redid the search and a mere 128,000.  Then I tried a slight shift, searching for the plural Jindal Incentives instead.  Boom:  4.2 million hits.  My faith in Governor Jindal is restored!