Government involvement in financing large scale energy projects has a checkered past. Historical forays into loan guarantees for biofuels and syn-fuels have been expensive failures. Large hydroelectric dams and federally-owned uranium enrichment facilities were built and operated as government-owned entities, though not without substantial subsidies. Title XVII of the Energy Policy Act of 2005 initiated a new wave of multi-billion dollar federal loan guarantees to large scale, high risk, privately owned energy infrastructure.
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Many organizations and key members of government believe that US energy markets need to embark on an accelerated transition off of oil. Some focus on diversification away from oil imports in order to stop funding countries that don't like us much. Others focus on climate change worries, working to transition from all fossil fuels. Both groups push for bold, new, and often very expensive plans to alter the nation's energy path. Usually, these plans call for large new government agencies, along with mandates, to implement the changes.
Tracking energy subsidies for a single country is a challenging task; trying to measure them globally is even more so. Multi-country studies of fossil fuel studies have been done, and normally use a price gap measure. This approach compares the world price of the energy commodity with a transport-adjusted world reference price at which fuels could be brought in to a country. While the price gap provides many useful insights on energy subsidy trends, these estimates form a lower-bound for total support.
This chapter reviews the major policy developments affecting the fuel-ethanol industry of the United States since the late 1970s, quantifies their value to the industry, and evaluates the efficacy of ethanol subsidization in achieving greenhouse gas reduction goals. Total support to ethanol is currently substantial ($5.8-7.0 billion in 2006) and set to rise sharply even under existing policy settings. However, its cost effectiveness is low, especially as a means to reduce greenhouse gas emissions.