What Would Jefferson Do? The Historical Role of Federal Subsidies in Shaping America’s Energy Future

Using data culled from the academic literature, government documents, and NGO sources, in this paper we examine the extent of federal support (as well as support from the various states in pre-Civil War America) for emerging energy technologies in their early days. We then analyze discrete periods in history when the federal government enacted specific subsidies. While other scholars have suggested that the scope of earlier subsidies was quite large, we are—as far as we know—the first to quantify exactly how the current federal commitment to renewables compares to support for earlier energy transitions. Our findings suggest that current renewable energy subsidies do not constitute an over-subsidized outlier when compared to the historical norm for emerging sources of energy. For example:

• As a percentage of inflation-adjusted federal spending, nuclear subsidies accounted for more than 1% of the federal budget over their first 15 years, and oil and gas subsidies made up half a percent of the total budget, while renewables have constituted only about a tenth of a percent. That is to say, the federal commitment to O&G was five times greater than the federal commitment to renewables during the first 15 years of each subsidies’ life, and it was more than 10 times greater for nuclear.

• In inflation-adjusted dollars, nuclear spending averaged $3.3 billion over the first 15 years of subsidy life, and O&G subsidies averaged $1.8 billion, while renewables averaged less than $0.4 billion.