Market-distorting renewable energy subsidies, according to the Energy Information Administration, dwarf those allocated to oil, gas and other fossil fuels.
At the request of the Secretary of Energy, the Energy Information Administration (EIA), an independent agency of the U.S. Department of Energy, evaluated the subsidies that the federal government provided energy producers for fiscal year 2016, updating a study that it did for fiscal years 2013 and 2010. Federal subsidies to support renewable energy in fiscal year 2016 totaled $6.682 billion (2016 dollars), while those for fossil energy totaled $489 million—renewables subsidies were higher by almost a factor of 14. The EIA noted that those subsidies do not include state and local subsidies, mandates, or incentives that in many cases are quite substantial, especially for renewable energy sources.
EIA found that most federal subsidies in FY 2016 support renewable energy supplies (primarily biofuels, wind, and solar) and reducing energy consumption through energy efficiency. In FY 2016, 45 percent of federal energy subsidies were associated with renewable energy and 42 percent were associated with energy end uses (e.g., Low Income Heating Assistance and other such programs). Energy end-use and conservation subsidies declined from $7.7 billion in FY 2013 to $7.2 billion in FY 2016.
Despite renewable energy receiving almost half the federal subsidies, EIA reported that fossil energy in the form of coal, oil, natural gas and natural gas plant liquids made up 78.1 percent of primary energy production in FY 2016. Nuclear power contributed 10 percent, followed by biomass at 5.9 percent, hydroelectric at 2.9 percent, wind at 2.4 percent, solar at 0.6 percent, and geothermal at 0.2 percent.
Total federal subsidies declined from $29.3 billion in FY 2013 to $15 billion in FY 2016. Federal renewable energy subsidies declined from $15.3 billion in FY 2013 to $6.7 billion in FY 2016. The decline in federal renewable energy subsidies was due mainly to a decrease in direct expenditures, which reflects an expired government program that allowed subsidy applicants to receive grants in lieu of tax credits. These grants (Section 1603 grants) were created by American Recovery and Reinvestment Act of 2009. While the application period for this temporary program ended, the outlays for some projects continued into FY 2016.