There has been much debate recently about subsidy in the energy industry and for wind energy in particular. According to the EIA, in 2007, wind energy received $724 million in federal support. That’s a lot right? Well, that same year fossil fuels received $3.2 billion in subsidy.
These figures only take into account the direct subsidies. We often overlook the hidden costs, sometimes called “externalities” related to energy generation. To get a full accounting of how much the taxpayer subsidizes energy we have to look at these externalities, and chief among them are damage to human health and damage to the environment.
Burning fossil fuels releases many dangerous compounds that cause lung damage, asthma and premature deaths from air pollution, birth defects from mercury fallout, and damage to buildings, timber harvests and ecosystems from acid rain. The National Academy of Sciences, in a report requested by Congress, calculated these damages at $120 billion a year in the United States. These costs are very real and they are not reflected, or “internalized” in market prices. In effect, they are a hidden subsidy for polluting energy sources.
Coal plants are the biggest source of such external, or “hidden” costs, with domestic non-climate damages alone averaging $62 billion annually, equivalent to 3.2 cents per kWh. Climate-related damages from coal power plants are estimated to range from 0.1 cents to 10 cents per kWh. The cost for cleaning up after coal then ranges from 3.3 cents to 13.2 cents per kWh produced. This is in addition to the billions of dollars in direct subsidies.
In comparison, wind energy is clean. There are no hidden costs—a wind turbine produces no harmful chemicals so there’s no disease or birth defects, no damage to our environment. Like the rest of our electricity sources, it gets a subsidy, to the tune of 2.3 cents per kWh. But that’s a real bargain compared to coal. Between the subsidies and the health and environmental damage, coal costs 3.5-13.4 cents per kWh. That means the direct and indirect subsidies for coal are at least 50% more, and perhaps 5 times more, for coal derived electricity.
National Academy of Science: Report Examines Hidden Costs of Energy Production and Use
U.S. Energy Information Administration: How much does the Federal Government spend on energy-specific subsidies and support?