While the majority of U.S. primary energy production comes from fossil fuel resources, the bulk of the energy tax breaks have gone to support renewable fuels in the past two years, according to a new analysis by the Congressional Research Service (CRS).
The revenue losses and outlays stemming from tax breaks for fossil fuels were $2.5 billion and $2.4 billion in 2009 and 2010, respectively, said the CRS analysis, which was requested by Sen. John Cornyn (R-TX). Comparatively, the tax breaks to spur the use of new renewable-related technologies — such as the production tax credit, residential energy-efficient property credit, renewable energy bonds, the Section 1603 grant program and credit for investment in advanced energy property — were $2.9 billion in 2009 and $6.7 billion in 2010. Tax perks for renewable fuels — alcohol fuels and biodiesel — were $12.5 billion in 2009 and $6.3 billion in 2010, said the CRS, which works primarily for Congress.
Renewable fuels received $13 billion in tax incentives from the federal government in 2010, which was 81% more than the $2.4 billion that fossil fuel sources (oil, natural gas and coal) received.
Tax breaks for all kinds of energy fuels, efficiency measures and alternative technologies dropped to $19.1 billion in 2010 from $19.9 billion in the prior year, according to the analysis. Tax incentives for renewables — including renewable electricity and renewable fuels — accounted for an estimated 76% of the total revenue loss associated with energy tax provisions in 2009. In contrast, revenue losses associated with tax incentives for fossil fuels were 13% of the sum of the cost of energy tax incentives, CRS said.
During the 2009-2010 period, the largest federal revenue loss came from the excise tax credit for alcohol fuel — a combined $10.9 billion. The excise tax credit for alcohol fuels was scheduled to expire at the end of 2010, but it was recently extended to expire at the end of the current year.
In 2010 $4.2 billion of tax-related support for energy came from the Section 1603 grant program, which is administered by the Department of Treasury and provides cash grant incentives for renewable energy projects. “Between 2009 and 2016, this provision is expected to result in an estimated $23 billion in outlays,” the CRS said.
The analysis estimated that in 2009, 21.5 quadrillion Btu of natural gas was produced, for 29.5% of the total energy produced in the U.S. Total fossil fuel output was 56.9 quadrillion Btu, or 77.9% of domestic production. In contrast, renewable energy production was estimated at 7.8 quadrillion Btu, or 10.6% of total domestic output in 2009.
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