by Jon Sanders
Director of the Center for Food, Power, and Life, Research Editor | John Locke Foundation
As my colleague Roy Cordato explained in his 2013 Spotlight report on energy subsidies, the proper way to compare energy subsidies is not by looking at gross subsidies, but net subsidies.
Why net subsidies are economically more relevant is because they “include not only the monetized value of policies that subsidize the relevant industries but also the monetized value of policies that penalize those industries.” (Emphasis added.)
Cordato’s report lists (pp. 3-4) several examples of subsidies and penalties that should be considered in calculating net subsidies. He concluded,
Energy markets are riddled with government intrusions, from mandates and grants of monopoly privilege to special tax breaks and environmental and land use regulations. All energy sources are both subsidized and penalized. The point to remember is that when we are given comparative estimates regarding energy subsidies alone we are being told an incomplete story.
From the perspective of economics, and liberty, the important question is — how are coercive policies distorting supply and demand relative to a free market that reflects actual scarcities, production costs, and consumer preferences?
New research from Mercatus provides a hint about coercive government policies in the energy market. Look for the energy industries among the most regulated industries in the United States:
With respect to subsidies, I point you to my newsletter of November 23, 2015. Here’s one chart from that newsletter:
Out of curiosity, I decided to see how much power those subsidies were buying in dollar per kilowatt-hour:
(Click on the images for the full-size versions)