How Much Is Energy Subsidized?

Abstract

Subsidies of economic activity are important policy tools, but discussions of their magnitude and consequences are obscured by arguments over definitions. In the field of energy, various reputable sources have reported subsidy figures ranging from trillions of dollars annually to zero. The many definitions are important, but more important still is ensuring that a dialogue ensues between holders of different views.

This article surveys the energy subsidization figures and definitions, unpacks the variations, and offers a way to move beyond definitions to substantive discussion of energy policy. An Energy Policy Palette is proposed to allow all partisans to participate in the conversation that is needed to make progress on societal goals for responsible energy deployment.

Throughout, quotations from George Orwell are invoked to demonstrate the care that must be taken when mixing politics and language--and economics as well. This article builds on the author's prior piece, "Numeracy for Energy and Environmental Lawyers," 8 Journal of Law (5 J. Legal Metrics) 33 (2018), https://papers.ssrn.com/abstract_id=3236938.

Keywords: Subsidy, Energy policy, Pigou, Orwell

JEL Classification: Q48, Q40