Elon Musk, no stranger to confronting seemingly insurmountable odds, recently set his sights on curtailing the "staggering amount of waste of taxpayer money" involved in how the federal government conducts its business.
In offering to lead a not-yet-established Department of Government Efficiency in the second Trump term, Musk has adopted the novel idea of combatting the existing bureaucracy through the creation of a new one. Getting the leviathan that is Washington to change its ways is a tall order, even for a man of Musk's prodigious talents, but the government's rush toward insolvency cannot be ignored. Waste is everywhere. And where money is doled out without a care in the world, cronyism will inevitably follow.
This is why a just-released report by the Texas Public Policy Foundation (TPPF) on the vast sums of money tied up in federal energy subsidies deserves due consideration by those wanting to subject government operations to a modicum of sanity.
The U.S. tax code has been awash in subsidies, tax credits, carve-outs, and other goodies for the politically favored for as long as anyone can remember. But the energy sector is a relative newcomer to the government grab-bag, with the first modest beginnings dating to the Carter administration.
Initially, special treatment was afforded to corn-based ethanol, synthetic fuels (synfuels), along with wind and solar power. This was done in the name of freeing the U.S. energy sector from dependence on the chronically unstable oil-rich Middle East. But the advent of the shale revolution, with its hydraulic fracturing (fracking) and horizontal drilling in the late 2000s, made the United States the world's leading producer of oil and natural gas during the Trump administration.
Energy subsidies, however, have not gone away; indeed, they multiplied exponentially during the Biden-Harris administration, this time in the name of combatting the "climate crisis." The TPPF study, "The Siren Song That Never Ends: Federal Energy Subsidies and Support from 2010 to 2023," written by Brent Bennett, concludes that the push to decarbonization aided by subsidies has misallocated resources and distorted energy markets.
"Over the past 14 years, wind, solar, nuclear, and fossil fuels have all received substantial government subsidies between $20 billion and $80 billion," the TPPF study notes. "While wind and solar have each received more than twice as much as oil and gas, the more important point is that they depend on federal subsidies for a far greater portion of their revenues. Wind has received 48 times and solar 168 times more subsidies per unit of electricity generated than oil and gas."
The kinds of subsidies that flow to wind and solar, on the one hand, and fossil fuels and nuclear, on the other hand, differ markedly. "Wind and solar subsidies are primarily focused on the installation of generation assets using current technologies rather than on new technology development," the study points out. "Conversely, most energy subsidies for nuclear and fossil fuels are focused on research and specific aspects of exploration and development." Under the 2022 Inflation Reduction Act, subsidies for wind and solar are set to grow substantially in the years to come, even though, as TPPF notes, they make up only 3.5 percent and 2 percent, respectively, of total U.S. energy production.
Even though the "energy transition" is coming at a high cost to taxpayers, without benefitting families and businesses who need affordable and reliable energy, TPPF cautions against overwrought expectations that they will go away soon. "The growing size and lobbying power of the wind and solar industries along with the constant drumbeat from the environmental lobby to reduce carbon dioxide emissions by building more wind and solar, is a powerful force against any attempt to eliminate subsidies," the study says.
"Instead of correcting supposed flaws in energy markets, energy subsidies exacerbate and enable the creation of more flaws by fostering industries and subindustries that depend on government support for their existence and profitability," TPPF's Bennett concludes. "As with all forms of cronyism, energy subsidies benefit politically connected businesses at the expense of taxpayers who do not notice the effects enough to demand change. To effect that change, voters and businesses that pay for the subsidies must pressure lawmakers to eliminate these damaging policies."
While he is going after government waste in the new Trump administration, Elon Musk could begin by demanding the elimination of energy subsidies and regulatory policies that have contributed mightily to his own wealth. EV maker Tesla, one of the enterprises he founded, cashes in on regulatory credits other auto companies purchase from Tesla if they fail to meet California's EV quotas or EPA's tailpipe emissions standards.
For car companies that produce both EVs and gasoline-powered vehicles, it is cheaper to buy regulatory credits from Tesla than to produce large numbers of money-losing EVs. Musk could also call for repeal of the Inflation Reduction Act's $7,500 per EV tax credit, which the Wall Street Journal calculates amounted to about $1.25 billion for Tesla in the last quarter.
The ball will soon be in Elon's court.
Bonner Russell Cohen, Ph. D., is a senior policy analyst with the Committee for a Constructive Tomorrow (CFACT).