Politics & Policy

Don’t Believe Elon Musk: Renewables Get Much More in Federal Subsidies than Fossil Fuels

Elon Musk
The federal government pays him lavishly to produce boutique renewable-energy products.

Tesla, SpaceX, and Solar City head Elon Musk lashed out at the Los Angeles Times following an article that totaled up all the government support that his three-headed corporate-welfare monster receives. The number the Times reported was nearly $5 billion in combined support for his companies, including subsidies for those who purchase Musk’s products, such as the high-priced solar panels of Solar City and the supercars of Tesla.

Musk responded by arguing, “If I cared about subsidies, I would have entered the oil and gas industry.” He further asserted that his competitors in the oil-and-gas industry haul in 1,000 times more in subsidies in a single year than his companies have received in total. Such statements reveal that Musk seems to care as little for facts as he purports to care about the taxpayer dollars propping up his various businesses.

Earlier this year, the U.S. Energy Information Administration (EIA) released the most recent data available regarding energy subsidies provided by the federal government. The data, covering the year 2013, broke down total taxpayer subsidies across the different sectors of the energy industry. While fossil fuels did enjoy some government support through various direct expenditures, tax credits, and R&D programs, the data stands in sharp contrast to Musk’s claims.

Data from the EIA report, combined with numbers from an anti-oil advocacy group regarding state-level government support, reveals that total state and federal support for the oil-and-gas industry is no more than $5.5 billion each year. As stated, Musk’s companies combine for $5 billion in subsidies, a number that he has yet to dispute. Clearly, the difference is much smaller than Musk’s outlandish 1,000-to-one claim.

Even without this data, Musk’s claims were completely ridiculous from the outset. Does the billionaire whom many regard as a genius not realize that 1,000 times $5 billion is $5 trillion, the equivalent of Japan’s GDP?  (He may have had this bogus IMF study in mind.)

Certainly a healthy debate should and does exist about whether taxpayers should be helping oil and gas conglomerates. Arithmetic trouble aside, Musk insinuated that the fossil-fuel industry is the primary beneficiary of energy subsidies. That’s not true either. In fact, according to the EIA, total federal taxpayer support across the renewables sector totaled roughly $15 billion in 2013. The solar sector (Musk’s favorite) alone received about $5.3 billion.

And neither of these figures accounts for the various benefits and mandates that help renewable industries on the state level. No subsidy quite compares to the standards that exist in a plurality of states that force people and utilities to buy renewable electricity. In total, the renewables sector combines for a staggering 72 percent of all federal energy-subsidy dollars. Oil and gas, meanwhile, combine for a mere 4 percent of total federal support. Even throwing in coal adds only another 6 percent.

Eliminating subsidies for wealthy people to buy solar panels and high-performance electric cars would undoubtedly end these crony endeavors of Elon Musk.

This difference becomes even more jarring when you consider the return on investment. While it seems that the main goal of the renewable-energy sector is to produce flashy political props, the main goal of the rest of the energy industry is to produce energy. Oil, gas, and coal produce immensely more energy than the renewables sector. In fact, each individual fossil-fuel sector produces more energy, in terms of BTUs, than all the renewables, including hydroelectric, combined.

This translates into a significant difference in how much it costs the taxpayer to produce a single unit of energy from these different sources. For example, according to the EIA data, in the coal, oil, and gas sectors, producing one million BTUs of energy costs about $0.05 in federal subsidies. For wind, that number jumps to $3.83. Solar is completely off the charts, at $18.63 per million BTUs.

The point of all this is not to embarrass Elon Musk over some math he got wrong, but to demonstrate that his broader point about subsidies and his characterizations of his critics and competitors are completely off the mark. While the oil and gas companies may receive some favorable treatment, eliminating oil and gas subsidies wouldn’t end their respective industries. Yet eliminating subsidies for wealthy people to buy solar panels and high-performance electric cars would undoubtedly end these crony endeavors of Elon Musk.

As hedge-fund manager Mark Spiegel said in the Times article, “Government support is a theme of all three of these companies, and without it none of them would be around.”

Government (that is, taxpayer) support isn’t going to last forever, so Elon Musk might consider pursuing a different business model.

— Sean Noble is president of American Encore, a nonprofit organization dedicated to promoting free speech and economic freedom and returning America to greatness.

Most Popular