Uncle Sam subsidizes 'clean' coal, biofuels
Fed posts record $46.1-billion profit
| Powerful politicians spend public monies for powerful business people. Senators propose fresh round of tax credits for green power. And the Fed, after bailing out banks, profited more than ever. We trim, blend, and append two articles of 2009 and 2010 from (1) MarketWatch, Dec 11, on funding energy by Steve Gelsi and (2) The Los Angeles Times, Jan 12, on funding bankers by Jim Puzzanghera. |
by Steve Gelsi and by Jim Puzzanghera
- Uncle Sam funding 'clean' coal, biofuels
The U.S. government continues to open its piggy bank to energy corporations, laying out $1.6 billion in grants for lower-emission coal plants and biofuel production, along with a fresh proposal from Congress to increase tax credits by $2.5 billion for green power from the $2.3 billion originally included in the 2009 stimulus package to $4.8 billion.
The tax credit could be used for renewable solar, wind, and geothermal energy, as well as technologies for storage, transmission, renewable fuels, conservation, plug-in hybrid vehicles, carbon capture and sequestration to reduce greenhouse gases.
In other government moves, the Energy Department on Dec. 4 awarded $979 million in grants to three major so-called clean-coal projects around the country.
American Electric Power (AEP) will receive about $334 million, which will pay for about half of the cost of its Mountaineer carbon-dioxide capturing project in New Haven, W.Va. The coal-fired plant will capture an estimated 1.5 million metric tons per year and inject it more than a mile underground. The project team includes AEP, Alstom, APCo, Battelle Memorial Institute, Consol Energy Inc., and Schlumberger Carbon Services.
Also under the DOE's coal program, Summit Energy Co. received $350 million to build a 400-megawatt plant near Odessa, Texas, to convert coal into a flammable gas. The plant will get about a third of its revenue from power sales, a third from the sale of carbon dioxide for oil recovery, and the rest by selling other gases.
The Southern Co. will get $295 million from the government to retrofit a carbon-capture plant on a 160-megawatt flue gas stream at an existing coal-fired power plant, Alabama Power's Plant Barry, near Mobile, Ala.
The captured carbon dioxide will be compressed and transported through a pipeline, and up to 1 million metric tons per year of CO2 will be sequestered in deep saline formations. The project team includes Mitsubishi Heavy Industries America, Schlumberger Carbon Services, Advanced Resources International, the Geological Survey of Alabama, Stanford University, the University of Alabama, and others.
The Energy Department said it will spend $564 million in grant money to go toward construction of 19 biorefineries.
JJS: Investing in clean energy technology sounds like good news. But is it? These are not private investments made in an open competitive market but political deals made after hours of private lobbying.
Most of the companies receiving tax-dollars are major corporations. They already have enough revenue to not need subsidies, especially if these new ideas are good ideas, meaning efficient and profitable.
Plus, these firms have so much political clout, whose voices did not get heard? Were the technologies that won subsidies -- a few big centralized plants -- really better than a goodly number of small decentralized plants?
More fundamentally, why pay the powerful to do the right thing -- implement cutting-edge technology -- instead of charge them for doing the wrong thing -- pollute the planet?
Finally, if we were to have government recover the socially-generated value of sites and resources instead of taxing labor and capital, I bet we’d find out just which new tools are the best and see robust start-ups with splendid techniques step to the plate.
And realistically, ordinary people have very little say in how their public funds get spent, as in the recent bailouts that made the already very rich very much richer.
- Fed posts record $46.1-billion profit
The Federal Reserve announced it made a record $46.1-billion profit last year.
[As required by law] the Fed said it paid the profit to the U.S. Treasury, marking an increase of $14.4 billion more than what it paid following 2008. The increase was largely due to higher earnings on securities [sold by fellow bankers] in 2009 that the Fed had purchased as part of its unprecedented intervention in the financial system.
The previous record was $34.6 billion in 2007. Federal Reserve officials stressed that the goal of the central bank is stabilizing monetary policy, not earning profits.
Starting in late 2008, the Fed dramatically increased its involvement in the financial system, purchasing large amounts of securities from the U.S. Treasury and other entities. Among the purchases were mortgage-backed securities backed by housing agencies Fannie Mae and Freddie Mac, which have helped push down mortgage rates. Mortgage-backed securities pay a higher rate than Treasury securities, accounting for the increased profit.
The Fed's 2009 earnings are preliminary, and the central bank could lose money on some of those investments if the values of the securities fell.
As part of the $46.1-billion profit, the Fed earned $2.6 billion on currency swap arrangements with central banks in 14 countries and other investments in foreign currency. The Fed also earned $700 million from fees for services the Fed provided to banks.
JJS: Yet, are those profits truly earnings? Could the Fed have made so much money if it could not print brand new money and enjoy a monopoly on doing so and charge the US -- which is all the US taxpayers -- interest on taking the freshly minted new notes?
And how secure are those “securities”? They seem secure for wealthy insiders who get bailed out but very insecure for the ordinary investors who get wiped out. More like “heads I win, tails you lose”.
A better system might be geonomics. That is, stop sending nearly all our spending on land over to lenders (via mortgages) by having local governments recover land values (via taxes, fees, dues, whatever); then use the revenue to disburse dividends to residents. Forget subsidies lavished on the elite. Fund everybody, paying us all a share of natural values.
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Jeffery J. Smith runs the Forum on Geonomics.
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