Following on from my post comparing the electricity bills faced by industrial companies in Europe and the United States, I came across a fascinating study that measures the scope of energy industry subsidies on the other side of the Atlantic.

Put together by NERA Economic Consulting and commissioned by the International Association of Oil and Gas Producers, the report seeks to compare the taxation and subsidy regimes applying to oil, gas, coal, wind, and solar power in all 28 European Union member states as well as Norway.

It is worth pointing out that the NERA study uses the term “subsidy” in a commonsense manner, i.e. direct payments by the government as well as government-mandated transfers.  Contrast this to some critics of the industry who bend over backwards to expand the notion of a subsidy to include everything from a part of the U.S. defense budget to ordinary and necessary tax deductions.

The NERA study’s findings are striking:

• European governments receive far greater revenues from oil, natural gas, and coal than these energy sources receive in the form of direct subsidies or other transfers.
• Oil is by far the largest contributor to government revenues in the European Union. In contrast, wind and solar power are net recipients of government support (see nearby chart).
• The consumption of one barrel of oil generates €90 (around $124) in government revenue in the form of taxes and royalties.
• The consumption of the energy generated by renewables that is equivalent to the energy from a barrel of oil can cost taxpayers more than €500 (about $689).

Another strength of the NERA study is its overview of the literature on energy subsidies. That section details the deficiencies of a number of other studies that have purported to measure subsidies and tax expenditures for energy. Many of these make unsupportable assumptions in order to drive preferred policy agendas (last fall I discussed one of these disingenuous studies, which was produced by the International Monetary Fund).

NERA has offered a valuable contribution to a critical energy-policy discussion. As the debate over energy and taxes continues – both in the United States as well as in Europe – it’s good to know there is solid data to inform the steps policymakers choose to take.