A new research to be released on Friday by the Environmental Law Institute (ELI) reveals that “the largest U.S subsidies to fossil fuels are attributed to tax breaks that aid foreign oil production”. The report was produced in partnership with the Woodrow Wilson International Center for Scholars. The study reviewed fossil fuel and energy subsidies for Fiscal Years 2002-2008 and shows that the lion’s share of energy subsidies supported energy sources that emit high levels of greenhouse gases.

During that period, the federal government provided substantially larger subsidies to fossil fuels than to renewables. Fossil fuels benefited from approximately $72 billion over the seven-year period, while subsidies for renewable fuels totaled only $29 billion. More than half the subsidies for renewables – $16.8 billion – are attributable to corn-based ethanol, the climate effects of which are hotly disputed. Of the fossil fuel subsidies, $70.2 billion went to traditional sources – such as coal and oil – and $2.3 billion went to carbon capture and storage, which is designed to reduce greenhouse gas emissions from coal-fired power plants.

Why is this happening? The U.S. energy market is shaped by a number of national and state policies that encourage the use of traditional energy sources. These policies range from royalty relief to the provision of tax incentives, direct payments, and other forms of support to the non-renewable energy industry. “The combination of subsidies – or ‘perverse incentives’ – to develop fossil fuel energy sources, and a lack of sufficient incentives to develop renewable energy and promote energy efficiency, distorts energy policy in ways that have helped cause, and continue to exacerbate, our climate change problem,” says ELI Senior Attorney John Pendergrass. “With climate change and energy legislation pending on Capitol Hill, our research suggests that more attention needs to be given to the existing perverse incentives for ‘dirty’ fuels in the U.S. Tax Code.”

The subsidies examined fall roughly into two categories: foregone revenues (changes to the tax code to reduce the tax liabilities of particular entities), mostly in the form of tax breaks, and including reported lost government take from offshore leasing of oil and gas fields; and direct spending, in the form of expenditures on research and development and other programs. Subsidies attributed to the Foreign Tax Credit totaled $15.3 billion, with those for the next-largest fossil fuel subsidy, the Credit for Production of Nonconventional Fuels, totaling $14.1 billion. The Foreign Tax Credit applies to the overseas production of oil through an obscure provision of the U.S. Tax Code, which allows energy companies to claim a tax credit for payments that would normally receive less-beneficial treatment under the tax code.

Fossie fuels and renewable energy were defined according to conventional definitions. Fossil fuels include petroleum and its byproducts, natural gas, and coal products, while renewable fuels include wind, solar, biofuels and biomass, hydropower, and geothermal energy production.

Renewable Energy World has published a report saying that in 2008 the United States decreased its use of coal and petroleum. On the other hand, consumption of natural gas solar, biomass wind and nuclear increased. The information was based on energy flow charts released by the Lawrence Livermore National Laboratory (LLNL). Geothermal energy use remained stable.

According to LLNL, the estimated U.S. energy use in 2008 equaled 99.2 quadrillion BTUs (“quads”), down from 101.5 quadrillion BTUs in 2007. (A BTU or British Thermal Unit is a unit of measurement for energy, and is equivalent to about 1.055 kilojoules).

Energy use in the industrial and transportation sectors declined by 1.17 and 0.9 quads respectively, while commercial and residential use slightly climbed. The drop in transportation and industrial use – which are both heavily dependent on petroleum – can be attributed to a spike in oil prices in summer 2008.

Last year saw a significant increase in biomass with the recent push for the development of more biofuels including ethanol.

“This is a good snapshot of what’s going on in the country. Some of the year-to year changes in supply and consumption can be traced to factors such as the economy and energy policy,” said A.J. Simon, an LLNL energy systems analyst who develops the energy flow charts using data provided by the Department of Energy’s Energy Information Administration.

Simon said the increase in wind energy can be attributed to large investments in wind turbine technologies over the last few years as well as better use of the existing turbines.

Nuclear energy also saw a slight increase from 8.41 quads in 2007 up to 8.45 quads in 2008. While no new nuclear power plants came online in 2008, the existing plants had less down time. Over the last 20 years, the downtime for maintenance and refueling at nuclear power plants had been decreasing.

“There’s an incentive to operate as much as possible,” Simon said. “It’s a smart thing to do. You can’t earn revenue by selling electricity when you’re down. I’m really excited about the renewed push for energy efficiency in this country. Because once that energy is rejected, it’s no longer useful. But more efficient power plants, automobiles and even light bulbs really do reject less energy while providing the same energy services.”

A report in the Independent newspaper published yesterday reminds us why the need to search for and implement renewable energy is very urgent.

Based on a report by the International Energy Agency (IEA), it said that governments seem unaware of the fact “the oil on which modern civilisation depends is running out far faster than previously predicted and that global production is likely to peak in about 10 years – at least a decade earlier than most governments had estimated.”

“What we need to do is accelerate the mobilisation of renewables, energy efficiency and alternative transport. We have to do this for global warming reasons anyway, but the imminent energy crisis redoubles the imperative,” Jeremy Leggett, a former oil-industry consultant and now a green entrepreneur with Solar Century, told the Independent.

Nobuo Tanaka, Executive Director of the IEA, echoes Mr, Leggett’s sentiment on the issue: “The far-reaching effects the current financial and economic crisis will have on energy security and climate change, coupled with plunging investment, demand urgent and global action to put the world on a more sustainable path”, he said.

This is not a letter from ExxonMobil, BP, or any other large corporation.

This is a letter from the small businesses that drill America’s oil and natural gas.

They want to be part of the Obama’s energy plan. They want the facts as they know them to be out there and included in the decision making process.

Petroleum and natural gas are not just used for energy production. They are used as raw materials and for heating in manufacturing and chemical processes as well.

I do not know what the IPAA thinks about the idea of Peak Oil, but I believe that oil will run out and that this means we need to start now how to not only power our cars and homes without the fossil fuels, but we need to figure out other manufacturing processes that do not need these scarce materials as well.

Yes, some chemical processes need heat, but perhaps there are different chemical pathways that use less heat. Yes, right now fertilizer is made with petroleum products. Is there a different way?

I applaud the IPAA as a front for all those small businesses that drill oil in America. I applaud the point of view and the facts they present at IPAA.org, but I feel bad that they will go away as oil goes away.

In Reuters and other places, I am sure the discussion is all about how lower oil prices area a sign of a weakening US economy.

And it may be that.

But it also proves the important environmental point that the best way to save the world is to buy less. I would rather that it did not take an economic downturn, recession, depression, panic to show that to everyone. But that is the way of the world. The less we buy, the less is made, the fewer resources are used, the more resources are left for later when we will need it.

If only it were that simple.

The other side of all this is that the US and Europe has a large material advantage over the rest of the world. And we are not going to simply give them the money they need to get their infrastructure set up correctly (and I doubt that that would work anyway). The only way to China, India, Africa to get material wealth is for us to buy things from them, and their material wealth will improve their lives and at the same time ravish the world’s resources.

So what can we do to stop this?

That is not an answer for this single blog entry but I wish I had an answer that balanced those billions well-being against our own. I know I do not want to give up my air conditioning, my XM radio, my many choices of safe food from multiple grocery stores, my paved roads, my clean water, so there are more resources available for them to use. And I doubt if my giving up these things would help them in any way.

The major problem with most renewable fuel sources is the simple reality that they are derived from materials of finite supply (such as food stocks). While it may be true that more corn, palm, or even sugar cane can be planted to offset fuel consumption, many analysts agree that the smartest of all biofuels just may be algae based.

So how does this stuff work? Pretty naturally it turns out. Algae produces energy rich oil naturally (think of that green slime that so often inhabits stagnant water). Raw algae can be harvested and processed to make biocrude, the renewable equivalent of petroleum, which can then be refined to make gasoline, diesel, and jet fuel.

It turns out not all algae strains are created equal but that can be advantageous as well. Thos strains that produce more carbohydrates can be processed and fermented to make ethanol (with leftover proteins used for animal feed).

But what really makes the algae shine over other biofuel options comes in the form of efficiency. To provide some perspective remember that one acre of corn produces a maximum of 18 gallons of oil per year. That same acre of palm trees produces 700 gallons per year. An acre sized open pond can produce 20,000 gallons of algae oil per year.

What we find most interesting is that back in 1986 the National Renewable Energy Laboratory (NREL) saw the potential of algae based fuel and began a program of study that was terminated a decade later on account of the fact that crude was being traded so affordably that it was impossible for the added cost of algae harvesting to compete. Of late however, algae-based fuels would likely be a cheaper alternative to crude petrol fuels while at the same time reducing the world’s dependency on fossil fuel.

We often talk of the near-limitless potential of creating fuel from such unlikely sources as say an old tire or perhaps a mountain of wood chips. Each time I research these topics; I’m reminded of the old saying that yesterday’s science fiction oft becoming tomorrow’s science.

As one might expect, however, there are some pretty complex chemical reactions involved in turning garbage into oil and in this case the process is commonly referred to as transesterification (aren’t you glad you didn’t have to spell that one in school) and it refers to the combining of either an alcohol, acid, or base to make the material in question more like traditional petro-based fuel (meaning stable, liquidized, flowing, and flammable).

There are several classifications of the various processes all meant to achieve the same result but let us, for a moment, focus on one such process. Pyrolysis: the main method that would be used in turning trash into gas.

Any long-chain hydrocarbon material could be used (which is quite a long list). The material would then be pressurized and superheated in an oxygen-less environment. From there atmospheric pressure would be used to evaporate the water from this soup. Filter out the solids and reheat the remaining liquid and you, my friend, have light crude.

We aren’t foolish enough to suggest that this process could be implemented to replace the world’s dependency on the stuff we drill from the ground overnight but so long as the science works (and it does) there is always the hope.

Pop quiz: Which company can lay claim to the title as the world’s largest producer of Geothermal Energy? Times up- If you guessed oil giant Chevron, you’re right.

Chevron is in fact the world’s largest producer of geothermal energy, a renewable resource that generates near inexhaustible power while producing virtually no greenhouse gas emissions.

In Indonesia, the power plants Chevron owns and operate produce enough electricity to meet the needs of more than 3.9 million homes. In July 2007, they expanded the effort by commercial production at the 110-megawatt Darajat Unit III geothermal power plant in Garut, West Java. This new unit brings their total geothermal generating capacity at Garut to 259 megawatts.

Their plants in the Philippines supply 7 percent of the electricity to Luzon, the country’s largest island with a population of more than 48 million.

While this is all quite encouraging on a global scale, many Americans feel like they are being neglected by Chevron’s impressive ambitions. To that the company counters with their domestic efforts of exploring the potential of hydrogen. Through their subsidiary, Chevron Technology Ventures, they are investing in a vast number of domestic projects aiming to learn more about design and operation of hydrogen fuel systems. Among these mentionables:

A 2007 research project with the U.S. Department of Energy’s National Renewable Energy Laboratory to develop technology to produce transportation fuels from algae.

In early 2008 Chevron formed a joint venture with Weyerhaeuser Co. to develop the next generation of renewable transportation fuels from nonfood sources.

A recent collaboration with the Ford Motor Company and Progress Energy in Florida to design and build the state’s first advanced hydrogen energy station. The station, which became operational in early 2007, fuels a fleet of hydrogen-powered shuttle buses used at the Orlando International Airport and the Orange County Convention Center.

Finally in Southern California, Edison Chevron has been using electrolysis to produce hydrogen from water to power a fleet of fuel-cell vehicles.

One doesn’t need to be a scientist to remember the very simple fact that water by itself doesn’t burn. And yet the Internet is alive with ads claiming it’s possible to run your gasoline-powered car (with a simple conversion) on good old-fashioned H2O. Even more amazing is that many of these companies claim double the fuel economy of burning gasoline alone.

While I’m not advocating any such claims, I did feel it necessary to look into the alleged process of turning tap water into an energy source. It turns out that there is in fact a legitimate scientific process at work in a water-fueled hybrid conversion kit in that electricity from the car’s battery can be used to separate water (stored in a separate tank from the gasoline) into a gas known as HHO (2 parts hydrogen, 1 part oxygen). HHO (commonly called Hydroxy) is in fact quite combustible. It is this gas that is ignited in typical internal combustion fashion with the byproduct being water rather hydrocarbons; not unlike the exhaust in the fuel cell process.

There is little concern of hauling a massive tank of water around either as the conversion works to something along the lines of one quart of water produces over 1800 gallons worth of HHO- which when used daily could literally last for months. It’s important to note that gasoline is still required only the car burns less of it thanks to the hydrogen injection.

I was skeptical at first, but the science behind the process is sound anyway. I have yet to conduct a test of an H20 burning hybrid conversion but will be keeping close tabs on the technology in posts to come.

According to the US Department of Energy, the greatest potential to revolutionize the transportation industry lies not within ethanol, bio-diesel, electric, or flex fuel engines but rather through hydrogen: The simplest and most abundant element in the known universe.

Versatility in production is one of the element’s greatest strengths and hydrogen comes with many options from fossil fuel byproduct, to biomass and even by simply electrolyzing water.

Producing hydrogen with renewable energy and then using it in fuel cell vehicles holds the promise of virtually pollution-free transportation. Unlike gasoline and diesel engines, which pump nitrogen oxides, hydrocarbons, and particulates into the atmosphere, hydrogen-powered fuel cell vehicles emit only H2O- water.

Perhaps one of its greatest strengths lies in the fact that the nation’s dependency upon imported petroleum could be completely severed. Hydrogen can be produced domestically from resources such as natural gas, coal, solar energy, wind, and even nuclear energy.

Best of all the hydrogen fuel cell engine would have far reaching applications beyond simply transportation needs and could theoretically be used to power everything from lawnmowers to electric generators. Some automakers (Honda in particular) have devoted much of their R&D budgets into the development of fuel cell powered vehicles.

In my next post I will take a look at how the fuel cell works in contrast to the internal combustion engine. Truly this technology could solve many of the world’s current fossil fuel dependency issues.