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Musk defends government subsidies as means to cleaner energy

LOS ANGELES – Elon Musk says his companies don’t need the estimated $4.9 billion they enjoy in government support, but the money will help them move faster to transform the dirty business of energy.

“If I cared about subsidies, I would have entered the oil and gas industry,” said Musk, the chief executive of Tesla Motors and SpaceX and the chairman of SolarCity which is building a sprawling solar panel facility in Buffalo.

Musk’s remarks came in response to a Times story detailing his corporate strategy of incubating high-risk, high-tech companies with government money – estimating the total received or pledged so far at $4.9 billion, a figure Musk did not dispute. The story noted that his companies have seen a big financial upside from the incentives – helping them build billions in stock value – while taxpayers have shouldered the cost.

Elon Musk’s growing empire is fueled by $4.9 billion in government subsidies

The companies at first did not respond to repeated requests for comment about subsidies, but Musk on Monday granted the Times a wide-ranging interview on government money for his companies and their competitors.

The Times’ estimate of government support comprises a variety of incentives, including grants, tax breaks, factory construction, discounted loans and environmental credits that Tesla can sell. It also includes tax credits and rebates to buyers of solar panels and electric cars. The companies have already received large sums and will get more over time as they meet milestones in deals with certain states.

“All three of these businesses get government subsidies and contracts, but none of them get much in the way of profit,” said Mark Spiegel, a hedge fund manager for Stanphyl Capital Partners who is shorting Tesla’s stock, a bet that pays off if Tesla shares fall. “He is going in to cutting-edge, fringe industries.”

Musk said Tesla and SolarCity are tied together by their mission to help the environment. Tesla’s electric cars and SolarCity’s panels aim to accelerate the development of clean power, he said.

“Ultimately, humanity has no choice but to transition to renewable energy,” he said. “It is just a question of when and how much damage occurs between now and that transition.”

Government money for Tesla and SolarCity helps speed that transition, Musk said.

Musk called SpaceX an “insurance policy” in the case of an environmental catastrophe. Its rockets, he said, will help colonize new planets.

“We should become a multi-planet species,” Musk said.

Musk said the subsidies for Tesla and SolarCity are “a pittance” compared with government support of the oil and gas industry.

“What is remarkable about my companies is that they have been successful despite having such a tiny incentive from the government relative to our competitors,” Musk told the Times.

A report late last year by the International Energy Agency said that the fossil fuels industry collects $550 billion a year in global government subsidies. That compares with about $120 billion for renewable energy, including wind, solar and biofuels, according to the Paris-based institution.

Those figures don’t account for the vast difference in size between the two sectors. But they also don’t include the costs to society caused by pollution from oil and gas, Musk said.

Another measure, the one cited by Musk, was released by the International Monetary Fund last month and takes a wider view. The IMF said global energy subsidies amount to $5.3 trillion, including an estimated cost of the damage caused by energy consumption.

SpaceX– which has been awarded billions of dollars in government rocket launch contracts, but relatively few subsidies – also competes against companies Musk says are subsidized. United Launch Alliance, a joint venture of Boeing and Lockheed Martin, receives an annual payment of about $1 billion for operational costs, even if it doesn’t launch a rocket.

Tesla, Musk said, competes with a mature auto industry that has seen massive federal bailouts for General Motors and Chrysler.