The largest U.S subsidies to fossil fuels are attributed to tax breaks that aid foreign oil production, according to research done by the Environmental Law Institute in partnership with the Woodrow Wilson International Center for Scholars. The study, which reviewed fossil fuel and energy subsidies for Fiscal Years 2002-2008, reveals that the lion’s share of energy subsidies supported energy sources that emit high levels of greenhouse gases.
The research demonstrates that 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. Thus, energy subsidies highly favored energy sources that emit high levels of greenhouse gases over sources that would decrease our climate footprint.
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,” notes ELI Senior Attorney John Pendergrass.
Title: U.S. Tax Breaks Subsidize Foreign Oil Production
Source: Environmental Law Institute, September 18, 2009
Faculty Evaluator: Peter Phillips
Sonoma State University