US federal government provided substantially larger subsidies to fossil fuels than to renewables, according to research by the Environmental Law Institute. It reveals that the lion’s share of energy subsidies supported energy sources that emit high levels of greenhouse gases.
The largest US subsidies to fossil fuels are attributed to tax breaks that aid foreign oil production, The study, in partnership with the Woodrow Wilson International Center for Scholars, reviewed fossil fuel and energy subsidies for Fiscal Years 2002-2008.
Fossil fuels benefited from approximately USD72 billion over the seven-year period, while subsidies for renewable fuels totaled only USD29 billion. More than half the subsidies for renewables, USD16.8 billion, are attributable to corn-based ethanol, the climate effects of which are hotly disputed.
Of the fossil fuel subsidies, USD70.2 billion went to traditional sources, such as coal and oil, and USD2.3 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 the country's climate footprint.
Policies in favor of tradition sources
The US 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, America's climate change problem,” said 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: (1) 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 (2) direct spending, in the form of expenditures on research and development and other programs.
Subsidies attributed to the Foreign Tax Credit totaled USD15.3 billion, with those for the next-largest fossil fuel subsidy, the Credit for Production of Nonconventional Fuels, totaling USD14.1 billion. The Foreign Tax Credit applies to the overseas production of oil through an obscure provision of the US Tax Code, which allows energy companies to claim a tax credit for payments that would normally receive less-beneficial treatment under the tax code.
ELI researchers applied the conventional definitions of fossil fuels and renewable energy. 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. Nuclear energy, which falls outside the operating definition of fossil and renewable fuels, was not included.
The largest US subsidies to fossil fuels are attributed to tax breaks that aid foreign oil production, The study, in partnership with the Woodrow Wilson International Center for Scholars, reviewed fossil fuel and energy subsidies for Fiscal Years 2002-2008.
Fossil fuels benefited from approximately USD72 billion over the seven-year period, while subsidies for renewable fuels totaled only USD29 billion. More than half the subsidies for renewables, USD16.8 billion, are attributable to corn-based ethanol, the climate effects of which are hotly disputed.
Of the fossil fuel subsidies, USD70.2 billion went to traditional sources, such as coal and oil, and USD2.3 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 the country's climate footprint.
Policies in favor of tradition sources
The US 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, America's climate change problem,” said 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: (1) 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 (2) direct spending, in the form of expenditures on research and development and other programs.
Subsidies attributed to the Foreign Tax Credit totaled USD15.3 billion, with those for the next-largest fossil fuel subsidy, the Credit for Production of Nonconventional Fuels, totaling USD14.1 billion. The Foreign Tax Credit applies to the overseas production of oil through an obscure provision of the US Tax Code, which allows energy companies to claim a tax credit for payments that would normally receive less-beneficial treatment under the tax code.
ELI researchers applied the conventional definitions of fossil fuels and renewable energy. 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. Nuclear energy, which falls outside the operating definition of fossil and renewable fuels, was not included.
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