Will Fossil Fuel Subsidies Become Extinct?

Fossil fuel subsidies may be on the way out. President Obama’s deputy assistant, Michael Froman, laid out the administration’s climate change priorities in a September 3 letter. Froman stated in the letter that “eliminating fossil fuel subsidies would help energy markets work better and improve our energy security.” Froman said last week that phasing out fossil fuel subsidies internationally could reduce greenhouse gases by up to 12 percent by 2050.

Froman’s letter also stated that the “G-20 leaders should commit to take the lead in eliminating non-needs based fossil fuel and electricity subsidies and to provide technical assistance to non-G-20 countries taking steps to reduce fossil fuel and electricity subsidies.” World leaders at last week’s Group of 20 summit pledged to phase out subsides for fossil fuels in the “medium term.”

Fossil fuels receive larger subsidies than renewables

The federal government “provided substantially larger subsidies to fossil fuels than to renewables,” according to a new study by the Environmental Law Institute (ELI) on fossil fuel and energy subsidies in U.S. for fiscal years 2002 to 2008. Subsidies to fossil fuels totaled approximately $72 billion over time period, “representing a direct cost to taxpayers.” However, subsidies for renewable fuels only totaled $29 billion during same period. Subsides to fossil fuels increased, but did decrease in 2008. The Funding for renewables increased then decreased from 2006 to 2007, but increased in 2008.

The study pointed out that the majority of the largest subsides to fossil fuels are written into the U.S. Tax Code as permanent provisions. Many subsidies for renewables are “time-limited initiatives implemented through energy bills, with expiration dates that limit their usefulness to the renewables industry.” Almost half of the subsidies for renewables are for corn-based ethanol.

The majority of fossil fuel subsidies “can be attributed to just a handful of tax breaks, such as the Foreign Tax Credit ($15.3 billion) and the Credit for Production of Nonconventional Fuels ($14.1 billion).” The Foreign Tax Credit applies to the overseas production of oil through a tax code provision which allows energy companies to claim a tax credit for “payments that would normally receive less-beneficial tax treatment. ”

John Pendergrass, a for lawyer ELI, said, “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.”

Rajendra Pachauri, head of the organization that shared a Nobel Peace Prize with Al Gore for work on climate change issues, said, “We need to remind these people about impacts of climate change – the fact that they are inequitable and fall very heavily on some of the poorest people in the world. We are likely to see a large number of failed states if we don’t act in time.”

Read more: fossil fuel subsidies, global warming

Disclaimer: The views expressed above are solely those of the author and may not reflect those of
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James S.

8:56PM PDT on Oct 4, 2009

It's about time!

send a green star

Barbara V.

5:02PM PDT on Oct 2, 2009

Kudos to lloyd H. If only more Americans had eyes that could see into what these monstrous corporations are doing to this nation!

Jean A.

9:08AM PDT on Oct 2, 2009

Subsidies to big oil and farms is insane. Where are our leaders?
I will not vote for one incumbant. Where are the statesmen? We sure are in the decline because all we have are politicians. How desperately we need term limits.

Carol S.

8:36AM PDT on Oct 2, 2009

It's the height of insanity to pay corporations for adding to the problems.

Karl M.

6:42AM PDT on Oct 2, 2009

We subsidize an industry that continues to make record profits? WTF?!?!

LLOYD H.

6:21AM PDT on Oct 2, 2009

It would be nice if 10s of billions of our tax dollars were not going to aid in the price gouging oil/power companies increase their hundreds of billions in profit and it would be nice to stop seeing even more tax payer money pay oil companies to cap and not produce from wells they drill,but with the paid corporate employees already in a position of control of the the US Senate to the point that 44,000+ Americans dying each year as a direct result of unafordable health care and over 1 million,and rising,personal bankruptcies of Americans each year directly attributeable to inhumane insurance corporation practices are preferable to actual health care reform that would hinder the yearly 42%+ increase in insurance corporation profits.There is not a chance in hell that oil/power corporations with a strangle hold on our entire economy will be stopped from padding their profits with tax payer money.And when the pro-corporation right-wing Supreme Court rules that it is unconstitutional to restrict the amount of money and how it is spent by corporations,not individual citizens,and they will;every elected official in the US will be a paid corporate employee working to enhance and protect cororate profits not an elected public servant working for the good of the American people.America will be a government of the corporations, by the corporations, and for the corporations and Democracy shall pass from these shores.

Lee G.

6:20AM PDT on Oct 2, 2009

The glaring difference between permanent institutionalized support for fossil fuels as compared to the yo-yo support for re-newable energy shows what a mountain needs to be leveled in order to provide a level playing field. Sustainable energy generation needs sustainable start up support.

Amber T.

5:24AM PDT on Oct 2, 2009

The human race, is on it's way to extinction, and we are doing it to ourselves.

Pamylle G.

4:36AM PDT on Oct 2, 2009

A move in the desirable direction.