Clean Edge - The Clean-Tech Market Authority

Search News:

Print

Previous Story | Next Story

U.S. Subsidies for Fossil Fuels far Outpace Those for Renewable Energy

The largest U.S subsidies to fossil fuels are attributed to tax breaks that aid foreign oil production, according to research 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. According to the Environmental Law Institute, 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 reportedly 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 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 $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.

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. A related graphic chart illustrates the findings, and a map prepared by the Woodrow Wilson International Center for Scholars depicts Energy Flows in the U.S. for 2007.