Study: U.S. Subsidies for Fossil Fuels Are More Than Twice Those for Renewables

The vast majority of U.S. federal subsidies for fossil fuels and renewable energy from 2002-2008 supported fossil energy sources that emit high levels of greenhouse gases when used as fuel, according to research released today by the Environmental Law Institute in partnership with the Woodrow Wilson International Center for Scholars.

Applying a conservative approach, the respected organizations found that the U.S. government provided substantially larger subsidies to fossil fuels than to renewable fuels.

Subsidies to fossil fuels -- a mature, developed industry that has enjoyed government support for many years -- totaled approximately $72 billion over the study period, representing a direct cost to taxpayers.
 
Over the same period, subsidies for renewable fuels -- a relatively young and developing industry -- totaled $29 billion, the study found. What's more, of the $29 billion, more than half -- $16.8 billion -- went toward corn-based ethanol, the climate effects of which are hotly disputed.
  
The study also found that most of the largest subsidies to fossil fuels were written into the U.S. Tax Code as permanent provisions. By comparison, many subsidies for renewables were time-limited initiatives implemented through energy bills, with expiration dates that limit their usefulness to the renewables industry.

The vast majority of subsidy dollars to fossil fuels 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 largest of those tax breaks, the Foreign Tax Credit, applies to the overseas production of oil through an obscure provision of the Tax Code, which allows energy companies to claim a tax credit for payments that would normally receive less-beneficial tax treatment.

In other words, the largest U.S subsidies to fossil fuels are attributed to tax breaks that aid foreign oil.

The combination of subsidies 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, John Pendergrass, senior attorney for the Environmental Law Institute, noted in a statement accompanying the study.

The study's 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 also falls outside the operating definition of fossil and renewable fuels, was not included.

The researchers used a standardized methodology to calculate government expenditures. Where this methodology was lacking or did not apply, the researchers calculated subsidy values on a case-by-case basis.

Posted by

Scott Doggett September 18, 2009, 1:32 PM

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