Fossil Fuel Subsidies More Than Double Those for Renewables

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October 23, 2009
Washington, D.C., United States [RenewableEnergyWorld.com]

The largest U.S subsidies to fossil fuels are attributed to tax breaks that aid foreign oil production, according to research from the Environmental Law Institute (ELI). The study, which reviewed fossil fuel and energy subsidies for Fiscal Years 2002-2008, revealed 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 US $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. 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.

“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,” said John Pendergrass, ELI senior attorney. “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 into two categories: foregone revenues, mostly in the form of tax breaks and direct spending, in the form of expenditures on research and development and other programs.

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.

For more information on the research from ELI, click here.

U.S. Fossil-Fuel Subsidies Twice That of Renewables

By Tina Seeley

Sept. 18 (Bloomberg) -- Fossil fuels including oil, natural gas and coal received more than twice the level of subsidies that renewable energy sources got from the U.S. government in fiscal 2002 through 2008, the Environmental Law Institute said.

Government spending and tax breaks amounted to $72.5 billion for fossil fuels and $29 billion for renewable energy, according to a report by the institute today.

“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,” said John Pendergrass, a lawyer for the institute.

President Barack Obama has called for the U.S. to reduce oil dependence by promoting efficiency measures and investing in alternative energy supplies. The $787 billion stimulus package signed in February included more than $60 billion for reducing energy use and supporting renewable programs.

The U.S. House approved legislation in June that would cap greenhouse-gas emissions and require a portion of the nation’s electricity to come from renewable sources. A Senate panel has also approved a renewable power requirement. The full Senate has yet to take up either measure.

The largest of the subsidies for fossil fuels in the report was a tax credit oil and natural gas companies can claim for paying royalties to other governments. The institute’s report finds that credit totaled $15.3 billion over the time period.

‘Tax Breaks’

“The major route for providing subsidies is tax incentives, tax breaks,” Pendergrass said at a briefing today in Washington.

Also included in calculation of subsidies are the U.S. Strategic Petroleum Reserve -- an emergency oil stockpile -- and the Low-Income Home Energy Assistance Program, which helps some consumers pay for heating and cooling costs.

Including such programs as subsidies is “ludicrous,” Jack Gerard, president of the American Petroleum Institute, said in a statement.

“This study is an irresponsible rendition based on a contorted recycling of government data that should never be used to craft national policy -- especially a tax increase on the oil and natural gas industry that would raise energy costs and kill jobs,” Gerard said.

About half of the government’s subsidies for renewable energy go to corn-based ethanol, according to the study. The largest of the renewable subsidies was for blending ethanol with gasoline, a credit that the institute calculated at $11.6 billion during the seven years.

The institute is a nonprofit research group that works to “strengthen environmental protection,” according to its Web site. Its board includes representatives from Constellation Energy Group Inc., International Business Machines Corp. and Toyota Motor Corp.

To contact the reporter on this story: Tina Seeley in Washington at tseeley@bloomberg.net

To download this study: http://www.elistore.org/reports_detail.asp?ID=11358