Cutting fossil fuel subsidies could save the U.S. $39 billion

It’s bad enough that our American oil and gas companies – who, by the way, have been earning record profits for their shareholders these past several years – pay next to nothing in federal income tax. That alone, even without taking into consideration the environmental damage perpetrated by these companies, should be making people outraged. But, on top of that, our legislators insist on handing the industry billions of dollars in subsidies each year, which, in my opinion, could be put to much greater use supporting newer, cleaner renewable energy sectors like solar and wind. Here, on that subject, is a clip from Solve Climate News:

…Environmentalists and deficit hawks are eager for the president to find his voice again by using his 2012 federal budget to once again take a whack at propping up oil and coal. Last year, the idea he dangled of eliminating $38.8 billion in such subsidies through 2020 went nowhere. It’s unclear if Obama might try to duplicate those savings when he unveils his latest budget proposal in mid-February.

David Goldwyn of the State Department made it clear during a talk in Washington this week that reining in fossil fuel subsidies worldwide would help to make a significant dent in greenhouse gas emissions. The Group of 20 has committed to doing so and the International Energy Agency will be keeping score, said Goldwyn, who is stepping down today from his position as coordinator for international energy affairs.

In the United States, he pointed out, reducing subsidies “will be a political battle.”

“The one piece you can lay at the Obama doorstep is a failure to push this issue,” Steve Kretzmann, executive director of the Washington-based nonprofit Oil Change International, told SolveClimate News in an interview. “He has put it in his budget the last two years and Congress didn’t pick up on it. A campaign from the White House about eliminating subsidies could do a lot”…

For decades, tax breaks and federal incentives have been a boon to the U.S. fossil fuels industry. Numbers compiled by the Environmental Law Institute reveal that those figures totaled $72 billion between 2002 and 2008—about $10 billion annually. Figures from Kretzmann’s organization put annual U.S. subsidy figures to these mature technologies somewhere between $6 billion and $39 billion annually, depending on what is included in the count….

So, how seriously will Obama push to cut fossil fuel subsidies, and how vehemently will the Republicans, who claim to want to cut the federal deficit, fight him on it? It seems like a no-brainer, but you’d be surprised how persuasive corporate lobbyists can be, especially when they represent companies that write big campaign checks.

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9 Comments

  1. Knox
    Posted January 17, 2011 at 6:58 am | Permalink

    I guess we’ll soon see how serious the Republicans really are about cutting the deficit.

  2. Kristin
    Posted January 17, 2011 at 8:38 am | Permalink

    Let’s start cutting ag subsidies while we’re at it. Subsidized corn fuels a false ethanol industry and gives farmers a reason to plow under native prairie. It is devastating to the environment and incredibly expensive.

  3. Edward
    Posted January 17, 2011 at 9:15 am | Permalink

    I second that, Kristin. If we have to subsidize agriculture, we should be subsidizing organizations servicing small, innovative, organic farms, and organizations bringing fresh produce to underserved urban areas, not factory farms.

  4. Stephen
    Posted January 17, 2011 at 12:31 pm | Permalink

    Just wanted to clear up some points. First, the Exxon reference did not recognize that there were substantial payments made in 2008 and that Exxon had overpaid thru required estimated taxes and had given the government an interest free loan to offset 2009 taxes to some extent. Second the ELI study is misleading and incorrect on a number of fronts. Try looking at the EIA study on energy subsidies. From 1999 to 2007 renewable subsidies have grown almost 2.5X and were more than the subsidy to petroleum. Kristin’s point is valid. If you do away with one, do away with all.

  5. Kristin
    Posted January 18, 2011 at 9:39 am | Permalink

    The Farm Bill is a big hunk of money that has varying levels of connection to actual farming. There’s school lunches, all of that energy money, all of the crop subsidies, and the largest conservation programs- ie Sodsaver,Swampbuster, Conservation Reserve Program, Wetland Reserve Program. The conservation programs will never get funded at a level to compete with subsidized crops. Maybe, just maybe, they could compete in an real, unsubsidized market situation. Big ag is so smart about how they go around regulations, too. They have figured out ways to skirt previous attempts to focus support on smaller farms. They turn into lots of small farms. These are the stewards of our working lands, and the government is paying them to decide against conservation.

  6. lorie thom
    Posted January 18, 2011 at 10:22 am | Permalink

    @Kristin,

    I grew up in an area surrounded by true family farms that have since either sold out to developers or “merged” with factory farms in one way or another. Know the realities well.

    I heartily second your point but with one exception: small family farms (say those under 2M in revenue, and that is really small if you look at what the “profit” is for that (about 100 k for the whole family) should have something available to help them make transitions to smarter irrigation systems and green and sustainable technologies all around. And those things should be mandated to the larger farms and factory farms.

    Also – one of the things to keep in mind is that there are farm business infrastructures based on these subsidies. Most farmers don’t have direct access to their market both on the supply side (seeds, livestock) and the demand side (dairly, poultry, grain etc). So if we cold-turkey eliminate them the folks left standing will be companies like Cargill and ADM and those are NOT folks that should be allowed to have that kind of control as it is they abuse farmers based on their size and market control.

  7. Edward
    Posted January 18, 2011 at 10:22 am | Permalink

    When you’re considering subsidies to the fossil fuel industry, you might also want to add in the cost of the war in Iraq, which allowed them access to that country’s oil reserves. That would not have happened otherwise.

  8. Kristin
    Posted January 19, 2011 at 10:00 am | Permalink

    @lorie. Excellent points. I’m not for cold-turkey eliminating anything. It is a giant infrastructure built on policy. Like so many policies they meant well and attempted to meet a legitimate need, but were perverted by one industry or another.

  9. Posted January 25, 2011 at 9:36 pm | Permalink

    Obama just came out for these cuts in his State of the Union address.

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  1. […] how, not too long ago, we were talking about the fact that we could save $39 billion by cutting our federal subsidies to the already highly-profitable oil and …? Well, it looks as though we’ll have to find those savings somewhere else – like with cuts in […]

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