White House Eyeing Phasing Out of Fossil Fuel Subsidies

September 20, 2009

(ChattahBox)—Ending subsidies to dirty fossil fuel industries is on the agenda for the upcoming G-20 summit to be held in Pittsburgh later this month. And the subject is sure to raise some objections from the oil, natural gas and coal industries that benefited from an estimated $72.5 billion in subsidies over a six-year period, according to a newly released study from the Environmental Law Institute.

The global recession and global warming will dominate the G-20 agenda in Pittsburgh, but especially international climate change efforts, as the upcoming December Climate Change Conference in Copenhagen puts pressure on world leaders to act.

Michael Froman, a deputy assistant to President Obama, said in an interview on Wednesday that the President plans to push for international support to end subsidies to fossil fuels and electricity. Froman noted that current studies show that an elimination of fossil fuel subsidies would result in the reduction of greenhouse-gas emissions, by 10 percent or more by 2050.

The new study released by the Environmental Law Institute entitled, “Estimating U.S. Government Subsidies to Energy Sources: 2002-2008,” provides the Obama administration with an additional weapon for the phasing out of fossil fuel subsidies in the United States.

According to the study, the fossil fuels industry was awarded more than twice the level of subsidies than renewable energy sources received from the U.S. government in fiscal 2002 through 2008. The combination of government spending and tax breaks amounted to $72.5 billion for fossil fuels and a paltry $29 billion for renewable sources of energy.

John Pendergrass, a lawyer for the Institute, stressed the policy disconnect between the administration’s efforts to curb greenhouse gases with its ambitious cap-and-trade legislation and a federal tax policy that benefits dirty fossil fuel industries, and even provides aid to foreign oil production.

“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 Pendergrass.

The study also documented the permanent nature of many fossil subsidies that are written into the federal tax code, while those “…subsidies for renewables are time-limited initiatives implemented through energy bills, with expiration dates that limit their usefulness to the renewables industry.”

Additionally, many of the subsidies for renewable sources of energy are awarded towards increasing the production of corn-based ethanol, which negatively affects climate change and the environment.

“Almost half of the subsidies for renewables are attributable to corn-based ethanol, the use of which, while decreasing American reliance on foreign oil, raises considerable questions about effects on climate,” according to the study.

Representatives from the fossil fuel industry are already speaking out to question the Institute’s study. Jack Gerard, president of the American Petroleum Institute, called the study, “…an irresponsible rendition based on a contorted recycling of government data” that “would raise energy costs and kill jobs.”

Despite industry opposition, if the United States wants to succeed at crafting a meaningful energy policy to curb greenhouse gases, the current policy of awarding billions of dollars in subsidies to dirty fossil fuel industries would have to be phased out, with additional funding given to clean renewable sources of energy.


5 Responses to “White House Eyeing Phasing Out of Fossil Fuel Subsidies”

  1. US govt considers phasing out fossil fuel subsidies « nuclear-news on September 20th, 2009 8:57 pm

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  2. Advanced BioFuels USA » White House Eyeing Phasing Out of Fossil Fuel Subsidies on September 21st, 2009 12:39 pm

    […] energy bills, with expiration dates that limit their usefulness to the renewables industry.”   READ MORE   Download […]

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  4. SacramentoE85 on September 22nd, 2009 10:22 am

    This is a significant direct subsidy, while other much larger “hidden” subsidies exist. Tax breaks, research grants, and especially military protection of foreign oil sources and shipping lanes represent $100 millions ANNUALLY for petroleum. If we were to remove those, the actual pump price of gasoline would surge to over $10 per gallon, as the oil companies would have to take on their own business expenses instead of raiding our weekly paycheck withholding taxes.

  5. | Draft Opinions on October 22nd, 2009 1:29 am

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