A REVIEW OF U.S. ENERGY SUBSIDIES

Estimating U.S. Government Subsidies to Energy Sources: 2002-2008
September 2009 (Environmental Law Institute)

"…Applying a conservative approach, [the Environmental Law Institute, ELI]…found that…[1] The vast majority of federal subsidies for fossil fuels and renewable energy supported energy sources that emit high levels of greenhouse gases…[2] The federal government provided substantially larger subsidies to fossil fuels…a mature, developed industry that has enjoyed government support for many years…approximately $72 billion…a direct cost to taxpayers…

"…[3] Subsidies for renewable fuels, a relatively young and developing industry, totaled $29 billion…[3] Subsidies to fossil fuels generally increased over the study period (though they decreased in 2008), while funding for renewables increased but saw a precipitous drop in 2006-07 (though they increased in 2008)…[4] 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 are time-limited initiatives implemented through energy bills, with expiration dates that limit their usefulness…"

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"…[5] 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 these, 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…[6] Almost half of the subsidies for renewables are attributable to corn-based ethanol…[which has questionable] effects on climate.

"The subsidies examined fall roughly into two categories: (1) foregone revenues, mostly in the form of tax expenditures…and (2) direct spending, in the form of expenditures on research and development and other programs…[The ELI definition] of fossil fuels…petroleum and its byproducts, natural gas, and coal products…[R]enewable fuels include wind, solar, biofuels and biomass, hydropower, and geothermal energy production."

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"Nuclear energy, which also falls outside the operating definition of fossil and renewable fuels, was not included…[T]he study did not identify the precise greenhouse gas emission profile…ELI examined only fuel-specific subsidies, not those that are available to all industries…[T]he analysis does not include…energy efficiency measures…non-fuel-specific transportation spending…non-fuel-specific subsidies to the electricity sector…the subsidizing effects of regulatory or procurement standards; and… other measures that either are not fuel-specific or do not affect the federal budget…

"…The study…does not seek to determine how these subsidies affect energy production or consumption, or whether they ultimately benefit consumers or industry…Similarly, the study counts funds used to support carbon capture and storage programs as a fossil fuel subsidy, despite their potential to reduce the emissions associated with burning coal…[and] subsidies to corn ethanol were tallied as a renewable fuel subsidy, although whether the production of corn-based ethanol constitutes a net subtraction of greenhouse gas emissions has been subject to significant debate."