High Fossil Fuel Subsidies Growing Higher

High Fossil Fuel Subsidies Growing Higher

"We can’t take on climate change without properly pricing coal, oil, and natural gas. But it’s a huge political challenge."

"rather than being phased out, fossil fuel subsidies are actually increasing. The latest International Monetary Fund (IMF) report estimates 6.5 percent of global GDP ($5.2 trillion) was spent on fossil fuel subsidies (including negative externalities) in 2017, a half trillion dollar increase since 2015. The largest subsidizers are China ($1.4 trillion in 2015), the United States ($649 billion) and Russia ($551 billion). According to the IMF, "fossil fuels account for 85 percent of all global subsidies," and reducing these subsidies "would have lowered global carbon emissions by 28 percent and fossil fuel air pollution deaths by 46 percent, and increased government revenue by 3.8 percent of GDP." An Overseas Development Institute study found that subsidies for coal-fired power increased almost three-fold, to $47.3 billion per year, from 2014 to 2017.

"There is a long history of government intervention in energy markets. Numerous energy subsidies exist in the U.S. tax code to promote or subsidize the production of cheap and abundant fossil energy. Some of these subsidies have been around for a century, and while the United States has enjoyed unparalleled economic growth over the past 100 years—thanks in no small part to cheap energy—in many cases, the circumstances relevant at the time subsidies were implemented no longer exist. Today, the domestic fossil fuel industries (namely, coal, oil and natural gas) are mature and generally highly profitable. Additionally, numerous clean and renewable alternatives exist, which have become increasingly price-competitive with traditional fossil fuels.

"The United States provides a number of tax subsidies to the fossil fuel industry as a means of encouraging domestic energy production. These include both direct subsidies to corporations, as well as other tax benefits to the fossil fuel industry. Conservative estimates put U.S. direct subsidies to the fossil fuel industry at roughly $20 billion per year; with 20 percent currently allocated to coal and 80 percent to natural gas and crude oil. European Union subsidies are estimated to total 55 billion euros annually.

Historically, subsidies granted to the fossil fuel industry were designed to lower the cost of fossil fuel production and incentivize new domestic energy sources. Today, U.S. taxpayer dollars continue to fund many fossil fuel subsidies that are outdated, but remain embedded within the tax code."  Source

"Higher average oil prices in 2018 pushed the value of global fossil fuel consumption subsidies back up toward levels last seen in 2014, underscoring the incomplete nature of the pricing reforms undertaken in recent years. The new data for 2018 show a one-third increase in the estimated value of these subsidies, to more than $400 billion. The estimates for oil, gas and fossil-fuelled electricity have all increased significantly, reflecting the higher price for fuels (which, in the presence of an artificially low end-user price, increases the estimated value of the subsidy). The 2018 data sees oil return as the most heavily subsidised energy carrier, expanding its share in the total to more than 40%."  Source

Source

"Direct Subsidies

Intangible Drilling Costs Deduction (26 U.S. Code § 263. Active). 

Percentage Depletion (26 U.S. Code § 613. Active)

Credit for Clean Coal Investment Internal Revenue Code § 48A (Active) .

Nonconventional Fuels Tax Credit (Internal Revenue Code § 45. Inactive)

Indirect Subsidies

Last In, First Out Accounting (26 U.S. Code § 472. Active).

Foreign Tax Credit (26 U.S. Code § 901. Active). 

Master Limited Partnerships (Internal Revenue Code § 7704. Indirect. Active). 

Domestic Manufacturing Deduction (IRC §199. Indirect. Inactive)"

Source

Anacortes Refinery Image Source