Subsidies for fossil fuels double that of renewables

By Susanne Retka Schill | September 18, 2009
Posted September 22, 2009

A study of energy subsidies by the Environmental Law Institute released Sept. 18 confirmed the federal government provides substantially larger subsidies to fossil fuels than to renewables. "The primary insight we want people to understand from the study is that the vast majority of subsidies support greenhouse gas emitting energy sources," said John Pendergrass, senior attorney with the institute and one of the authors of the study. "The majority of subsidies are through tax breaks rather than direct spending."

Fossil fuels benefited from approximately $72 billion over the seven-year period studied from 2002 to 2008, while subsidies for renewable fuels totaled $29 billion. More than half the subsidies for renewables-$16.8 billion-were attributed to corn-based ethanol. The calculated subsidy for corn ethanol included a portion of federal farm program payments attributed to corn used for ethanol. The combined biodiesel blenders credit and biodiesel excise credit for the same seven year period total $182 million. 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, which is designed to reduce greenhouse gas emissions from coal-fired power plants. While the volume of fossil fuels is much higher than renewable fuels, Pendergrass said they chose to analyze the cost to taxpayers. "We have not attempted to measure the benefits that may be gained from the subsidies," he added.

The U.S. energy market is shaped by a number of national and state policies that encourage the use of traditional energy sources, the study noted. These policies range from royalty relief to the provision of tax incentives, direct payments, and other forms of support to the non-renewable energy industry. "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," Pendergrass said. "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 report, "Estimating U.S. Government Subsidies to Energy Sources: 2002-2008," is available on the Environmental Law Institute Web site.
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