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Another look at Fossil Fuel Subsidies


Incentives are a powerful tool in the growth of emerging technologies.

By: Wes Golomb – NH Energy Geek – May 10, 2019

Several presidential candidates are calling for an end to fossil fuel subsidies.

Subsidizing fossil fuels is nothing new, the US has been doing so since 1916.   The subsidies began because of the huge risks which were initially taken by speculative investors, wishing to find oil.   Those subsidies supported the emerging technologiess of the time by providing ample fuel for rapid development. These incentives paid off handsomel,y as oil supercharged our economy and society.

The history of fossil fuels subsidies is well documented by Mother Jones magazine in two articles: Triumph of the Drill: How Big Oil Clings to Billions in Government Giveaways.  and  A Brief History of Big Tax Breaks for Oil Companies  . Both these articles give a lot more detail  than I am providing here and are worth reading.   For the moment, consider the first paragraph of “A brief history… this article published in April of 2014 begins:

“Over the past century, the federal government has pumped more than $470 billion dollars into the oil and gas industry in the form of generous, never-expiring tax breaks.”  On May 2, 2019  the International Monetary Fund released a report on fossil fuel subsidies estimates.  That report estimated that the value of the incentives in the US to fossil fuel companies for the year 2o15 alone was $649 billion dollars

Let me repeat that, its not a misprint.  That’s $470 billion dollars for the past century (1914-2014)  and $649 billion for the year 2015.

A recent article By Tim Dickinson in Rolling Stone magazine points out US Fossil Fuel Subsidies Exceed Pentagon Spending, and total more than ten times the education budget of the US.

Something is clearly wrong.  We’re spending more on fossil fuel incentives than on the military budget or education budget.  Climate Science tells us we must  cut emissions of carbon from fossil fuels.  It is clear however that these subsidies have outlived their purpose.  Subsidies now distort the market in a negative way.  According to the  IMF report  published on May 2, 2019:

” Efficient fossil fuel pricing  in 2015 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.”   Link To IMF Study


IPCC reports over the last 20 years  conclude we must limit temperature rise to to 1.5 degrees above pre industrial limits.  In these studies they test a variety of scenarios and find that only ones which have us quickly transitioning from fossil fuels to sustainable energy limit temperature rise.

Subsidies  for fossil fuels have proven to be an effective way to incentivize emerging energy technologies, but fossil fuels are no longer emerging, and are now known to be the cause of climate change.  For these reasons, it is time to replace fossil fuel subsidies with similar scale sustainable energy subsidies.

The lesson, for which there is ample precedent and evidence is that incentives are an effective way to support  emerging energy technologies.  We need to convert to fossil-free energy asap and the use of incentives is an important tool which could be used to help us get there.



Photo:The dome of the U.S. Capitol is seen behind the smoke stacks of the Capitol Power Plant, the only coal-burning power plant in Washington, D.C. (photo: Jim Lo Scalzo/Shutterstock)

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