The US Still Hands Out $20 Billion a Year to Fossil Fuel Companies

Despite its efforts to reign in pollution, the Obama administration is still giving free cash to the nation's biggest polluters.

Brian Merchant

Brian Merchant

Image: werner22brigitte / Pixabay

Over the years, President Obama has repeatedly called on Congress to kill the sizable subsidies the federal government annually grants to oil companies. "It's outrageous," he said in a 2012 speech. "It's inexcusable. I'm asking Congress: Eliminate this oil industry giveaway right away."

Instead, something closer to the opposite has happened: Over the years, those subsidies have not only remained in place, but have also become even more valuable to oil and gas companies who enjoy them. According to a new report, the US government has handed out an average of $20 billion a year to fossil fuel companies over the last five years.

"The federal subsidies to fossil fuel producers represent an increase of 35 percent over levels when President Obama took office in 2009," the study, compiled by Oil Change International and Overseas Development Institute, notes,"in spite of calls to remove several major subsidies in every budget that the Obama administration has sent to Congress."

The subsidies are larger because domestic production has grown larger, at a rapid clip. As the US has experienced its recent gas and oil boom, those subsidies have "reduced risk and boosted returns in the US, helping to drive the supply growth that has made the US the world's largest producer of both oil and natural gas, ahead of Saudi Arabia and Russia. In 2014, the US produced more oil than Iran, China, and Canada combined."

Subsidies aren't the main reason behind the boom—fracking is—but they make further exploration and production a more palatable endeavor. This is, in other words, low-hanging fruit for any government interested in reducing carbon pollution.

"These are tax dollars going directly to fossil fuel companies to dig up carbon and pad the profits of the industry, plain and simple," David Turnbull, the campaign director of Oil Change International, told me. "Ending these subsidies should be a straightforward and immediate step to stop funding fossils and move in a cleaner, more climate-friendly direction."

You may have seen even higher tallies for how much the federal government hands over in subsidies to the oil industry (Obama has previously called for the removal of up to $38 billion in benefits for the oil industry), but this report is concerned only with the funds given explicitly to produce fossil fuels.

"This study is a unique look at subsidies going directly to the fossil fuel industry for their production," Turnbull said. "Previous reports have included hidden costs of fossil fuels like health costs, climate impacts, and other so-called externalities. That's certainly appropriate in many ways, but this study seeks to expose the direct tax loopholes and other corporate giveaways the industry enjoys directly."

Even without those externalities factored in, the advantage that subsidies grant fossil fuels over the nascent clean energy industry is massive.

"Globally, our report shows that fossil fuel production subsidies in the G20 alone are four times greater than renewable energy subsidies in the entire world," Turnbull said. "That's a striking disparity given our climate crisis. We already have far more fossil fuels than we can afford to burn if we want a habitable planet, so it's simply irrational for our government to be funding the exploration and production of more."