As a presidential candidate, Joe Biden called for ending subsidies to the fossil fuel industry. Since becoming president, he’s taken steps to rein in the expansion of fossil fuel extraction on public lands and famously canceled the Keystone XL tar sands pipeline on his first day in office.
A conservative estimate from Oil Change International puts the U.S. total of fossil fuel subsidies at around $20.5 billion annually, including $14.7 billion in federal subsidies and $5.8 billion in state-level incentives. Eighty percent of these subsidies go to oil and gas, with the rest supporting coal, and most of the subsidies are in the form of tax deductions and exemptions and other “obscure tax loopholes and accounting tricks” that result in massive, avoided costs for fossil fuel producers. There are many kinds of subsidies, for both fossil fuels and renewables, but they are not created equal.
Between The Lines’ Melinda Tuhus spoke with Collin Rees, senior campaigner with Oil Change International about Joe Biden’s stance on fossil fuel subsidies and what we may see happen in both Congress and through Biden administration departments and agencies, such as the Department of Energy and Department of Interior.
COLLIN REES: So, the U.S. federal government gives tens of billions of dollars every year to the fossil fuel industry. This is public money going to support oil, gas and coal production. Tax breaks, giveaways, lessened royalty rates, grants, any number of fiscal mechanisms which go directly to increase the profitability of fossil fuel companies and to drive additional fossil fuel production. And right now in the U.S. there is about $15 billion per year in public fossil fuel subsidies going to the oil, gas and coal industries.
MELINDA TUHUS: So, what’s the difference in dollar amount or longevity between fossil fuel subsidies and subsidies to renewable energies?
COLLIN REES: Renewable subsidies are both lower than fossil fuel subsidies – the numbers are somewhat comparable – but the big point to remember is that renewable energy subsidies are almost all temporary. These tax breaks for renewables – the ones we usually think of when we talk about renewabale subsidies – are the investor tax credit and the production tax credit, which go to help solar and wind development, which are useful. They’re good; we’re investing in something we like, but one of the problems is they’re set to expire every year, every two years. Maybe if you’re lucky in Congress, you’ll get a two- or three-year extension. Meanwhile, almost all the fossil fuel subsidies – the tax breaks we’re talking about – have been around for decades, over a century is some cases. These are what we call permanent tax breaks, permanent parts of the tax code. I think the relevant thing to remember here is that unless a tax break is permanent, it’s always on the chopping block, essentially. Permanent tax breaks for the fossil fuel industry are about seven times higher than permanent tax breaks for the renewables industry, looking at over $7 billion for fossil fuels and only about $1 billion a year in permanent tax subsidies for the renewable industry, so that’s the big gap we like to talk about.
MELINDA TUHUS: It’s so interesting that some are permanent and the ones we want aren’t permanent, and that really impacts companies’ ability to build out the renewable infrastructure. And I know sometimes they rush to start something before the subsidy expires. It must be very stressful.
COLLIN REES: Absolutely, which is very much the point. What these permanent tax breaks do is give certainty to the fossil fuel industry. It’s important to remember that that’s a key piece of what fossil fuel subsidies are designed to do, which is to send a political signal that the government has your back if you’re a coal, oil, or gas company. The dollar amounts are very germane, they’re very important. They do make a material difference in some of these cases, but I think the political signal is as important or more important than the monetary piece, and so this idea that you know the government is always going to have your back, you’re going to get these subsidies when you need them, they’re going to be there next year – it allows you to do long-term planning to continue to plan this expansion, which is so deadly, whereas for renewables, there is not that certainty; you don’t have that kind of guaranteed environment in which you can continue to build out new plants.
MELINDA TUHUS: Can you just say with as much specificity as you can what President Biden is proposing to do about rolling back or getting rid of fossil fuel subsidies?
COLLIN REES: President Biden has been quite consistent throughout his campaign for president – both in the primary and in the general election – and then since he was elected, that he does intend to end fossil fuel subsidies. There’s a lot of gray area in what is defined as a subsidy in the public discourse. Higher end estimates of direct subsidies to the fossil fuel industry are in the range of $10, $15 billion a year. That’s what our research shows. That’s in the End Polluter Welfare Act — which was released mid-April by Sen. Bernie Sanders and Rep. Ilhan Omar — those are the subsidies it identifies.
What we’ve seen from the Biden team so far is a lack of specificity as to what subsidies they’re targeting. We actually don’t think that’s a bad thing. It’s good that he’s in some sense leaving the door open to go big, to be bold, to use a larger number. And so we’re going to continue to push him to do that, putting a lot of support behind great bills, like the End Polluter Welfare Act. These subsidies to fossil fuels are harmful to people’s health. They’re creating environmental injustice. They’re leading to racial injustice, and they’re leading to continued expansion of the fossil fuel industry that’s driving the climate crisis.
MELINDA TUHUS: I was just reading that Interior Secretary Deb Haaland rolled back a bunch of things about drilling and that the department has to look at everything through the lens of climate change. Is there any more you can say about that?
COLLIN REES: Absolutely. When Biden made his executive orders on climate at the very beginning of his presidency, he singled out a couple of kinds of subsidies that he wanted to look at. The ones that we talk about the most and that get the most media attention are the tax breaks, legislative subsidies we call them, so those are the ones that need to be removed by Congress, and so that’s what the budget reconciliation fight is, the infrastructure bill; we’re going to be working to try to eliminate some of those subsidies in Congress.
But there is another category of subsidies, which is still $1 to $2 billion a year, which are called executive subsidies. So these are things like giveaways to the Department of the Interior, fossil fuel loans at the Department of Energy, or the existence of the Office of Fossil Energy, for instance. These are things we don’t think should exist in an administration that’s committed to tackling the climate crisis and so these are subsidies that the Biden administration can remove without any obstruction from Congress.
For more information, visit Oil Change International at priceofoil.org.