Unbelievable: We Subsidize The Very Fossil Fuels That Are Ruining Our Planet

Published Jun 11, 2021

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Climate and Energy

It’s bad enough that as a nation we’ve dragged our feet on switching to 100% renewable energy. Why are we also giving handouts to an industry that would naturally become obsolete?

It’s bad enough that as a nation we’ve dragged our feet on switching to 100% renewable energy. Why are we also giving handouts to an industry that would naturally become obsolete?

Update (Mary 29, 2024): On May 23, Senator Bernie Sanders and Representative Ilhan Omar reintroduced the End Polluter Welfare Act to end outrageous taxpayer subsidies to fossil fuel corporations.

The U.S. government provides billions of dollars’ worth of support to fossil fuel companies each year. The End Polluter Welfare Act would recover $170 billion in revenue in the next 10 years by cutting such support, like tax loopholes and leasing giveaways. The Act would also cut investments in false solutions, like carbon capture and storage, that only serve as a lifeline to polluting corporations as we transition to clean energy.

By cutting such support, the End Polluter Welfare Act would also help lower climate pollution, rein in corporations that profit and grow off our tax dollars, and reduce harms to communities on the frontlines of polluting infrastructure. Food & Water Watch joins more than 300 organizations in supporting the bill.

As climate change accelerates, the science is clear that we need to move off fossil fuels in the next decade if we hope to avoid runaway climate chaos. It is critical that Congress pass a robust infrastructure package that invests in renewable energy. However, in order to facilitate a rapid transition off oil, gas, and coal, the package must also include provisions that halt current massive subsidies for the fossil fuel industry.

We simply cannot afford to keep subsidizing an industry that is poisoning our climate and communities — Congress must pass the End Polluter Welfare Act either as a stand-alone measure or as part of Biden’s infrastructure package.

Handouts Help Fossil Fuel Corporations Expand Their Footprint

The federal government currently provides about $15 billion in direct subsidies to the fossil fuel industry each year in the form of tax breaks, loans and loan guarantees, research and development, and aid for dirty energy projects abroad. These corporate handouts are driving an unprecedented expansion of U.S. fossil fuel development — over the next 10 years, the U.S. is on track to account for 60% of global growth in oil and gas production — and every dollar the federal government spends to support dirty energy makes it more difficult to achieve the 100% renewable energy future we need to avoid climate chaos. 

Some examples of the special tax breaks that oil and gas companies receive include:

  • Deduction of costs for new drilling: Oil and gas companies can deduct a majority of the costs associated with drilling new wells. Eliminating this tax break would save $13.3 billion over 10 years
  • Deduction of royalties paid as foreign tax: U.S. companies that pay royalties for leases abroad are allowed to deduct that cost as a foreign tax. In 2009, Exxon Mobil paid zero federal income taxes, in large part by taking advantage of this tax break. 
  • Percentage depletion: Companies are typically allowed to deduct depreciation of certain assets over time, but fossil fuel companies can deduct a set percentage of their taxable income not related to capital costs. This can allow deductions that exceed the total capital costs. Eliminating percentage depletion would secure $12.9 billion over a 10-year period. 

Our Tax Dollars Fund Loans For Their Research Into Perpetuating Dirty Energy

In addition, these fossil fuel corporations also receive assistance and support for the research, development, and deployment of their projects through the Department of Energy. This includes $8 billion in loans for fossil fuel projects to avoid the release of or to sequester carbon and $2.66 billion for research and development projects between 2001 and 2017, 91% of which went to coal projects. 

As a candidate, President Biden promised to end subsidies for the fossil fuel industry, and recently the American Petroleum Institute testified that fossil fuel corporations wanted to be treated like any other industry. It’s time for Congress to do just that and end special subsidies, both direct and indirect, for fossil fuels. Congress can fulfill this promise by passing the End Polluter Welfare Act

Send a message to your members of Congress: Cosponsor the End Polluter Welfare Act!

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