Even in the middle of a UN-declared Code Red climate crisis, oil and gas corporations are planning new drilling projects. Subsidies from the federal government are largely used to reduce operating expenses and fossil fuel production would probably become unprofitable without them, an argument that climate activists have been using for years.
President Biden has signed an executive order directing federal agencies to eliminate subsidies for fossil fuels, but only a fraction of those subsidies are within the president’s control. He can’t touch Congress’ fossil fuel budget, but his administration could make sure that fossil fuel companies pay up when facing government penalties. In 2015, the Justice Department reached a settlement with BP over the Deepwater Horizon oil spill, promising that the company would have to pay $20.8 billion in damages for leaking oil in the Gulf of Mexico. But the settlement turned out to be tax-deductible, meaning that BP could write off $15.3 billion of the penalty. The Justice Department could close that kind of loophole.
However, the biggest effect of Biden’s executive order might not be the money, but the spotlight now turned on subsidies that “free up” money for fossil fuel corporations to invest in lobbying and block efforts to tackle the climate crisis. Between 2000 and 2016, fossil fuel interests spent nearly $2 billion to derail climate legislation.
The spotlight on these activities and dwindling public support for fossil fuels is building momentum for a fossil fuel subsidy phase-out. But action is needed from Congress. The subsidies under Congress’s control amount to around $15 billion a year from tax breaks, and regulatory loopholes, so getting rid of those would require new legislation.
Democratic lawmakers have introduced legislation named the End Polluter Welfare Act, to repeal dozens of tax policies that benefit fossil fuels, raise royalty rates on federal oil and gas production, halt federal research into oil and gas technology, and potentially raise $150 billion over the next 10 years.
The Senate’s bipartisan infrastructure bill, sold as a down payment on addressing the climate crisis, is, critics claim, full of new fossil fuel industry subsidies masked as climate solutions. The subsidies would go toward technologies, “dream fixes” for ending the climate crisis. These are the technologies of carbon capture and decarbonized hydrogen fuel that help fossil fuel companies mask the continued release of climate-warming gases. Neither of these technologies are currently commercially viable at a large scale, so will require government help to carry out what critics claim is a public relations scheme. Carbon capture would do nothing to resolve the array of severe environmental problems caused upstream by drilling, fracking, and mining nor the downstream burning of the fuels for energy.
The bill also has subsidies for hydrogen fuel made from natural gas, “low emissions buses” that could run on fuels including hydrogen and natural gas, and subsidies that go unquantified in the legislation; for example, urging states to waive property taxes for pipelines to transport captured carbon.
It is also true that government subsidies are needed for the rapid scale-up of renewable energy sources, which are already proven to slow the climate crisis. We know that wind and solar work as climate fixes right now, while carbon capture and “decarbonized” hydrogen do not. Instead of providing funding for proven renewable energy technology, it appears that Democrats and Republicans are choosing to give the fossil fuel industry a lifeline.
Is that where we want our tax dollars to go? If not, it’s up to us to demand that President Biden fulfill his mandate to Build Back Fossil Free, and Congress enact legislation that will eliminate fossil fuel subsidies and instead fully support renewable energy.
—Lesley Frost, Advocacy Chair