Stop Subsidizing Climate Change (Part 5 in the Real Price of Oil series)

This article is part of a series on climate change, the effects of fossil fuels, and ways towards a sustainable future.

You can make your voice heard on these issues.  Alaska’s own Senator Murkowski is the Chair of the Senate Energy and Natural Resources Committee.  Tell her to act on climate change by signing our petitionsending a letter we’ve written, or contacting her yourself.  Her office can be reached at 202-224-6665, by mail at 709 Hart Senate Building, Washington, D.C. 20510, or through this contact form.

Cartoon courtesy of

Often when I talk with people who are reluctant to address climate change, they express a weariness of government intervention that will unfairly skew the system. We shouldn't impose a carbon tax to discourage fossil fuel use, they’ll say - instead we should let the free market decide what is affordable, and when renewable energy becomes cheap enough, it will naturally take over and replace oil, gas, and coal.

The problem with this logic is that the system is already skewed - in favor of fossil fuels.  The fossil fuel industry spends a lot of money lobbying, but not nearly as much as it gets back in federal and state subsidies and tax breaks.  These subsidies drive fossil fuel prices artificially low, increasing consumption and making it hard for renewables to compete in the market.  If we want to live in a future with a safe climate, it is ridiculous to be economically encouraging fossil fuel use.  Ending these subsidies is a necessary step in the natural transition to a clean energy economy.

To understand why we need to end these subsidies, it’s helpful to know why they exist in the first place.  A hundred years ago, oil was a sprouting industry that needed help to get off the ground.  It makes sense for a government to offer subsidies to new industries, especially when there is a risk of losses involved.  The federal government offered tax breaks for things like ‘intangible drilling cost’ - the risk involved in drilling without the technology we have now to analyze the underlying geology.  Somehow, this tax break has managed to persist along with many others that have accrued over the years.  Despite the fact that the fossil fuel industry is now very much off (and into) the ground (the big five oil giants earned combined profits of $93 billion - or $177,000 a minute - in 2013), it continues to receive massive subsidies from state and federal government - on the scale of tens of billions of dollars a year.  While oil lobbies try to deny that these subsidies exist, the companies they represent are able to pay taxes at mere fractions of the corporate tax rate.  The International Monetary Fund figures the problem runs much deeper than it seems.  They totalled together all the costs incurred by governments due to emissions from the fossil fuel industry - such as money spent treating patients of pollution-related illness or dealing with droughts and floods induced by climate change.  How much do they estimate the US government is subsidizing the fossil fuel industry?  $700 billion a year.

The notion that we should continue subsidizing fossil fuels to help low-income people is a backwards one; it is well-documented that such people disproportionately bear the brunt of climate change, at home and abroad.  What we need in order to protect the livelihood of all people on our planet is to transition away from fossil fuel use.

Compare these massive subsidies to those for renewable energy - a fledgling industry that could certainly use the help - and there’s no wonder why we burn so much oil.  Renewable subsidies are not only smaller, but are impermanent - creating an uncertainty that hampers investment.  Yet the U.S. government continues to give fossil fuels permanent subsidies - even for exploration.  It’s absurd that these companies continue their explorations when it’s quite clear that burning even a fifth of the already identified fossil fuel reserves would result in climate catastrophe.  But to ask the people to foot part of the bill for that?  Unfathomable.  Yet the federal government does it, and so does the state of Alaska.  These and other subsidies are meant to encourage oil production in Alaska to bring in revenue for the state. Last fiscal year, however, Alaska gave these companies about $100 million more in production credits than it received in product taxes.  This deficit is expected to be even worse for this year as oil prices remain low.  These subsidies are doing more than encouraging emissions - they are troubling economies and leading to oil dependence.

So why do these subsidies still exist?  That can partially be explained by the political power that the industry exerts through lobbying.  Not all of these subsidies, however, go directly to big oil.  For example, the federal Low Income Heating Energy Assistance Program helps low income families pay for the fuel to heat their homes.  Some argue that we shouldn’t cut subsidies like these because it would put an undue burden on these families.  This presupposes a false dichotomy - between helping people pay for fossil fuels, or letting them pay for their own fossil fuels.  Another option is helping these families heat their homes using clean energy.  Bernie Sanders, U.S. senator and presidential candidate, introduced legislation this month that would give low income families access to solar energy by installing solar panels on the roofs of public housing, community buildings, and private homes.  The notion that we should continue subsidizing fossil fuels to help low-income people is a backwards one; it is well-documented that such people disproportionately bear the brunt of climate change, at home and abroad.  What we need in order to protect the livelihood of all people on our planet is to transition away from fossil fuel use.

Ending subsidies to the fossil fuel industry is a good step down this road.  By artificially driving down the price of oil, coal, and gas, these subsidies encourage their consumption.  Both the World Bank and the International Monetary Fund have been advocating for ending subsidies across the globe, the IMF claiming that such action would reduce carbon emissions by 20%.  An economist at the International Energy Agency said that ending subsidies could bring the world half way to avoiding climate disaster.  The UAE is already ending their fossil fuel subsidies.  Other countries are starting to follow suit as well.  In order to do our part for the environment and the wonderful, seven billion people who live in it, the U.S. must end these subsidies as well.  Should we go further and instate a carbon tax?  It seems to me that these companies should not be asked to pay taxes only for production, but also for the huge expenses their pollution incurs on the government through health care and disaster relief.  But if our governments cannot agree on that, they at least need to end fossil fuel subsidies to give clean energy a fair shot in the market.  Tilting the scales in favor of a type of energy that is destroying the planet we live on is, to be quite clear, morally bankrupt.


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