Washington, DC, November 22, 2010 – U.S. subsidies of fossil fuel are far lower than most other nations’ subsidies, according to a new analysis from the Tax Foundation of an annual report from the International Energy Agency (IEA).
In advance of the G-20 meeting in Seoul, the IEA released its annual World Energy Outlook, a 738-page analysis of the global energy market that is highly critical of governments that subsidize fossil fuels.
“The U.S. doesn’t even give enough subsidies to oil, gas or coal to register on a worldwide ranking of the biggest subsidizers,” says Tax Foundation president Scott Hodge. “Yet the Obama Administration and Senate Majority Leader Reid continue their campaign to eliminate not only the few tax breaks that fossil fuel providers currently receive, but to withhold from them the ordinary tax treatment of business expenditures that many corporate taxpayers benefit from.”
The report is Tax Foundation Fiscal Fact, No. 252, “IEA Study Ranks Nations’ Subsidies to Fossil Fuel Consumption,” at http://www.taxfoundation.org/research/show/26851.html.
The IEA says governments cite five major reasons for their fossil fuel subsidies: (1) alleviating energy poverty, (2) boosting domestic supply, (3) redistributing natural resource wealth, (4) protecting employment, and (5) protecting the environment.
Internationally, subsidies for fossil fuels far outweigh other energy subsidies. According to the IEA, support for renewables totaled $57 billion in 2009, only 18 percent of the value of fossil-fuel consumption subsidies.
“Giving away gasoline to low-income people and protecting the employment of coal miners are both common government policies, but the U.S. has leaned much more heavily toward environmental protection,” says Hodge. “The $2.8 billion in U.S. tax breaks for oil and gas firms is much smaller than the $11.3 billion in tax breaks we are funneling into green energy such as wind and solar power production.”
When the IEA measures fossil fuel subsidies as a share of gross domestic product, the biggest subsidizers are Uzbekistan, Iran, Turkmenistan, Iraq and Saudi Arabia. Even when measuring in dollars, which would be expected to push the U.S. up when compared to less wealthy nations, the IEA doesn’t list the U.S. among the top 25 subsidizers. Iran, Saudi Arabia, Russia, India and China rank 1-2-3-4-5 as the nations offering the largest subsidies in billions of dollars.
Since taxes are the opposite of subsidies, Hodge cites the impressive amounts collected from U.S. oil and gas firms. Between 1981 and 2008, the oil industry paid more than $388 billion to the federal and state governments in corporate income taxes and almost twice that amount, $683 billion, to foreign governments.
“The demands from the Administration and its allies in Congress for eliminating what little subsidies the U.S. provides,” concludes Hodge, “seem out of proportion. The Administration should focus on making the U.S. more competitive for corporate activities instead of targeting energy firms for punitive tax treatment.”
The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.