Should the United States Government Continue Subsidizing the Fossil Fuel Industry?

Jason Orringer

Associate Editor

Loyola University Chicago School of Law, JD 2023

In his proposed American Jobs Plan, President Biden has stated that if the United States wants to achieve its decarbonization targets and get climate change under control, cutting off government support to the fossil fuel industry is a crucial first step. Eliminating government subsidies for fossil fuels is the most logical step in fighting back against climate change, but Biden is facing an uphill battle to get his American Jobs Plan passed through Congress.

Understanding fossil fuel subsidies

The United States fossil fuel industry, which includes coal, oil, and natural gas, continues to be highly profitable. However, numerous renewable energy alternatives to fossil fuels have risen to prominence over recent years, which serve to compete with the traditional fossil fuel industry. Given the rise in clean energy as alternatives to fossil fuels and growing concerns over the impact of climate change, there has been increasing scrutiny as to whether the United States should continue to provide the fossil fuel industry with tax subsidies.

The United States government has maintained a significant presence in global energy markets, including various subsidies within the United States tax code that promote or subsidize the production of cheap and abundant fossil energy. Considering that total global energy subsidies in 2017 amounted to more than $5.2 trillion and America contributed $649 billion of the aggregate, it is clear that this industry is financially significant globally.

The fossil fuel industry today is a mature and highly profitable industry. The American Petroleum Institute claims that the industry supports nearly eight percent of the nation’s Gross Domestic Product (GDP) and 10.3 million jobs in the United States. Additionally, those in support of the fossil fuel industry say that it is continuing to grow and create jobs across a wide variety of sectors in America.

The opposition to fossil fuel subsidies

The movement in opposition to fossil fuel subsidies has steadily grown as the negative effects of climate change have become more and more severe. Between the devastating effects of climate change and the various forms of renewable energy, the technology supporting renewable energy has become increasingly cost-competitive with fossil fuels, and many believe that putting United States taxpayer dollars towards funding fossil fuel subsidies is outdated and should be removed from the tax code.

The backbone of the opposition to fossil fuel subsidies stems from the current climate crisis. With a dwindling carbon budget, there is a limited amount of greenhouse gases we can emit while hopefully staying below temperature warning limits. Developing newfound gas, oil, and coal will have irreversible effects on the planet. Not only does this industry pollute the environment and severely impact climate change, but it also negatively affects public health. By putting money into fossil fuels, the government is placing taxpayer’s dollars toward damaging the planet and its population instead of putting that money toward clean energy and public health.

Not only are fossil fuel subsidies aiding the destruction of the planet, but they are also diverting money away from other important public sectors, especially those that are more environmentally friendly. In the United States, the $649 billion spent on fossil fuel subsidies in 2015 was more than the country’s defense budget and over ten times the federal spending for education. Redirecting that enormous amount of taxpayer dollars toward building hospitals, funding schools, and supporting health and education could have enormous benefits to public welfare.

The path forward

If a bill including subsidy reform does pass, we will see a significant shift in the United States’ approach to fighting the climate crisis. The billions that the federal government provides the fossil fuel industry every year could be redirected to clean energy jobs and education. It would allow the United States to redeem itself from its current state of being the number one emitter of greenhouse gases in the world over the last century and set an example that other countries could follow. Most importantly, it could substantially reduce the country’s carbon dioxide emissions and significantly impact combating climate change and preserving the planet.

In April of 2021, Senator Bernie Sanders and Representative Ilhan Omar introduced formal legislation in an attempt to eliminate fossil fuel subsidies. In their proposed bill, End Polluter Welfare Act (“EPWA”), they hope to eliminate over $150 billion in government subsidies and loopholes provided to the fossil fuel industry.

While this EPWA covers a majority of the direct subsidies that the fossil fuel industry continues to be awarded, it does not cover all of the indirect subsidies that the industry enjoys the benefits from. However, this is the first time legislation like the EPWA has been introduced to Congress with a reasonable possibility of passing. If passed, it will be America’s biggest step ever in addressing the global climate crisis that it continually contributes a disproportionate amount of carbon dioxide toward. Not only will the funds be able to be redirected to support a green economy and a green future for the country, but it would eliminate the pedestal that the fossil fuel industry has been historically placed on in the political arena.