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Balancing budget key path to #ActOnClimate?

October 3rd, 2017 · No Comments

Writ large, there is relatively small overlap between “budget hawks” and “climate hawks”.  Yet, as highlighted in a just released Oil Change International (OCI) report, there is reason for the two to find common ground (beyond a carbon fee/tax). OCI identified $20B in

Subsidies … where the government gives financial incentives to artificially lower the cost of production or consumption of fossil fuels to encourage more drilling or oil, gas, or coal use.

The $20B/year in direct financial subsidies to the fossil fuel industries

is equivalent to the projected 2018 budget cuts from Trump’s proposals to slash 10 public programs and services, including supports for America’s most vulnerable children and families.

Tackling fossil fuel (fossil foolish) subsidies could cover the planned cuts to food stamps, (the GOP just allowed to lapse) Children’s Health Insurance Program (CHIP), Amtrak, weatherization programs, and more …

Campaign contributions do pay off …

No kidding folks, that is a lot of money and a lot of good things that could be done/protected with it.

While Exxon Mobil executives are happier with larger bonuses on the back of the taxpayer, a simple expectation: most American voters would be happier without subsidizing fossil fuel profits and continuing these programs that help strengthen American society.

While that $20B is a lot of money, that is just the tip of the iceberg.

The report, Dirty Energy Dominance: Dependent on Denial, headlines the $20B in subsidies, the most telling points come on pages 21-22 (though not in OCIs promotional material nor public discussions seen to date). Pages 21-22 cover “additional U.S. support for fossil fuels”. OCI discusses four arenas:

  • Financing for fossil fuel projects overseas: $2.3B/year
  • Military expenditure to due to oil: Uncertain, likely $10Bs & maybe $100Bs/year
  • Externalities: Health impacts (asthma, cancer, deaths); lower production; water pollution; climate impacts: $186B to $686B/year^
  • Consumption subsidies: $14.5B/year

Okay, look at those numbers. OCI’s included consumption subsidies^^ plus that financing essentially doubles the direct financial number (that is real money), put the total in the range of $38B/year.  The military easily would double that.  And, well, if there is any accountability for externalities (fossil fuel profits are privatized (making Rex Tillerson wealthy) and their costs socialized (creating costs for everyone else)), there is an order of magnitude increase.

While OCI’s headline $20.5B figure gets play and seems so large, it is at best a fraction of the actual U.S. subsidizing of the fossil fuel industry.  That larger figure merits more attention and discussion — in other words, American society and citizens are being ‘taxed’ at least about 1-2% of total gross domestic product (GDP) (and serious risk to the future) to subsidize the fossil fuel industry’s fossil foolish endangerment of our common future.

To be clear, Oil Change International has made a real contribution with this serious and well documented report. While there is value in constraining discussion to that direct $20.5B in subsidy for fossil fuel production, the larger (truer) impact merits understanding and discussion.


^ The OCI team relies on some of the better work on externalities and social cost of carbon. These efforts, however, do not fully examine the systems-of-systems benefits from climate action (and, therefore, inversely the costs (or subsidies) of fossil fuel dependency).  For a discussion illuminating some of these issues see Climate Sanity and the necessity for fully-burdened cost-benefit analyses.

^^ OCI seems to have been relatively constrained in discussion ‘consumption subsidies, to direct programs like LIHEAP.  There are other serious subsidies fostering greater fossil fuel use. For example, office parking as a tax-free benefit costs the Federal Treasury $7.5B year and clearly contributes to increased driving. The unchanged gas tax means that highway construction and maintenance comes from the general treasury, not user fees, to a subsidy in the range of $70B per year.

*** Related, a just published study concluded that roughly 50 percent of US oil drilling projects would be not be financially viable (with projected profits below 10%) without these subsidies. For another good discussion, see The Oil Industry Needs Taxpayers To Prop Up Nearly Half Of Its New U.S. Drilling.

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Tags: economics · Energy