Each year the world’s taxpayers provide an estimated
$700 billion of subsidies for environmentally destructive activities,
such as fossil fuel burning, depleting aquifers, clear-cutting
forests, and overfishing. An Earth Council study, Subsidizing
Unsustainable Development, observes that “there is something
unbelievable about the world spending hundreds of billions
of dollars annually to subsidize its own destruction.”
Some countries are eliminating or reducing these climate-disrupting
subsidies. Belgium, France, and Japan have phased out all subsidies
While some leading industrial countries have been reducing
subsidies to fossil fuels—notably coal, the most climate
disrupting of all fuels—the United States has been increasing
its support for the fossil fuel and nuclear industries. A 2002
Green Scissors report, supported by a coalition of environmental
groups, calculated that over the preceding 10 years subsidies
for the energy industry totaled $33 billion. Of that, the oil
and gas industry got $26 billion, coal $3 billion, and nuclear
At a time of mounting public concern about climate change driven by the burning
of fossil fuels, the world fossil fuel industry is still being subsidized by
taxpayers at more than $210 billion per year. Fossil fuel subsidies belong to
another age, a time when development of the oil and coal industries was seen
as a key to economic progress—not as a threat to our 21st century civilization.
Subsidies lead to special interest lobbies that fight hard against eliminating
them, even those that were not appropriate in the first place.
In the United States, oil and gas companies are now perhaps the most powerful
lobbyists in Washington. Between 1990 and 2004, they amassed $181 million in
campaign contributions in an effort to protect special tax deductions worth billions.
Many subsidies are largely hidden from taxpayers. This is especially true of
the fossil fuel industry, whose subsidies include such things as a depletion
allowance for oil pumping in the United States. Even more dramatic are the routine
U.S. military expenditures to protect access to Middle Eastern oil, which were
calculated by analysts at the Rand Corporation before the most recent Iraq war
to fall between $30 billion and $60 billion a year, while the oil imported from
the region was worth only $20 billion.
In testimony before the House Ways and Means Committee in 1999, Donald Lubick,
U.S. Treasury assistant secretary for Tax Policy, said in reference to oil and
gas companies: “This is an industry that probably has a larger tax incentive
relative to its size than any other industry in the country.” That such
profitable investments are possible is a measure of the corruption of the U.S.
political system, particularly the capacity of those with money to shape the
economy to their advantage.
A 2001 study by Redefining Progress shows U.S. taxpayers subsidizing automobile
use at $257 billion a year, or roughly $2,000 per taxpayer. In addition to subsidizing
carbon emissions, this also means that taxpayers who do not own automobiles,
including those too poor to afford them, are subsidizing those who do.
Subsidies are not inherently bad. Many technologies and industries were born
of government subsidies. Jet aircraft developed when military R&D expenditures
led to modern commercial airliners. The Internet was the result of publicly funded
links among computers in government laboratories and research institutes. The
combination of the federal tax deduction and a robust state tax deduction in
California gave birth to the modern wind power industry.
There is an urgent need for subsidy shifting. Eliminating environmentally destructive
subsidies reduces both the burden on taxpayers and the destructive activities
themselves. A world facing the prospect of economically disruptive climate change,
for example, can no longer justify subsidies to expand the burning of coal and
oil. Shifting these subsidies to the development of climate-benign energy sources
such as wind, solar, biomass, and geothermal power is the key to stabilizing
the earth’s climate. Shifting subsidies from road construction to rail
construction could increase mobility in many situations while reducing carbon
A bright spot about this subsidization of fossil fuels is that it provides a
reservoir of tax deductions that can be diverted to climate-benign, renewable
sources of energy, such as wind, solar, and geothermal energy. To subsidize the
use of fossil fuels is to subsidize crop-withering heat waves, melting ice, rising
seas, and more destructive storms. Perhaps it is time for the world’s taxpayers
to ask if this is how they want their hard-earned money to be spent.
Adapted from Chapters 4 and 12 of Lester R. Brown’s, Plan B 2.0: Rescuing
a Planet Under Stress and a Civilization in Trouble (New York: W.W. Norton & Company,
2006), available online at Earthpolicy.org.