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Which energy source is most subsidized in the US?

President Biden has committed to shifting the United States to renewable energies but the fossil fuel industry still receives billions of dollars every year.

President Biden has committed to shifting the United States to renewable energies but the fossil fuel industry still receives billions of dollars every year.

As the American economy continues its recovery from covid-19 and the associated disruption, there is a sense that this moment represents a key opportunity to rethink how the economy operates.

The restrictions of 2020 and 2021 have largely been removed and as industry powers up again there’s greater focus on where that power is coming from. The issue of the ‘green economy’ was a major part of President Biden’s Build Back Better proposals which failed to gain traction in the Senate last year.

The $1.75 trillion package would have provided hundreds of billions of dollars to boost renewable energy production and consumption over the next decade, but those proposals are yet to materialise.

Fuel subsidies play a major role in energy production and a report published by the Congressional Budget Office in 2017 shows that an emphasis has already been placed on the switch to renewables. That data shows that the $18.4 billion of annual government allocation of energy-related tax preferences can be divided as:

- Renewable energy – 59%

- Fossil fuels – 25%

- Energy efficiency – 15%

- Nuclear energy – 1%

Fossil fuels still receive massive government subsidies

However while renewables do now receive the most in terms of subsidies, the fossil fuel industry still claims a huge amount of taxpayer money to help keep their prices low. The Environmental and Energy Study Institute found that the US government alone spends $20 billion every year on direct fossil fuel subsidies. Of that figure, around $16 billion goes towards oil and gas, while the remaining $4 billion benefits the coal industry.

There is also data to suggest that the problem is getting worse rather than better. Between 2017 and 2019 production subsidies for fossil fuels grew by 28%.

The United States is certainly one guilty party, spending huge amounts to prop up fossil fuel companies, but is far from the only nation spending billions of dollars of taxpayer money to support the industry.

Last year a report from the Brookings Institute found that more that across the world governments spend more than $500 billion on fossil fuel subsidies, artificially bringing down the cost of non-renewable energies and slowing the transition to more sustainable sources.

A 2021 estimate found that the G20, a group of twenty nations with the world’s biggest economies, was responsible for 80% of global greenhouse gas emissions. Despite that, fossil fuel production subsidies amongst the G20 countries remain high and averaged around $290 billion per year between 2017 and 2019.

Of that amount, almost 95% goes to the oil and gas industries.

Countless G20 summits have attempted to reduce the level of government support offered to the fossil fuel industry but the disruption of recent years has pushed such long-term thinking aside in the favour of short-term economic savings.


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