U.S., China peer-reviewed reports lay out huge subsidies for fossil fuels


Oil well (photo by John Hill)

Oil well (photo by John Hill)

Enlarge Photo

Critics of the renewable-energy industry argue that it's unfair that energy sources such as wind and solar often benefit from government subsidies.

But the volumes and amounts of subsidies received by the fossil-fuel industry are substantial, as new analysis shows.

In December 2013, the U.S. and China announced plans to undertake a reciprocal peer review of their countries' fossil-fuel subsidies.

DON'T MISS: Ending $4 billion U.S. oil, gas drilling subsidies would have low impact: study

The results of those studies were released this month at a meeting of the G20 nations in Hangzhou, China.

They show that, together, the U.S. and China provide around $20 billion in subsidies to the fossil-fuel industry each year.

The U.S. report (pdf) identified 16 "inefficient" fossil-fuel subsidies for exploration, development, and extraction of fossil-fuel sources that could be phased out or reformed.

The Chinese report found nine subsidies for similar activities, but also included subsidies that benefited specific groups of users, such as fishermen and taxi drivers.

All told, subsidies were estimated at $8.1 billion annually for the U.S., and $14.5 billion for China.

However, the Chinese figure did not include annual costs estimates for six of the nine fossil-fuel subsidies listed, according to The Guardian.

ALSO SEE: Wealthy nations on fossil-fuel subsidies: we'll end them...later

In addition to the listed subsidies, the U.S. report also took note of related government spending that benefits the fossil-fuel industry.

It noted that while subsidies for the bulk transportation of fossil fuels by rail or barge were not specifically identified, much of the infrastructure that supports these activities receives at least some taxpayer funding.

It also noted that the cost of maintaining the U.S. Strategic Petroleum Reserve—the world's largest emergency supply of crude oil—is borne entirely by the government, not by the oil industry itself as in other countries.

Natural gas flaring from oil well [licensed under Creative Commons from Flickr user Sirdle]

Natural gas flaring from oil well [licensed under Creative Commons from Flickr user Sirdle]

Enlarge Photo

Only one fossil-fuel subsidy—the Low Income Home Energy Assistance Program (LIHEAP)—was not marked "inefficient" by reviewers, and thus escaped a recommendation for elimination or alteration.

The U.S. has an incentive to cut the subsidies deemed "inefficient," at least in theory.

In 2009, the G20 nations agreed in principle to phase out "inefficient fossil-fuel subsidies," and the smaller G7 group set a deadline of 2025 at a meeting in Japan back in May.

But cutting most U.S. subsidies will require Congressional legislation, something that seems unlikely to happen any time soon given the current heated political climate in Washington.

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