U.S. taxpayers funding climate change through oil industry subsidies

provided by Greenpeace

he U.S. government is massively subsidizing one of the major causes of climate change, the burning of oil, according to a new report by Greenpeace International. The report, "Fueling Global Warming: Federal Subsidies to Oil in the United States," by Douglas Koplow and Aaron Martin of U.S. economics consultancy company Industrial Economics, found that the U.S. government provided up to $11.9 billion in subsidies to the U.S. oil industry in 1995 excluding the cost of defending the Persian Gulf oil supplies. Including defence costs, the subsidies figure rises to $35.2 billion.

"This study shows the hypocrisy of the US government on climate change policy which attempts to blame developing countries for failing to take action to cut greenhouse gas emissions while it continues to provide billions in subsidies to its domestic oil industry, which includes some of the richest companies in the world," said Greenpeace climate campaigner Kalee Kreider.

The subsidies to the oil industry include:

  • The full cost of maintaining the Strategic Petroleum Reserve (a stockpile of oil in case of disruption to imports) at $5.4 billion; tax breaks to domestic oil exploration and production at $2.3 billion and support for oil-related exports and foreign production at $1.6 billion.
  • Oil companies continue to pay substantially less than the standard rate of corporate taxation, with payments in 1995 more than 23 percentage points below the statutory rate. The average effective tax rate paid by oil companies fell from 21.9 percent in 1981 to only 11.9 percent in 1995.
  • Creative accounting by oil producers and lapses in auditing practices by some government agencies led to federal government losses of $200 million per year in royalties.
  • Inadequate bond payments and user fees to cover the plugging of oil wells and dismantling of rigs at the end of production shifted up to $550 million in liability insurance premiums from oil companies to the public.
  • Multinational oil companies also benefited from subsidized export promotion with below market rate loans and cheaper insurance, through the Export-Import Bank and Overseas Private Investment Corporation, both of which continue to heavily favor oil over clean energy alternatives.

The study found that the oil tax proposed by Congress in 1992-93 ($0.31 per million British thermal units Btu) would not have even offset federal subsides to oil.

"The U.S. government can't argue that the costs of boosting real solutions to climate change - renewable energy like wind and solar - are too high when they've spending billions on the oil industry," said Kreider.

"Greenpeace is calling for Congress to strip all subsidies to the oil industry, and make renewable energy sources, like solar and wind, an integral part of US efforts to curb global warming," Kreider said. "Taxpayers shouldn't be shouldering an energy policy that is gambling with the environment."

  Contact:Douglas Koplow and Aaron Martin of Industrial Economics, (617) 354-0074.