All year, the Trump administration and Republicans in Congress have been rolling back tax credits for clean energy projects, part of a broad effort to stymie the growth of wind, solar and electric vehicles.
Despite this, as Rebecca Elliot wrote this week, renewable power development is booming in the United States — for the moment, at least, as companies race to take advantage of expiring federal tax credits.
When I asked Energy Secretary Chris Wright about the administration’s moves to hold back clean power at the Climate Forward event last month, he called those tax credits “subsidies.” Renewables, Wright said, should compete with traditional forms of energy on a level playing field.
“We did have an effort to end subsidies,” he told me. “The wind subsidies and solar subsidies are 33 years old. So it’s about time for industries to walk on their own.”
That’s the kind of economic logic that is used by many free-market proponents who argue that the government shouldn’t pick winners and losers with support for particular technologies.
But when I asked Wright, a former fracking executive, about the government’s support for fossil fuels, he said there was none.
“There are not oil and gas subsidies,” he told me. “In the United States, oil and gas and coal are huge taxpayers and don’t have any subsidies that I’m aware of. And I’ve been in the business for 40 years. So if you can find the subsidies, tell me where they are.”
But, despite Wright’s claim, fossil fuel companies have benefited from specific elements of the U.S. tax code for decades.
The tax code and fossil fuels
Coal, oil and gas interests in the U.S. received more than $16 billion in subsidies in 2023, according to the Fossil Fuel Subsidy Tracker, which is maintained by the International Institute for Sustainable Development and the Organization for Economic Cooperation and Development.
That includes nearly $10 billion in subsidies for natural gas and more than $5 billion for petroleum, and is the highest total in the 15 years the group has been monitoring the data.
The subsidies vary by type and technology, but include provisions that allow companies to deduct the costs associated with drilling new wells and incentives for the production of certain types of coal.
“We subsidize oil and gas through the tax code,” said Joseph Aldy, a professor at the Kennedy School of Government at Harvard University, who served as a special adviser to President Barack Obama on energy issues. “They have industry specific tax preferences that increase the returns to investing in oil and gas compared to other industries, and they’ve had that for more than a century.”
By some estimates, the total figure is much higher. Oil Change International, an activist group, puts the total government support for fossil fuels in the U.S. at more than $34 billion per year.
The Energy Department did not respond to a request for comment.
There are differences in the ways in which renewables and fossil fuels are subsidized. Clean energy development has largely benefited from tax credits. But many oil and gas projects take advantage of tax preferences, which can reduce the after-tax costs of investing in drilling for oil and gas, for example.
“It has the same effect as a tax credit but you would not technically call it a tax credit,” Aldy told me.
And as the Trump administration has rolled back tax credits for clean energy over the past nine months, it has simultaneously boosted its support for the fossil fuel industries.
Last month, the Energy Department announced it would invest $625 million into aging coal plants, part of a coordinated effort by the administration to revive the ailing coal industry.
The giant policy bill passed by Republicans in Congress this summer includes numerous additional perks for the fossil fuel industry. There is a 2.5 percent tax break for U.S. production of metallurgical coal, mandates for the sale of oil and gas leases on federal lands, and lower royalty rates for coal companies operating on federal lands.
Oil Change International estimates that the bill contained subsidies worth an additional $4 billion per year for fossil fuel interests.
For years, subsidies for fossil fuels have proved hard to kill. As my colleague Lisa Friedman wrote last year, despite years of efforts by Democrats, most of the tax credits and other incentives for coal, oil and gas endure.
Taxing pollution
Subsidies aside, some economists argue that fossil fuel companies should be taxed even more than they already are because of the air pollution they create and their contributions to climate change, a concept known as “negative externalities.”
A 2021 report from the Natural Resources Defense Council put the financial costs from fossil fuel generated air pollution and climate change in the U.S. at more than $820 billion annually.
But unlike many countries around the world, the United States has not implemented a carbon tax, and a plan to start taxing methane emissions was scrapped by Congress earlier this year.
“We don’t tax pollution at all in this country, but other countries do,” Aldy said. “It’s a way to raise revenue. And it creates an incentive for these firms to reduce their pollution.”
The Trump administration
How FEMA is forcing disaster-struck towns to fend for themselves
President Trump’s vision for emergency management in the United States would transfer responsibility for disaster recovery from the federal government to the states in all but the largest catastrophes.
For many places, it is already the reality.
The Federal Emergency Management Agency has been delaying disaster declarations and aid payments to communities, adding new hurdles to access some grant funds and cutting off the flow of money intended to boost resilience and prevent future disasters from causing so much damage.
Emergency managers and elected officials across the country are adjusting to a system in which they can no longer count on the sort of disaster aid they typically expect from FEMA. They are figuring out how to prepare for future disasters without key FEMA grants, raising private funds to replace federal aid and turning to state governments to beef up their preparations. In some places, volunteer disaster recovery squads have sprung up. — Scott Dance
Lost science
“I’ve been proud to be an American for this reason: We have, for so long, been a steward for conservation. And now, practically overnight, that’s been shut off. It’s really almost soul-crushing.”
— Joshua Plotnik is the director of the Comparative Cognition for Conservation Lab at Hunter College, City University of New York. His research into Asian elephant cognition was primarily funded by the U.S. Fish and Wildlife Service. In January, after President Trump’s executive order freezing foreign aid, his funding was canceled. Read more.
And read more from our Lost Science series.
Has your scientific work been cut? We want to hear about it. You can fill out the form at the bottom of this page or email us at [email protected]. You may be contacted by a New York Times journalist.
Number of the day
$28 billion
Two weeks into the government shutdown, the Trump administration has frozen or canceled nearly $28 billion that had been reserved for more than 200 projects primarily located in Democratic-led cities, congressional districts and states, according to an analysis by The New York Times.
The projects include new investments in clean energy, upgrades to the electric grid and fixes to the nation’s transportation infrastructure, primarily in Democratic strongholds, such as New York and California. Each of these infrastructure projects had received federal aid, sometimes after officials spent years pleading in Washington — only to see that money halted as President Trump has looked to punish Democrats over the course of the fiscal stalemate. — Tony Romm and Lazaro Gamio
More climate news from around the web:
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Plug-in hybrids pollute far more than previously thought and almost as much as gas-powered cars, according to a new study highlighted by The Guardian.
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Americans raced to buy electric vehicles in record numbers in the third quarter, as federal tax credits expired, Heatmap News reports. The only exception? The Tesla Cybertruck.
David Gelles reports on climate change and leads The Times’s Climate Forward newsletter and events series.
The post Subsidizing Fossil Fuels, but Not Clean Energy appeared first on New York Times.
