The first step in stopping climate change: Quit subsidizing fossil fuels by Jack Kochansky

The United States has a long tradition of burning fossil fuels. As of 2019, 38% of utility-scale electricity came from natural gas, and 24% came from coal. In contrast, only 18% of American electricity needs were met by renewable energy.[1] The result of this heavily fossil fuel-dependent system is that despite Americans making up only 4% of the world’s population,[2] we are responsible for 14% of global CO2 emissions.[3] To reduce air pollution and limit climate change, climate scientists agree that industrialized nations such as the United States need to decarbonize their electrical grids by moving away from fossil fuels.

On the campaign trail, U.S. President Donald Trump worked hard to win the support of rural Midwestern voters, and among his tactics was to berate the Obama administration’s “war on coal”.[4] But here’s the thing: such a war never existed. In fact, since the Revenue Act of 1916, the United States has offered fossil fuel producers generous subsidies and tax breaks, many of which are still in place today.[5] For all the talk about the government trying to kill coal, it has actually been supporting it for over a century.

The original logic for fossil fuel subsidies made sense. During a time when oil was still scarce and other sources of energy were all but nonexistent, policymakers wanted to support energy independence, and people were not yet aware of the external costs of CO2 emissions. Yet to this day, many of those same subsidies and tax breaks remain in place. Direct subsidies include deductions for drilling costs ($1.59 billion/year), tax breaks depending on how depleted an oil reserve or coal mine is ($12.9 billion over 10 years), and broad tax credits to promote domestic production.[6] The larger group of subsidies, however, is indirect. Fossil fuel companies avoid paying billions of dollars of taxes each year by exploiting accounting loopholes, claiming foreign tax credits, and harnessing tax breaks meant for other industries.[7] In total, the federal government shovels over nearly $14.7 billion per year to oil, gas, and coal companies.[8]

While the majority of these government handouts go to oil and natural gas, nearly 20 percent go to coal.[9] Furthermore, the coal industry pays an effective tax rate of only 0.97% — nearly nothing — compared with an average of 7.32% for all industries.[10] In other words, the United States government is paying billions of dollars in subsidies and foregone tax revenues to support an industry whose emissions are costing lives and destroying the planet. In fact, an IMF report found that the fossil fuel industry costs the United States $649 billion per year — more than the Pentagon’s annual expenditures — when direct subsidies and external costs of pollution are taken into account.[11]

The policy solution to this problem is very simple: remove and reallocate the existing fossil fuel subsidies to climate-friendly industries. Although it would be politically challenging to enact a carbon tax or other emissions pricing initiative, there is no reason for fossil fuels to receive special tax exemptions. As of 2020, the United States is a net exporter of crude oil,[12] so there is little substance to the argument that we still need to prioritize energy independence. In contrast, renewable energy is the fastest-growing energy sector in the US,[13] and it offers more sustainable long-term energy produced on home soil. Furthermore, once external costs are considered, renewable energy is the least expensive way to generate energy for nearly every US state.[14]

Rather than offering broad, obsolete subsidies to the coal companies that pollute our atmosphere, the federal government should redirect funds to cutting-edge solar and wind power projects. Today, the government is facing pressure from oil and coal lobbyists to remove renewable energy subsidies, but as wind and solar continue to grapple with intermittency issues, we need them more than ever.[15] Although solar installation costs currently have a 26% federal tax deduction, that will fall to 10% by 2022 and apply only to commercial solar systems (not residential ones).[16] If the federal government were to instead cut the majority of fossil fuel subsidies, it could maintain the renewable ones and still collect more revenues.

With that said, not every fossil fuel subsidy is a bad subsidy. Rather, the government needs to be smart in its approach. The only fossil fuel subsidies worth keeping are for pollution abatement, power plant closure, and environmental protection. For example, some natural gas subsidies might make sense, as long as they incentivize the shuttering of dirtier coal plants. In other words, subsidies should be used as precise tools to ease the transition towards clean energy, not merely a way to take money from citizens and put it in the pockets of industrialists.

Many young voters are very concerned about climate change and support broad new environmental plans, such as the Green New Deal. As we work towards a more sustainable future for America, we must both pass sweeping new legislation and eliminate the bad policies that go against the interests of the citizens. No longer should the American public be subsidizing our bigges

[1] What is U.S. electricity generation by energy source? – FAQ. (2019). Eia.Gov; U.S. Energy Information Administration.

[2] Migiro, G. (2018, October 25). Countries By Percentage of World Population. WorldAtlas.

[3] Each Country’s Share of CO2 Emissions. (2020). Union of Concerned Scientists.

[4] Irfan, U. (2018, January 31). Trump’s perennial “war on coal” claim, fact-checked. Vox; Vox.

[5] Funkhouser, D. (2018, March 16). How Much Do Renewables Actually Depend on Tax Breaks? State of the Planet; Earth Institute, Columbia University.

[6] Coleman, C., & Dietz, E. (2019). Fact Sheet: Fossil Fuel Subsidies: A Closer Look at Tax Breaks and Societal Costs. Eesi.Org; Environmental and Energy Study Institute.

[7] Ibid.

[8] Redman, J. (2017, October 3). Report: Trump’s “Energy Dominance” Plans Rely on Billions in Fossil Fuel Subsidies. Oil Change International.

[9] Atkin, E. (2017, December 25). The Tax Bill’s Gift to Big Coal. The New Republic.

[10] Damodaran, A. (2020, January). Tax Rate by Sector (US). Pages.Stern.Nyu.Edu; NYU.

[11] Dickinson, T. (2019, May 8). Study: U.S. Fossil Fuel Subsidies Exceed Pentagon Spending. Rolling Stone; Rolling Stone.

[12] The United States is projected to be a net exporter of crude oil in two AEO2020 side cases. (2020, February 12). Www.Eia.Gov; U.S. Energy Information Administration.

[13] Renewable Energy. (2017, October 21). Center for Climate and Energy Solutions.

[14] Levelized Cost of Electricity Map. (2020). Calculators.Energy.Utexas.Edu; University of Texas at Austin Energy Institute.

[15] Perry, A., Cleary, M., & Oliver Wyman Energy Practice. (2020, January 14). Why It’s Too Soon To Sunset Renewable Energy Subsidies. Forbes.

[16] Investment tax credit for solar power. (2020, March 11). Energysage.Com; EnergySage.

5 thoughts on “The first step in stopping climate change: Quit subsidizing fossil fuels by Jack Kochansky

  1. Great piece, Jack. I completely agree that repealing specific fossil fuel subsidies is the necessary first step before attempting to implement a carbon tax. It is absurd that at this moment in time, with our current knowledge of how much damage has already been done to our environment and how little time we have to fix it, that there are still subsidies on a fuel as dirty as coal. As ever, this issue is a complex one, because as you mention, these subsidies made sense when they were created. However, much like our current agriculture industry, it has been shown that now we need to adapt in order for the continued benefit (or survival) of American citizens. I also agree that we cannot completely condemn all fossil fuels and remove all subsidies of slightly cleaner fuels such as natural gas. It must be a gradual process that we begin very quickly, starting by removing the most harmful substances whilst we continue to build infrastructure for the greener ones.

  2. Very interesting take, Jack! I understand your idea to remove the subsidies, but I think that doing so would also mean that workers in the coal industry would probably eventually lose their jobs and then have to transition to another line of work. I read an interesting NY Times article about “dethroning King Coal” (see here: and how the transition towards cleaner energy could benefit these coal regions by providing new jobs in the green industry. This is especially important in conservative states like West Virginia where 93% of the energy was coal generated in 2017 (really cool graphic here:! As far as I can tell, energy is a partisan issue and one that will decide the 2020 presidential election. While Joe Biden may have signed onto the No Fossil Fuel Funding pledge on June 27, that position puts him at odds with many voting coal miners.

    One last thing! I believe that in order to make an impact on climate change in the foreseeable future, the United States needs to invest money in clean energy in developing countries. As these countries continue to grow and develop, they won’t need to catch up on technology or follow an industrialization curve! Rather, they will be growing sustainably and without pollution (which will also prevent disease and other costs for the country)!

  3. I really like your suggestion Jack! Many countries are moving more and more towards renewable and clean energy sources, and I think that we should definitely start to pivot more government money into renewables. The only problem I see with this approach is political feasibility. I am just worried about the existing power that oil and gas companies have to influence legislation, they will fight very hard against removal of subsidies, and many people will also object if things like gas prices rise because of government intervention. That is why I agree with Elizabeth, we should be providing job opportunities and alternative transportation along with un-subsidizing oil and gas companies. I think that if, for example, we provided more opportunities for cheap and electric public transportation, then maybe people would not be so angry about the removal of oil subsidies. At the same time, we definitely should be pushing for more production of hybrid and electric cars, again to eliminate the need for oil in this country. I also think that clean energy production can support numerous jobs, we should work on trying to corral these benefits in areas that will be massively hurt with the decline of the fossil fuel industry (like the Gulf Coast, Alaska, West Virginia as Elizabeth said). We should also work to get state governments on our side somehow, but I acknowledge this would be a difficult task. If states like Texas and Alaska gave up subsidizing fossil fuels and, it would massively encourage these industries to pursue more renewable energy sources, but that requires the (often heavily conservative) state legislatures to make a massive shift in their policy making.

  4. I agree that this is one of the necessary first steps to transitioning the United States away from fossil fuels and towards cleaner renewable energy. I also concur with the two earlier comments and your point that this process needs to occur in a way that is going to minimize net job loss by simultaneously investing in renewables such as solar/wind in order to create more jobs whilst decreasing the subsidies for coal, inevitably eliminating jobs. I also think it is clever of you to point out that not all of these subsidies are bad, as we should start by eliminating the most harmful fuels, that being coal, and then gradually decreasing oil and natural gas subsidies and usage as we are able to replace them with cleaner sources. Regardless, I think your central idea is correct and not widely understood amongst our population. This situation reminds me in some ways of the agricultural issues the United States faces. At the time when current policy was implemented, it made sense and was the best route to take. Now, we understand more and have (or at least should have) different priorities which require adapting legislation.

  5. Thank you for the interesting article Jack! I think that the proposition of diverting funds to renewable energy is a strategic move for the long-term sustainability of the US. However, I do think this change would disproportionately impact certain coal-producing regions, as Elizabeth pointed out in her comment. I think that moving to cleaner energies should take priority, but I imagine that local governments will have to work diligently to create jobs for their citizens. New jobs will have to be spread out into multiple industries as coal-intensive regions abandon coal.

    A novel example of a job-creating, sustainable development is the West Virginia partnership between Johann Zimmerman Engineering (JZE), West Virginia Voluntary Organizations Active in Disaster (WV-VOAD), and the Mennonite Disaster Service (MDS). Together, these organizations have built over 70 bridges in West Virginia to help the region rebound from floods that took place in 2016. The program gets funding from a FEMA grant, and with that money they are able to fund bridge projects which provide jobs to West Virginians. (Here’s a short article ) Local initiatives that receive some federal funding may be useful as the coal economy winds down.

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