It is no secret that fossil fuel subsidies hinder decarbonization. The G20 group countries, including the United States, have pledged to phase out inefficient tax breaks for the fossil fuel industry.
However, the US federal and state governments provide approximately US$20.5 billion in subsidies to the oil and gas industry each year. But there are few concrete numbers to quantify the impact of these subsidies on the country’s efforts to achieve climate goals. Therefore, climate policy researcher Ploy Achakulwisut Stockholm Environmental Research Institute, Started a project and tagged it.
Her team found that, as Achakulwisut puts it, “These [subsidies] Either bad or bad. ”
she ResearchPublished in the “Environmental Research Letters”, it gives a figure on the impact of the 16 tax reliefs on the 1,000 new US oil and gas production fields that are expected to be built before 2030. The paper shows that if fossil fuel prices remain high, most subsidies—96% of oil and 87% of natural gas—will go directly to investors’ pockets as profits. If prices fall, these subsidies will help 60% and 74% of new oil and gas fields remain profitable. The author estimates that by helping the industry remain profitable in either case, these subsidies may add 150 million tons of carbon dioxide emissions to the atmosphere in 2030.
“We must reduce emissions, but we must also stop doing things that increase emissions; these things complement each other,” said Daniel Bresset, The director of the non-profit Environmental and Energy Research Institute, did not participate in this research. “This report helps prove that what we are doing is intensifying [high-emissions] The situation we are in now. “
Achakulwisut explained that this research took “many, many hours of programming time.” Before starting, the team must define what they think is the subsidy.They used Definition of the World Trade Organization Because it allows them to include non-specific tax relief benefits, such as state and federal public insurance to help cover well cleaning costs or road damage costs. The team found 16 subsidies dating back decades. At the same time, they entered a database that included all gas and oil fields expected to be constructed between 2020 and 2030, about 1,000. Then, they tested the profitability of each oil field under 20 different price scenarios, with and without each individual subsidy.
Unsurprisingly, the team found that of all the industry support evaluated, the accelerated deduction of intangible exploration and development cost tax credits (IDC) had the greatest impact. The tax relief was an exemption in 1916 that allowed oil companies to deduct the cost of new wells from taxes, which could increase the annual growth rate of oil and natural gas investment by 11% and 8%, respectively.
However, because they adopted the definition of subsidies, allowing indirect benefits to be included as subsidies, they were able to make interesting points about other forms of government support for the industry, Bresette noted.The research team found that transferring part of the cost of closing and cleaning oil wells to the government reduced the cost of each new oil well by $60,000 (this value does not even take into account the health and environmental costs associated with abandoned oil wells.) Over time, A series of intricate loopholes has left 2 million Unplugged oil and gas wells In the United States, cleanup costs are in the billions of dollars—states such as Texas, Pennsylvania, and Oklahoma have cleanup costs of approximately US$10 billion, which have a large number of abandoned oil wells.
“We have been talking about phasing out fossil fuel subsidies for many years,” Achakulwisut said. “We just hope that this analysis, and all ongoing efforts to phase out fossil fuels, will force policymakers to take action eventually.”