Fossil Fuel Subsidies: A Closer Look at Tax Breaks and Societal Costs

This fact sheet from the Environmental and Energy Study Institute examines the scale and impact of fossil fuel subsidies in the United States and globally. It details specific tax provisions and federal funding mechanisms that support the coal, oil, and natural gas industries, arguing that these subsidies are outdated and undermine climate goals. The document also analyzes the 'externalities' of fossil fuel use—societal, health, and environmental costs—that are not reflected in market prices.

• Direct U.S. subsidies to the fossil fuel industry are conservatively estimated at approximately $20 billion annually, with 80 percent of these funds allocated to crude oil and natural gas and 20 percent to coal.
• Global fossil fuel subsidies, including negative externalities, reached $5.2 trillion in 2017, representing 6.5 percent of global GDP. The largest contributors to these subsidies were China ($1.4 trillion in 2015), the United States ($649 billion), and Russia ($551 billion).
• The U.S. tax code contains several active provisions that benefit the fossil fuel industry, including the Intangible Drilling Costs Deduction, Percentage Depletion, and the Foreign Tax Credit. The Joint Committee on Taxation estimated that eliminating the Intangible Drilling Costs Deduction would generate $1.59 billion in 2017, and eliminating percentage depletion for coal, oil, and natural gas would generate $12.9 billion over ten years.
• Federal research and development funding has heavily favored coal. Between 2010 and 2017, the Department of Energy provided $2.66 billion for 794 advanced fossil energy projects; 91 percent of that total ($1.4 billion) was spent on coal-related research.
• Carbon Capture and Storage (CCS) is unlikely to preserve the domestic use of coal power due to negative economics and high energy intensity. Currently, the U.S. has only 10 carbon capture facilities, and only one is located at a coal plant.
• Fossil fuel externalities—including health, environmental, and societal costs—totaled $5.3 trillion globally in 2015. In the U.S., air pollutants from fossil fuels cause 200,000 premature deaths annually, and fine particulate matter from coal plants alone caused 13,200 deaths in 2010.
• The Social Cost of Carbon (SCC) was $36 per metric ton of CO2 in 2015 under a 3 percent discount rate. The Trump administration proposed revaluing this to $6 per metric ton (at a 3 percent discount rate) or $1 per metric ton (at a 7 percent discount rate) by shifting to a national valuation.

APA

Coleman, C., & Dietz, E. (2019). Fossil Fuel Subsidies: A Closer Look at Tax Breaks and Societal Costs. Environmental and Energy Study Institute. https://www.eesi.org/papers/view/fact-sheet-fossil-fuel-subsidies-a-closer-look-at-tax-breaks-and-societal-costs

Chicago

Coleman, Clayton, and Emma Dietz. Fossil Fuel Subsidies: A Closer Look at Tax Breaks and Societal Costs. Environmental and Energy Study Institute, 2019. https://www.eesi.org/papers/view/fact-sheet-fossil-fuel-subsidies-a-closer-look-at-tax-breaks-and-societal-costs.

Wikipedia

{{cite report |last1=Coleman |first1=Clayton |last2=Dietz |first2=Emma |title=Fossil Fuel Subsidies: A Closer Look at Tax Breaks and Societal Costs |publisher=Environmental and Energy Study Institute |date=29 July 2019 |url=https://www.eesi.org/papers/view/fact-sheet-fossil-fuel-subsidies-a-closer-look-at-tax-breaks-and-societal-costs |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{coleman2019fossil, author = {Coleman, Clayton and Dietz, Emma}, title = {{Fossil Fuel Subsidies: A Closer Look at Tax Breaks and Societal Costs}}, institution = {Environmental and Energy Study Institute}, year = {2019}, month = jul, url = {https://www.eesi.org/papers/view/fact-sheet-fossil-fuel-subsidies-a-closer-look-at-tax-breaks-and-societal-costs}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }