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

The report details various direct and indirect U.S. tax subsidies for coal, oil, and natural gas, alongside federal R&D funding and overseas financing. It highlights that global fossil fuel subsidies, including negative externalities, reached $5.2 trillion in 2017. The authors argue that these subsidies are difficult to justify given the maturity of the industry and the severe health, environmental, and climate externalities—such as the social cost of carbon and air pollution deaths—that are not reflected in fuel prices.

• U.S. direct subsidies to the fossil fuel industry are conservatively estimated at approximately $20 billion annually, with 80 percent going to crude oil and natural gas and 20 percent to coal.
• Global spending on fossil fuel subsidies, including negative externalities, rose to $5.2 trillion (6.5 percent of global GDP) in 2017, representing a $500 billion increase from 2015. The largest subsidizers were China ($1.4 trillion in 2015), the United States ($649 billion), and Russia ($551 billion).
• The U.S. tax code contains several specific provisions that benefit the fossil fuel industry, including the Intangible Drilling Costs Deduction, Percentage Depletion, and the use of Master Limited Partnerships (MLPs), the latter of which allows companies to avoid corporate income taxes.
• Federal R&D funding has heavily favored coal; between 2010 and 2017, 91 percent of total fossil R&D money ($1.4 billion) was spent on coal-related research, with 89 percent of the 794 projects focusing on coal.
• Carbon Capture and Storage (CCS) is unlikely to save the domestic coal industry due to negative economics and high energy intensity, despite its necessity in IPCC warming scenarios.
• Fossil fuel externalities—including health, environmental, and climate costs—totaled $5.3 trillion globally in 2015. In the U.S., air pollutants from fossil fuels cause 200,000 premature deaths annually.
• The Social Cost of Carbon (SCC) was estimated at $36 per metric ton of CO2 in 2015 (at a 3 percent discount rate), but the Trump administration proposed reducing this to $6 per metric ton by shifting to a national valuation and altering the discount rate.

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} }