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You Asked: How Much Does the U.S. Subsidize Renewable Energy Versus Fossil Fuels?

You Asked” is a series where Earth Institute experts tackle reader questions on science and sustainability. In honor of Climate Week NYC and the Covering Climate Now initiative, we’re focusing on your questions about climate change.

The following question was submitted through our Instagram page by one of our followers. The answer was provided by Peter Marsters.

Could you please compare US subsidies for coal and fossil fuels to US subsidies for renewables, annually over the last 10 years?

Peter Marsters Headshot
Peter Marsters is a research associate at Columbia’s Center on Global Energy Policy. He studies the policy levers and economic outcomes of deep decarbonization and carbon pricing.

At its most basic, this question gets to what, as a nation, do we want to encourage in our energy system beyond what the market produces. Though the answer might seem cut and dried, it’s not as simple as you might think. For example, the Low-Income Home Energy Assistance Program aids households struggling to pay for winter heating, but it encourages carbon-intensive fuel oil. Wind and solar investment and production tax credits encourage more renewable energy on the grid, but they also cost billions of dollars per year. As you might imagine, each subsidy may have different goals, ranging from helping low-income households, to encouraging domestic production of oil and gas, to getting new technologies to scale. The costs and benefits of these goals are sometimes hard to quantify and the topic gets very political, very quickly.

So with that in mind, back to the original question. The image below shows U.S. Energy Information Administration data on direct subsidies from the federal government, which includes tax benefits, grants, loans, or other financial assistance awards made directly to recipients, and also grants, loans, and other financial assistance for research and development.

chart of energy subsidies
Energy subsidies from the federal government (in billions of 2018 U.S. dollars). The “other” category represents technology-agnostic energy subsidies, like transmission and conservation efforts which aren’t tied to specific fuels. Source: EIA

The data is not annual, but it should give a picture of how priorities have shifted over the last 10 or so years. Generally, the emphasis has shifted from fossil fuel sources to renewables. The overall scale of energy subsidies also depends on the larger context — for example, federal energy spending increased greatly as a part of the recovery from the 2008 financial crisis.

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4 years ago

Are these subsidies on the consumer level? I read on The Gardian that 2015-2016 subsidies for oil+gas+coal industries was $29.4B. Forbes reported that fossil fuels account for 85% of all global subsidies. There should be more transparency.

Michael Conklin
Michael Conklin
4 years ago

Can you help me understand the reason for the dramatic difference between the EIA figures above and varying figures reported by other outlets such as the IMF or Oil Change International which put the amount of subsidies closer to $20.5 billion for fossil fuels (excluding consumption subsidies and externalities)?

Reply to  Michael Conklin
2 years ago

This was a while ago, but since there is no reply:
I’m guessing he is basing his results on how much is spent in subsidies per unit of energy produced. If you just compare the total amount spent per year, fossil fuels gets more in subsidies, but if you compare based on how much is spent in subsidies per unit of power produced then renewables get way way more. That’s the only thing I can think of to get the graph he shows.

This article also talks a bit about why estimates for subsidies per year vary depending on who calculates them.

2 years ago

The chart here has no units shown. It’s like the author is hiding something. I looked on EIA’s website. The numbers in their subsidies chart do not match those shown here. There it shows natural gas subsides increasing to $32 billion in 2016 and renewables increasing to $533 million. This article appears to be written by a fossil fuel lobbyist.

Reply to  Michael
2 years ago

Yeah, it looks like the author also advocates for the, “Comeback of coal”.

Ted Lee
Ted Lee
1 year ago

This information is a little outdated, by six years. Is there a plan to update this information?

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