$500 billion and $5 trillion in fossil fuel subsidies

The International Monetary Fund has found that fossil fuels receive $500 billion in direct subsidies and $5 trillion in indirect subsidies a year. 

Let that sink in... that is more than 6% of the world's GDP that fossil fuel suppliers are not paying to account for the cost of burning their products. 

75% of those costs are local costs resulting from immediate health impacts like air pollution. You are paying those costs in your health care bills. 

Approximately 25% of those costs are attributable to climate change impacts. Droughts, wildfires, extreme weather events like Hurricane Sandy, Irene, off the charts snowstorms, sea level rise... 

[Climate Progress] [IMF]

We're Not Broke

So, is the U.S. really broke? We are the richest nation in the world, right?
But those riches aren’t exactly creating healthy, equitable wealth.  The money is going to the 1% for bailouts and to subsidize the “dinosaur economy.”  Our wealth is continuing to prop up a “throw away economy,” says Annie Leonard, host of the popular internet film “The Story of Stuff.”

Coal Subsidies

President Obama pledged in his State of the Union address that he would eliminate the subsidies we pay to oil companies.

"I'm asking Congress to eliminate the billions in taxpayer dollars we currently give to oil companies. I don't know if you've noticed, but they're doing just fine on their own. So instead of subsidizing yesterday's energy, let's invest in tomorrow's."

Perhaps he should also look at eliminating the subsidies we pay to coal producers. According to a study by the Environmental Law Institute, the coal industry received $17 billion in subsidies between 2002 and 2008. 

Meanwhile, the health and environmental costs of mining and burning coal are staggering. 

Around $1.5 billion of our federal taxes are associated with damages to miners' health such as the notorious black lung disease.

"What is the true health and environmental cost when mining machines rip off mountaintops and chuck the rubble into streams? What was the cost of acid rain? What's been the healthcare cost of 47 tons per year of mercury from burning coal," the Sierra Club asks, "that put 300,000 fetuses at risk for neurological damage each year?"

The coal industry was responsible for 2,237 megatons of carbon-dioxide-equivalent greenhouse pollution in 2008, 38 percent of the United States footprint. The cost of this "market externality" is between $60 and $600 billion every year, given expert estimates for the cost to human civilization of manmade climate change.

It is time to end subsidies that destroy our health and the health of all life on our planet. As President Obama suggests, it is time to take the money we've used to invest in yesterday's energy and invest it in the clean, renewable energy of the future. 

Credit for Production of Nonconventional Fuels ($14.1 billion)- IRC Section 45K. This provision provides a tax credit for the production of certain fuels. Qualifying fuels include: oil from shale, tar sands; gas from geopressurized brine, Devonian shale, coal seams, tight formations, biomass, and coal-based synthetic fuels. This credit has historically primarily benefited coal producers. 

Characterizing Coal Royalty Payments as Capital Gains ($986 million) – IRC Section 631(c). Income from the sale of coal under royalty contract may be treated as a capital gain rather than ordinary income for qualifying individualsx 

Exclusion of Benefit Payments to Disabled Miners ($438 million) – 30 U.S.C. 922(c). Disability payments out of the Black Lung Disability Trust Fund are not treated as income to the recipients. 

Other-Fuel Excess of Percentage over Cost Depletion ($323 million)- IRC Section 613. Taxpayers may deduct 10 percent of gross income from coal production. 

Credit for Clean Coal Investment ($186 million)- IRC Sections 48A and 48B. Available for 20 percent of the basis of integrated gasification combined cycle property and 15 percent of the basis for other advanced coal-based generation technologies. 

Special Rules for Mining Reclamation Reserves ($159 million) – IRC Section 468. This deduction is available for early payments into reserve trusts, with eligibility determined by the Surface Mining Control and Reclamation Act and the Solid Waste Management Act. The amounts attributable to mines rather than solid-waste facilities are conservatively assumed to be one-half of the total. 

84-month Amortization Period for Coal Pollution Control ($102 million) – IRC Section 169(d)(5). Extends the amortization period used in calculating the deduction from the generally applicable 60-month period available for other types of pollution control facilities. 

 Expensing Advanced Mine Safety Equipment ($32 million) – IRC Section 179E. The costs of qualifying mine safety equipment may be expensed rather than recovered through depreciation.

Black Lung Disability Trust Fund ($1 billion)- As industry excise tax payments did not sufficiently cover early benefits payments, the BLDTF was given "indefinite authority to borrow" from the U.S. General Fund, and bailed out for $6.498 billion, 13 percent of which is relevant to the 2002-2008 period. 

Financial support for the World Bank and other international financial institutions that finance fossil fuel use and extraction. Since 1994, these institutions have provided $137 billion in direct and indirect financial support for new coal-fired power plants. 

U.S. Treasury Department's backing of tax-exempt bonds and federally subsidized taxable Build America Bonds for use in the electric sector. $81 billion in tax-exempt debt was issued between 2002 and 2006 for electric power, most for coal plants. 

U.S. Department of Agriculture's Rural Utilities Service provision of loans, loan guarantees, and lien accommodations to public power companies that are investing in new or existing coal plants. 

Tax credits, loans, and loan guarantees through the U.S. Department of Energy. In 2009, DOE issued $5.9 billion in loan guarantees for advanced coal projects.

$557 Billion in Fossil Fuel Subsidies

Governments last year gave US$43 billion to US$46 billion of support to renewable energy through tax credits, guaranteed electricity prices (feed-in tariffs) and alternative energy credits, Bloomberg New Energy Finance said in a statement. That compares with the US$557 billion that the International Energy Agency last month said was spent to subsidize fossil fuels in 2008. That works out to 12 times the support for dirty versus clean energy. 

Between 2002 and 2008, fossil fuels received $72 billion in US federal subsidies, with 98% of that going to conventional energy sources like coal and oil. During those same six years, solar power received less than $1 billion, a massive disparity that helped keep oil and gas prices artificially low and made it impossible for renewable energy sources to gain any real ground. 

Why do we continue to subsidize fossil fuel industries at the expense of a clean, healthy and prosperous future? If we want solar, wind, and other renewable resources to succeed, we must stop funding fossil fuels. And we must stop now.

Obama's Budget

While President Obama has slightly decreased funding for the EPA, the EPA's budget does include $21 million to implement the Mandatory Greenhouse Gas Reporting Rule and $43 million to implement regulations on greenhouse gas emissions. 

The message seems to be that the administration intends to regulate greenhouse gases if Congress doesn't pass the Energy Bill. 

The proposed budget plans to eliminate $36.5 billion in tax breaks to the oil and natural gas industry and $2.3 billion for the coal sector between 2011-2020. Note that fossil fuels get $70.2 billion a year in subsidies—and that excludes implicit subsidies like military spending—so this is the tip of the iceberg. 

But that money seems to be headed to nuclear, which is getting an increase of $36 billion in loan guarantees, raising that total to $54 billion. The Congressional Budget Office considers that probability of default on these loan guarantees to be very high, well over 50%.