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August 02, 2014
Subsidies for Oil and Gas Companies Increase under Obama
    by Robert Kropp

A report by Oil Change International estimates that fossil fuel exploration and production subsidies have increased by 45% since President Obama took office in 2009, as his repeated efforts to lower them have been stymied in Congress.


The Third National Climate Assessment, published by the US Global Change Research Program in May, was unsparing in its conclusions about climate change. The effects are upon us already and are certain to intensify rapidly without an abrupt change of course in energy production and use. “Current implementation efforts are insufficient to avoid increasingly negative social, environmental, and economic consequences,” the report warns.

This week, the Council of Economic Advisers produced a report detailing the financial implications of failing to take rapid steps to mitigate the effects of climate change. “CO2 emissions create a negative externality,” the report states. “Because the price of carbon-based energy does not reflect the full costs, or economic damages, of CO2 emissions, market forces result in a level of CO2 emissions that is too high. Because of this market failure, public policies are needed to reduce CO2 emissions and thereby to limit the damage to economies and the natural world from further climate change.”

Yet, in what can be construed as the most perverse of ironies, subsidies for companies in the fossil fuel industries continue. And not only do they continue, a report by Oil Change International concludes. During the years of the Obama administration, federal fossil fuel exploration and production subsidies have increased by 45%, to $18.5 billion.

And that's just the federal contribution to exacerbating the worst effects of climate change. When state subsidies are added, the total amount increases to $21.6 billion. Overall, in the US alone, Oil Change International estimates that subsidies total approximately $37.5, when international finance measures are factored. “This does not include military, health, climate, or local pollution costs,” the organization added. Those additional costs, of course, comprise most of what the Council of Economic Advisers described as negative externalities.

Compounding the economic consequences of the negative externalities referred to by the Council is the concept of stranded assets, which has driven the fossil fuel divestment campaign that originated on college campuses and has since spread to other institutions as well. The oil and gas exploration currently being subsidized—amounting to $5 billion annually, Oil Change International estimates—seeks additional fossil fuel reserves that will have to stay in the ground if there is any chance to effectively address climate change.

Oil Change International attributes the increases in federal subsidies to the “Administration’s 'All of the Above' energy policy that promotes the US oil and gas boom and amounts to nothing less than climate denial.” On the other hand, the report acknowledges, “President Obama has proposed cutting certain subsidies to the oil and coal industries every year he’s been in office. The projections for savings have varied slightly each year but always hover around $4 billion annually. Congress has never even agreed to vote on all of them.”

“In 2011-12,” the report states, “oil, gas, and coal companies spent $329 million in campaign finance contributions and lobbying expenditures and received $33 billion in federal subsidies over the same two years – a more than 10,000 percent return on investment.”

In 2012, Oil Change International estimated the global amount of subsidies for the fossil fuel industries to be about $775 billion.

 

 
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