United States’ Efforts to Phase Out Fossil Fuel Subsidies Leave Much Progress to Be Made

Twenty leaders in the world's most industrialized nations have determined to "phase out their subsidies for fossil fuels."

| October 2, 2009

The 20 leaders of the world’s top industrialized nations, as well as key countries with developing economies, have agreed to phase out their subsidies for fossil fuels.

In a concluding statement from the Group of 20 (G20) Summit — held in Pittsburgh on Sept. 24 and 25 — the nations’ leaders agreed to “phase out and rationalize over the medium term inefficient fossil fuel subsidies.” The G20 leaders also called for targeted support for poor people that would be impacted by higher prices for fossil fuels. The leaders noted that "inefficient" fossil-fuel subsidies "encourage wasteful consumption, reduce our energy security, impede investment in clean energy sources, and undermine efforts to deal with the threat of climate change." According to President Obama, the agreement will ultimately phase out nearly $300 billion in global subsidies for fossil fuels. And as noted in a White House fact sheet, the Organization for Economic Cooperation and Development and the International Energy Agency estimate that eliminating fossil fuel subsidies worldwide would cut global greenhouse gas emissions by 10 percent or more by 2050.

According to a new report from the Environmental Law Institute (ELI), the United States has a long way to go in phasing out fossil fuel subsidies. The report reviewed fiscal years 2002-2008 and found that fossil fuels benefited from about $72 billion in subsidies over the seven-year period, while subsidies for renewable energy and fuels totaled only $29 billion. Of the fossil fuel subsidies, $70.2 billion went to traditional sources such as coal and oil, while $2.3 billion went toward carbon capture and storage, an essential climate-change technology for fossil fuels. In addition, more than half of the subsidies for renewable energy and fuels went to corn-based ethanol.

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