Check any online article that mentions Electric Vehicles, and the comments will be filled with usual profile pictures of goatee wearing sunglass wearing men taking selfies in their trucks, bleating the same tired lies about electric vehicles. One of which is invariably “If electric vehicles are so great, end the subsidies and let them compete in an open market”. This stupidly ignores the fact that our markets, particularly with regard to energy, is anything but a level playing field, and the United States government maintains a complex web of financial support for fossil fuel industries that costs taxpayers billions while entrenching dependence on climate-damaging energy sources. These subsidies represent not just an economic policy choice, but a profound statement of values that prioritizes corporate profits over community health, environmental sustainability, and climate justice. Behind the technical language of tax expenditures and production incentives lies a system that disproportionately burdens working families and frontline communities while funneling public resources to some of the world’s most profitable corporations.
The Trillion-Dollar Support System
The true scale of US fossil fuel subsidies remains contested terrain, with estimates varying widely depending on what’s counted and who’s doing the counting. Conservative estimates from the Environmental and Energy Study Institute place direct subsidies at approximately $20 billion annually in federal funding alone. However, when accounting for the full spectrum of government support—including tax preferences, regulatory exemptions, and unpriced externalities—the International Monetary Fund estimates the true cost exceeds $649 billion annually. This staggering figure represents more than the federal government spends on defense and is roughly fifteen times the budget for the Environmental Protection Agency.
These subsidies take many forms, from century-old tax code provisions to modern infrastructure investments that lock in fossil fuel dependency. The tax code offers particular advantage to oil and gas companies through provisions like the intangible drilling costs deduction, which allows companies to deduct most costs associated with preparing wells for production. This single tax benefit provides approximately $1.59 billion in annual support to the industry. Similarly, the percentage depletion allowance permits independent producers to deduct 15% of their revenue, rather than the actual value of the resource depleted—a provision that costs taxpayers roughly $900 million annually and has no parallel in other extractive industries.
Direct spending programs further bolster fossil fuel interests, with the Department of Energy directing billions toward fossil energy research and development. Between 2010 and 2018, the federal government spent $14.7 billion on research, development, and demonstration programs related to fossil fuels. These investments occur alongside substantial indirect support, such as below-market leasing rates for extraction on public lands—a subsidy conservatively estimated at $2.2 billion annually by the Council on Foreign Relations.
Automotive Fuel Subsidies: Driving Dependency
Transportation represents the largest source of carbon emissions in the United States, with personal vehicles accounting for over half of those emissions. Government subsidies specifically benefiting automotive fuels represent a critical link in maintaining this carbon-intensive system. The most significant of these is the longstanding fuels tax exemption for certain petroleum products. While typical gasoline and diesel face an 18.4 cent per gallon federal tax (24.4 cents for diesel), numerous specialized petroleum products receive partial or complete exemptions, representing $6.7 billion in foregone revenue annually.
Infrastructure subsidies further entrench automotive dependency through massive public investments in highways and roads. The federal government allocates approximately $46 billion annually to highway infrastructure, while public transit receives just $13 billion. This disparity effectively subsidizes private vehicle use over more efficient and equitable transportation options. When combined with zoning laws requiring extensive parking infrastructure and development patterns necessitating car ownership, these policies represent a profound public investment in automotive fuel consumption.
The Low Income Home Energy Assistance Program (LIHEAP), while providing crucial support for vulnerable households, allocates 85% of its funding toward fossil fuels rather than cleaner alternatives. This well-intentioned program inadvertently creates a feedback loop maintaining dependency on the very fuels driving climate change impacts that disproportionately harm low-income communities.
The Human Cost of Fossil Fuel Favoritism
Behind each subsidy lies a human story—communities suffering from extractive economic relationships and toxic pollution. In Houston’s East End, predominantly Latino neighborhoods experience benzene levels 13 times higher than wealthier, whiter parts of the city. Similar patterns emerge in “Cancer Alley” between Baton Rouge and New Orleans, where predominantly Black communities face cancer risks 50 times the national average due to their proximity to petroleum refineries and petrochemical facilities. These disparities exist not by accident but by design, reflecting how fossil fuel subsidies help maintain systems of environmental racism and economic exploitation.
Working families bear multiple burdens from this subsidy regime. First, as taxpayers funding these corporate benefits; second, as residents of communities facing health impacts; and third, as those most vulnerable to climate destabilization. A single parent in Detroit paying $2,000 annually in transportation costs receives no tax break for this necessity, while oil companies receive billions in deductions. Meanwhile, climate impacts—increasingly linked to fossil fuel emissions—cost American taxpayers approximately $150 billion annually in disaster relief, infrastructure repair, and agricultural losses.
Global Context and International Comparisons
The United States’ approach to fossil fuel subsidies stands in stark contrast to its international climate commitments. As a G20 member, the US has repeatedly pledged to phase out “inefficient” fossil fuel subsidies, yet continues expanding rather than contracting such support. While Germany has implemented concrete plans to eliminate coal subsidies by 2025, and Canada has launched comprehensive subsidy reviews leading to phase-out schedules, the United States has moved in the opposite direction, particularly during the Trump administration which expanded fossil fuel production incentives by an estimated $25 billion through regulatory changes and tax code revisions.
European nations have demonstrated alternative approaches, with Norway directing oil revenues into a sovereign wealth fund exceeding $1.3 trillion that funds social programs and clean energy development. Meanwhile, Costa Rica has eliminated fossil fuel production subsidies entirely while implementing progressive carbon pricing, demonstrating that even nations with fewer resources can make meaningful policy shifts when political will exists.
Pathways Toward Just Transition
Transforming America’s relationship with fossil fuel subsidies represents not just an environmental imperative but an opportunity to realign public resources with public needs. The most straightforward reform would involve eliminating direct tax expenditures benefiting fossil fuels, which could redirect over $20 billion annually toward climate solutions. The Green New Deal framework provides one comprehensive approach, proposing to eliminate subsidies while simultaneously creating millions of high-quality jobs in clean energy, infrastructure modernization, and environmental restoration.
Comprehensive reform would necessarily address external costs currently borne by society rather than producers. Carbon pricing mechanisms, whether through direct taxes or cap-and-dividend approaches, would incorporate climate and health costs into fuel prices while potentially generating revenue for affected communities. The Climate Action Rebate Act, for example, would establish a carbon fee starting at $15 per ton and rising annually, with 70% of revenue returned directly to households earning under $130,000, directly addressing potential regressive impacts on working families.
Perhaps most promising are targeted investments in communities currently dependent on fossil fuel economies. The Reclaim Act would direct $1 billion to economic development in coal communities, while the Blue-Green Alliance has developed detailed transition plans that would maintain economic stability for workers while shifting toward sustainable industries. These approaches recognize that meaningful change requires not just eliminating harmful subsidies but creating viable pathways for workers and communities currently dependent on fossil fuel infrastructure.
Conclusion: Reimagining Public Investment for Climate Justice
The magnitude of government support for fossil fuels represents not just a climate challenge but a profound opportunity to reimagine how public resources serve collective well-being. By redirecting even a portion of current subsidies toward renewable energy, public transportation, and community resilience initiatives, the United States could simultaneously address climate change, environmental justice, and economic inequality. The technical pathways exist—what remains is cultivating the political courage to challenge entrenched interests benefiting from the status quo.
Transformative change begins with recognizing that fossil fuel subsidies represent a political choice rather than an economic necessity. Oil, gas, and coal companies rank among America’s most profitable corporations, collectively reporting over $81 billion in profits during 2022 alone. These industries maintain massive lobbying operations—the oil and gas sector spent over $124 million on federal lobbying in 2022—precisely because subsidies represent such significant financial benefit. By connecting these abstract policy discussions to concrete community impacts, we can build the political momentum necessary for meaningful reform.
The struggle over fossil fuel subsidies ultimately represents a contest between two visions of America’s future: one that continues prioritizing short-term corporate profits over community well-being, and another that aligns public resources with the public good. By choosing the latter path, we can create an energy system that serves people rather than profits, that heals rather than harms, and that builds rather than depletes the world we’ll leave to future generations.
