How Much Do Federal Tax Breaks Help Out Fossil Fuel Companies?

How Much Do Federal Tax Breaks Help Out Fossil Fuel Companies?
Tax breaks for fossil fuels are a tiny slice of government spending on energy, but removing them could still make renewable sources more competitive.

Dollar for dollar, tax breaks can be the biggest financial boost the U.S. government gives the energy sector. Some 2020 hopefuls have proposed removing these incentives from the fossil fuel industry in particular, to help push the U.S. toward more environmentally friendly energy. But how much would they tip the scales, exactly?

Beto O'Rourke's campaign made headlines with one of the 2020 race's most specific climate proposals yet: His plan would eliminate "tens of billions" of dollars in tax breaks for the fossil energy sector. Jay Inslee says that money could be better used for renewable energy goals.

But in recent years, the federal government hasn't given fossil industries that much money. The latest numbers from the Energy Information Administration are from 2016. Then, the U.S. government subsidized the nation's entire energy mix to the tune of $14.9 billion. That was about 1.5% of U.S. energy's total costs for the year, and only some of it was tax breaks. Coal got $906 million, but gas and petroleum actually generated $940 million in tax revenue instead of costing the government money.

Again, these numbers are just for federal taxes — and they also tend to change from year to year as federal budgets come and go. We don't know what 2020 will bring yet. But it's likely that removing any fossil subsidies will still help out renewables. Analysis by Lazard shows even unsubsidized wind and solar power can already compete with fossil fuels under the right circumstances.

It's not just about saving money, though. Both O'Rourke and Inslee's campaigns hope the funds could be reinvested to drive new job creation and make the public healthier.