Fossil Fuel Subsidies

From Wikipedia:

The three largest fossil fuel subsidies were:

  1. Foreign tax credit ($15.3 billion)
  2. Credit for production of non-conventional fuels ($14.1 billion)
  3. Oil and Gas exploration and development expense ($7.1 billion)

The foreign tax credit is not a subsidy. When one of our corporations pays income tax to another nation because they made money there, a credit is available up to the amount of the income taxes paid. To not allow this could amount to being taxed twice on the same income. Individuals can use this credit as well as just about every corporation in the S & P 500.

The Credit for production of non-conventional fuels I think is a subsidy. Scaling it back or ending it should be considered.

Oil and Gas exploration and development expensing is not much of a subsidy. Either the corporation takes an immediate write off or takes it over 6 years for expenses. It is a timing difference and a benefit obtained sooner, gets paid back later. It is a subsidy when considering the time value of money which might be 2% annually. The subsidy amount given by Wikipedia is likely overstated by 10 times, using the time value of money.

Wikipedia has overstated the amount of the 3 largest subsidies by at least two times.

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2 thoughts on “Fossil Fuel Subsidies

  1. Would it be OK if I cross-posted this article to WriterBeat.com? There is no fee; I’m simply trying to add more content divergsity for our community and I enjoyed reading your work. I’ll be sure to give you complete credit as the author. If “OK” please let me know via email.

    Autumn
    AutumnCote@WriterBeat.com

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