by Kevin Killough
In fiscal year 2025, explicit government subsidies in the form of tax expenditures for the energy sector total $64.1 billion. Those going to renewable energy, electric vehicles and energy-efficient equipment accounted for 90% of that total.
A new report from the National Center for Energy Analytics (NCEA) finds that 90% of subsidies for the energy sector in 2025 went to renewable energy. The analysis also shows that oil, gas and coal industries’ subsidies come mainly in the form of tax expenditures as opposed to direct subsidies.
Using data from the Department of the Treasury, Paul Tice, senior fellow with the NCEA, calculates that in fiscal year 2025, explicit government subsidies in the form of tax expenditures for the entire energy sector totaled $64.1 billion. This was more than all other domestic industries. The NCEA was created by The Texas Public Policy Foundation as a national energy think tank.
The total fossil fuel-related tax expenditures came to $2.6 billion in revenue losses for the federal government in fiscal year 2025.
By comparison, the total amount of federal tax money subsidizing renewable energy, electric vehicles and energy-efficient equipment in fiscal year 2025 was $57.9 billion, which exceeds the total for fossil fuels over the entire fiscal year 1994-2025 period, according to the report.
Disputing other reports
The analysis disputes claims from other sources that “Big Oil” is gobbling up trillions of dollars in subsidies every year. The International Monetary Fund pegs the global figure at $7 trillion. A report in September from the climate advocacy nonprofit Oil Change International estimated that oil, gas and coal in the U.S. receive approximately $34.8 billion per year.
“This yearly figure continues a decades-long escalation of public support for the fossil fuel industry, despite the trillions in profits accumulated by the oil and gas industry and a laundry list of harms caused by fossil fuels to the residents of this country and the globe,” the Oil Change International report claimed.
The report doesn’t argue that the subsidies for the energy industry are problematic. Instead, the report demands that the subsidies going to fossil fuel companies should be redirected to social services and wind and solar development.
“We’re paying $35 billion per year to prop up a polluting, expensive energy system instead of investing our public money into clean, affordable renewable energy. Congress must stand up to Big Oil and Gas, eliminate fossil fuel subsidies, and redirect those billions toward the things our communities actually need: healthcare, housing, and clean, affordable, renewable energy,” Collin Rees, Oil Change International United States Campaign Manager and author of the report, said in a statement.
Tice: Activists' reports show "Flawed methodology"
The NCEA's Tice explained in his analysis that organizations opposed to fossil fuels attempt to attribute the exponential growth in the use of fossil fuels to subsidies the oil, gas and coal industries receive, but these are full of exaggerations.
Estimates like those of the International Monetary Fund’s $7 trillion figure, Tice explained, rely on a “flawed methodology” utilizing interpolation — estimating unknown data points between known data points — and “implicit” subsidies. These are costs of health and environmental damages that activists claim come from the use of fossil fuels. Since the companies don’t pay for these costs, the activists argue, they are a de-facto subsidy.
Implicit subsidies are based on a concept in economics called externalities, which are unintended costs to third parties uninvolved with the use or production of a product. Tice points out that the externalities applied to calculations of oil and gas subsidies are highly subjective, and he argues the scope is so wide that it renders the numbers meaningless.
“This is a theoretical exercise that serves only to cloud the issue and confuse the public,” Tice wrote.
Preferential tax policies
Federal financial interventions and subsidies in the energy sector, Tice wrote, come in the form of tax expenditures such as expense deductions, research and development support, loan guarantees, and direct spending, which includes grants.
Citing data from the U.S. Energy Information Administration, Tice’s report notes that 84% of the total financial support provided to fossil fuels in the fiscal year 2022 was tax in the form of tax deductions. For fossil fuel producers, this comes primarily from costs associated with drilling, such as surveys, labor and road construction. As with other industries, the costs of doing business can be deducted from the company’s income tax for the year the costs were incurred.
Tice stated in the report that the other main form of tax expenditures fossil fuel industries receive is the tax treatments for capital expenditures, which the mining, timber and agriculture industries also receive.
The industries also have smaller tax expenditure categories, such as tax credits against a company’s tax liabilities for enhanced oil recovery activities, which pumps carbon dioxide into the ground to extract more oil from a well. This stores some of the emissions the oil will generate when used.
Impacts on federal revenue
Some of these preferential tax policies, the report notes, go back more than 100 years. Since these are mainly expense-related deductions, Tice argued, the total annual revenue loss to the federal government is minimal. The volatility of the market has also made many of these tax reductions reversible over time, meaning that some years the industry generates negative tax expenditures.
Renewable energy companies, on the other hand, benefit from energy production and investment tax credits for wind and solar farms. Production tax credits are also given to operations producing ethanol and other renewable fuels. Investment tax credits also go to end-use categories for businesses and individuals who purchase electric vehicles or install energy-efficient equipment and appliances on their property.
Unlike expense deductions that fossil fuel companies utilize, Tice explained, the tax credits renewable energy companies receive lower the overall tax liability of corporate filers, which has a much larger impact on federal tax revenues.
Dwarfing fossil fuel subsidies
The analysis also shows that support for the domestic fossil fuel industry in the U.S. is much less than that of other nations. Developed countries in Europe also provide more fiscal support for fossil fuels, primarily through direct subsidies, than the U.S.
Subsidies have doubled globally in the last few years, primarily due to sharp spikes in energy commodity prices in the wake of the Russian invasion of Ukraine.
Tice concluded that repealing all subsidies for fossil fuels would have no meaningful impact on the profitability of the industry or the demand for its products. The main driver of energy-sector subsidies are tax credits for renewable energy.
“Income tax expenditures for renewable energy producers and clean energy users will continue to dwarf those for the traditional energy sector for the foreseeable future,” Tice wrote.
While the One Big Beautiful Bill Act that Trump signed in July will phase them out, it will be another decade before that happens. And there’s no certainty they will. The tax credits were originally established in 1992 as a means to boost a fledgling industry. They’ve been renewed 11 times since.
Kevin Killough
Source: https://justthenews.com/politics-policy/energy/subsidies-renewables-account-almost-all-energy-sector-federal-support-new
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