Mark Gongloff: The US is giving away $35 billion a year to cook the planet

The price of eggs has more than doubled in the past eight years, which isn’t great, but at least you can eat eggs. The price of U.S. government subsidies for the fossil-fuel industry has also more than doubled in that time, which is far, far less great. Welfare for an industry that makes billions of dollars in profits and pollutes the climate is worse than useless. It’s self-destructive.

The federal government gives oil, gas and coal producers at least $34.8 billion in subsidies each year, according to a new study by the research and advocacy nonprofit Oil Change International. In 2017, OCI estimated these gifts at $14.7 billion annually. This doubling in federal largesse has taken place under both Democratic and Republican political administrations, highlighting the difficulty of stopping its growth, much less reversing it.

In fact, some of the most recent extensions of federal aid have made it possible for these subsidies to explode in the future, threatening to reach trillions of dollars. When the world needs exponential growth in clean-energy investments to avoid the most catastrophic effects of global heating, the U.S. government will be bankrolling fossil-fuel expansion and stoking the emergency.

“A lot of these subsidies have been relatively capped in output, with no danger of massive increase,” study author Collin Rees told me. “Now the danger is we have uncapped subsidies with massive potential for growth if they’re not stopped.”

The latest boon to fossil fuels was the “One Big Beautiful Bill,” passed by Republicans and signed into law by President Donald Trump in July. It delivered $4 billion in new annual rewards to the industry by OCI’s count, or $40 billion over the next 10 years. The biggest gift was the expansion of a tax credit for capturing carbon dioxide, known as the Section 45Q credit. The law gave fossil-fuel producers the same benefit for using captured carbon to pump more oil and gas — a process known as enhanced oil recovery — as they get for simply storing the carbon underground to, you know, help the planet.

But the July law was just the 45Q credit’s most recent steroid injection. The Inflation Reduction Act, passed by Democrats under President Joe Biden in 2022, also bolstered it by raising its value and expanding its reach. BloombergNEF at the time suggested the IRA could be a potential $100 billion gift to all industries using carbon capture and storage (CCS), including power plants and steel and cement factories.

These subsidies to the power sector alone could cost taxpayers $1 trillion to $3.6 trillion by 2050, depending on how long future Congresses let the benefits last, according to a 2023 study in the journal Environmental Research: Infrastructure and Sustainability. That study warned the credit could encourage some power plants to spew more carbon than necessary just so they could get money for capturing it.

Similarly, the expansion of 45Q could boost the U.S. taxpayers’ bill for backing CCS to $1.1 trillion to $3.8 trillion through 2050, according to a February estimate by the Institute for Energy Economics and Financial Analysis.

Such staggering numbers may be overblown. CCS is still a nascent technology that is brutally expensive, hard to scale and will require thousands of miles of pipelines that inspire rare bipartisan unity in NIMBY opposition. As my colleague Liam Denning has pointed out, cheap, scalable renewable fuels will keep stealing share from fossil-fuel power plants and producers, making investing in CCS increasingly uneconomical. Much of this theoretical carbon will never be captured, meaning these credits will never be claimed.

But fossil-fuel producers are making 45Q hay while the policy sun shines. Exxon Mobil Corp. alone claimed at least $240 million of the $1 billion in CCS credits awarded before 2020, according to an investigation by Inside Climate News. Occidental Petroleum Corp. Chief Executive Officer Vicki Hollub has said the 45Q benefit would help producers extract an extra 50 billion to 70 billion barrels of oil. To the extent CCS is a tool for vacuuming up hard-to-abate emissions, it deserves government support. Using it to generate more pollution deserves nothing of the sort.

The same goes for all of the many fossil-fuel goodies beyond CCS credits. The subsidies in place before the July law was passed were enough to boost the profitability of new oil and gas production by 55% or more, depending on market prices, with the lion’s share of that value going straight to the bottom line, according to a 2021 study by nonprofit researcher Earth Track and the Stockholm Environment Institute.

Estimates of federal subsidies are almost certainly an undercount, given a lack of available data. They don’t include the cost of the U.S. military protecting fossil fuels around the world or government-backed finance for oil projects or the vast and growing toll on human health and prosperity of a changing climate, which the International Monetary Fund has estimated at $7 trillion annually.

Nor do these estimates include state and local perks, which add up to possibly tens of billions more every year. They don’t include consumption subsidies — money given to consumers to help them buy more fossil-fuel products. Politicians typically attack these demand-side gifts first and promptly retreat after an understandable popular backlash (think the yellow-vest revolt that greeted France’s plan to boost its diesel-fuel tax).

That reaction helps explain why a carbon tax to address that $7 trillion in externalities is a heavy political lift despite arguably being the most straightforward way to rebalance the world’s priorities. But surely our politicians can muster the wherewithal to take gifts away from an industry that neither needs nor deserves them. The world’s top five oil companies turned a $102 billion profit last year alone and returned $349 billion to shareholders in buybacks and dividends. They don’t need any more cash, especially not with their demand outlook so hazy.

In one sign of courage, U.S. Representatives Scott Perry, a Pennsylvania Republican, and Ro Khanna, a California Democrat, recently introduced a bill to kill the 45Q tax credit. For the most part, though, the U.S. government is dedicated to coddling fossil fuels. This is being done in the name of lowering energy bills for Americans, though industry-group studies have suggested its attacks on renewables will hamper energy supply and boost household electric bills.

The idea of taxing fossil-fuel companies to help defray the costs of adapting to a chaotic climate is already politically popular. Killing $35 billion in annual gifts to that same industry should be no less so. Think of all the clean energy and climate resilience that money could buy — not to mention housing, health care or pricey eggs.

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This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Mark Gongloff is a Bloomberg Opinion editor and columnist covering climate change. He previously worked for Fortune.com, the Huffington Post and the Wall Street Journal.