Greenpeace targets U.S. oil subsidies

London-based environmental group Greenpeace has broadened its campaign base with an attack on U.S. government subsidies of the domestic oil industry. Greenpeace International claims the U.S. government is funding the root cause of climate change to the tune of $11.9 billion/year by giving oil companies big concessions, compared with other U.S. industries. The claims are based on a report commissioned by Greenpeace from Douglas Koplow and Aaron Martin, respectively, senior associate and research

June 15, 1998

2 min read

London-based environmental group Greenpeace has broadened its campaign base with an attack on U.S. government subsidies of the domestic oil industry.

Greenpeace International claims the U.S. government is funding the root cause of climate change to the tune of $11.9 billion/year by giving oil companies big concessions, compared with other U.S. industries. The claims are based on a report commissioned by Greenpeace from Douglas Koplow and Aaron Martin, respectively, senior associate and research analyst at economics consultancy Industrial Economics Inc., Cambridge, Mass.

Greenpeace's Kalee Kreider said: "These subsidies are nearly $12 billion worth of hypocrisy. The U.S. government's climate change policy is to blame developing countries for failing to take action to cut greenhouse gas emissions while it provides billions in hand-outs to its domestic oil industry, an industry that includes some of the richest companies in the world."

Koplow and Martin reckon that subsidies to domestic oil producers are worth $1.20-2.80/bbl consumed, which equates to 3-6.5% of U.S. consumer spending on petroleum products in 1995.

They maintain that more than 95% of the subsidy total is accounted for by 15 policies. These include maintenance of the strategic petroleum reserve, tax breaks for U.S. exploration and production, and support for products exports.

The authors claim that, while statutory tax levels required U.S. oil companies to pay 34.7% of their income during 1992-95, the average tax paid by the companies was only 8.7%.

The American Petroleum Institute said the Greenpeace study arrived at high figures by using a misleadlingly simple definition of "subsidy." For example, it counted defense costs related to broader security concerns than just oil, and government aid to low income families for winter heating fuel costs.

API said a U.S. Energy Department study in 1992 found subsidies to all energy sources were about 2% of the national energy bill. Oil accounted for about $1 billion, or 0.4¢/gal of oil used in the U.S.