Two studies quantifying American fossil fuel subsidies have both concluded that the oil & gas industry receives billions of tax breaks and other subsidies every year. An Environmental Law Institute report studying 2002-08 found that fossil fuels obtained $70.2 billion over a seven year period

while traditional renewables (e.g., wind and solar) received $12.2 billion. The subsidies examined fall roughly into two categories: (1) foregone revenues (changes to the tax code to reduce the tax liabilities of particular entities), mostly in the form of tax breaks, and including reported lost government take from offshore leasing of oil and gas fields; and (2) direct spending, in the form of expenditures on research and development and other programs. Subsidies attributed to the Foreign Tax Credit totaled $15.3 billion, with those for the next-largest fossil fuel subsidy, the Credit for Production of Nonconventional Fuels, totaling $14.1 billion. The Foreign Tax Credit applies to the overseas production of oil through an obscure provision of the U.S. Tax Code, which allows energy companies to claim a tax credit for payments that would normally receive less-beneficial treatment under the tax code. (For further discussion of this report, please see A Siegel's diary describing How we subsidize filthy air to employ foreigners rather than clean air to employ Americans.)

Oil companies will receive $32 billion from 2009 to 2013, a separate report by Friends of the Earth found. Oil companies stand to gain at least $23.2 billion from tax loopholes, $3.8 billion in royalty rollbacks, $1.6 billion in direct subsidies for research and development, and $4.3 billion through accounting gimmicks. The analysis found that tax giveaways have increased dramatically since the passage of a Republican-drafted energy bill in 2005.

Both studies measured only direct and easy to quantify items such as tax benefits. Indirect subsidies to the fossil fuel industry include, arguably, the entire interstate highway system and every war ever fought for oil.

The United States is hardly alone in subsidizing what it decries. The World Bank calls on all nations to act differently on climate change. It's funded by developed countries with a stated goal of reducing poverty, and recently released a report finding that between 75 and 80 per cent of the damage caused by climate change through drought, floods and rising sea levels will happen in developing countries. Lord Nicholas Stern, its former chief economist, recently made headlines by calling 350 ppm a sensible target. However, the World Bank recently approved $850M for a coal-fired plant in India, among other projects adding up to $5 billion in fossil fuel projects over the last three years (and, to be fair, $11 billion in low-carbon alternatives).

Those are the subsidies that Obama proposes to eliminate next week. The meeting itself is an effort to effort to breathe new life into bogged-down negotiations. Ban-Ki Moon, Secretary-General of the United Nations, has called for a special summit on climate change on Tuesday, September 22, immediately prior to the G-20 meetings in Pittsburgh on Thursday and Friday, September 24 and 25, with a simple message to the leaders of the world:

The world needs you to actively push for a fair, effective and ambitious deal in Copenhagen. Fail to act, and we will count the cost for generations to come. Climate change is the preeminent geopolitical issue of our time. It rewrites the global equation for development, peace and prosperity. It threatens markets, economies and development gains. It can deplete food and water supplies, provoke conflict and migration, destabilize fragile societies and even topple governments. Hyperbole? Not according to the world’s best scientists. The Intergovernmental Panel on Climate Change says global greenhouse gas emissions need to peak within 10 years if we are to avoid unleashing powerful, natural forces that are now slipping out of our control. Ten years is within the political lifetime of many attending the summit. The climate crisis is occurring on their watch.

Obama's first speech on climate change will be, not in front of Congress and a nation, but the United Nations and the world. Asking that G-20 countries stop subsidizing fossil fuels will be only one item on the agenda next week. It's certainly going to be a controversial part in some circles. Already, some have suggested that ending fossil fuel subsidies to desperately poor developing nations will create a backlash. However, many of the subsidies listed in both the ELI and FOE reports above are breaks on US taxes and other benefits occurring entirely within the United States. And the letter calls for some sensitivity toward developing countries: "The move away from subsidies should be managed to protect those most vulnerable to price increases. The G-20 should commit to take the lead in eliminating non-needs based fossil fuel and electricity subsidies and to provide technical assistance to non-G20 countries taking steps to reduce fossil fuel and electricity subsidies."

Asking the G-20 countries to end the hypocrisy of billions of dollars of subsidies to the fossil fuel industry is an audacious move. However, expect the fossil fuel industry lobbyists' wails to echo from the American East Coast all the way to Copenhagen. Exxon Mobil desperately needs tax breaks in order to keep earning record profits barely break even, right?

If Obama succeeds in separating the fossil fuel industry from its tax breaks, perhaps the money freed up could even be used for something useful, like health care reform.