Full Title: U.S. Energy Subsidies: Effects on Energy Markets and Carbon Dioxide Emissions
Author(s): Maura Allaire and Stephen P. A. Brown
Publisher(s): The Pew Charitable Trust
Publication Date: 8/2012
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Over the period from 2005 through 2009, the U.S. government spent $96.3 billion on about 60 different subsidies that were directed at increasing energy production, subsidizing energy consumption, or increasing energy efficiency.1 Although few of these programs were directed at carbon dioxide (CO2) emissions, they affected U.S. CO2 emissions through their effects on U.S. energy markets, resulting in some subsidies that increased CO2 emissions, and others that reduced them.
This paper uses a model of U.S. energy markets to examine the effects of U.S. government subsidies—both spending programs and tax provisions—on energy markets and CO2 emissions from 2005 through 2009. Over that period, U.S. expenditures shifted from energy subsidies that increased CO2 emissions toward those reducing CO2 emissions (Figure 1). In 2005, U.S. government expenditures on subsidies that increased CO2 emissions were $9.1 billion and expenditures on subsidies that reduced CO2 emissions were $3.4 billion. By 2009, the respective figures shifted to $15.4 billion for subsidies that increased CO2 emissions and $18.5 billion for subsidies that reduced CO2 emissions. Subsidies that increased CO2 emissions include tax provisions for fossil fuel companies, assistance for low-income housing cooling and heating, and the alcohol fuels excise tax. Subsidies that reduced CO2 emissions include programs such as the home weatherization program, tax credits for energy efficient home improvements and renewable energy production, and loan guarantees for energy efficient improvements.