Factbox: Biden budget targets U.S. fossil fuel subsidies

U.S. President Biden visits Philadelphia to deliver remarks about his budget for fiscal year 2024
U.S. President Joe Biden delivers remarks about his budget for fiscal year 2024 at the Finishing Trades Institute in Philadelphia, Pennsylvania, U.S., March 9, 2023. REUTERS/Evelyn Hockstein

March 9 (Reuters) - U.S. President Joe Biden proposed a budget on Thursday that would scrap billions of dollars in oil and gas industry subsidies reviving a perennial debate about whether fossil fuel companies should be receiving lucrative tax breaks.

While the proposal has little chance of making it through a divided Congress, it represents a political signal from the White House, which has repeatedly criticized Big Oil for raking in record profits at a time of high consumer energy costs since the Russian invasion of Ukraine.

Here are some details about U.S. fossil fuel subsidies:


Calculating the cost of U.S. subsidies for the fossil fuel industry is complex because the incentives stretch across the U.S. tax code, but estimates range from $10 to $50 billion per year.

Axing the subsidies would save the government nearly $31 billion over 10 years, Biden's fiscal year 2024 budget proposal says.

Taxpayer advocates and environmental groups argue the subsidies are inappropriate at a time when the federal government is trying to shift the economy to cleaner forms of energy to fight climate change.

The oil industry counters that the support is needed to ensure ongoing investment and reliable supply.


U.S. oil and gas subsidies include provisions ranging from incentives for domestic production, write-offs and deductions tied to foreign production and income, and approved accounting methods that can reduce the stated taxable value of assets.

One specific U.S. tax break on domestic production, for example, called intangible drilling costs, allows producers to deduct a majority of their costs from drilling new wells. The Joint Committee on Taxation, a nonpartisan panel of Congress, has estimated that eliminating it could generate $13 billion for the public coffers over 10 years.

Another, the percentage depletion tax break, which allows independent producers to recover development costs of declining oil gas and coal reserves, could generate about $12.9 billion in revenue over 10 years, according to the panel.


Before taking office, Biden promised to get rid of fossil fuel subsidies as part of a multi-pronged effort to fight climate change that also included ending new drilling on public lands.

These promises have been impossible to keep. For one, they require an act of Congress, and Republicans and some Democrats oppose the removal of fossil fuel subsidies. Secondly, soaring energy prices since the Russian invasion of Ukraine have led Biden to call for more oil and gas, not less.

Ending subsidies for oil and gas is not a new idea, but it has always been difficult: former President Barack Obama also wanted to ditch tax breaks for fossil fuels to show the world that the United States was serious about speeding a transition to clean energy to tackle climate change.

But even with a commanding Democratic majority in the Senate during Obama's first six years in office, he was unable to kill the subsidies.


Lance West, a vice president of government relations at the American Petroleum Institute lobbying group, said the budget shows contradictions in Biden's energy policy. "The White House calls for increasing American oil and natural gas to meet consumer demands and then fails to issue leases and discourages future investment by proposing new discriminatory taxes," West said.


For many governments, keeping consumer energy prices affordable is the top priority. That's why numerous countries, ranging from Japan to Brazil, last year imposed or increased subsidies to cushion consumers from skyrocketing prices.

The International Energy Agency estimated that so-called consumption subsidies for fossil fuels doubled in 2022 to $1 trillion globally.

Reporting by Timothy Gardner and Richard Valdmanis

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