Katerina Swanson
Fossil fuels have dominated the US energy mix for over a century, but the environmental and economic costs of their use are steep. Fossil fuel combustion is the leading contributor to global warming, and the US government subsidizes the fossil fuel industry to the tune of $20 billion per year. The US is expected to spend an estimated $23 trillion on fossil fuels between 2010 and 2030, with fossil fuel expenditures surpassing $1 trillion in 2011. In 2022, fossil fuel subsidies surged to a record $7 trillion globally, with consumers not paying for over $5 trillion of environmental costs.
| Characteristics | Values |
|---|---|
| Estimated spending on fossil fuels between 2010 and 2030 | $23 trillion |
| Estimated spending on fossil fuels by 2030 | $360 billion more per year than in 2006 |
| Estimated spending on fossil fuels by 2030 if prices are driven higher | $30 trillion |
| Spending on fossil fuels in 2007 | More than $360 billion |
| Spending on fossil fuels per year | $700 billion to $1 trillion |
| Fossil fuel subsidies in 2022 | $7 trillion |
| Fossil fuel subsidies in 2015-2016 | $20 billion |
| Fossil fuel subsidies in 2017 | $250 million |
| Fossil fuel revenues between 2015 and 2020 | $138 billion per year |
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What You'll Learn
Fossil fuel subsidies
In 2022, fossil fuel subsidies in the United States totalled $757 billion, according to the International Monetary Fund. This includes $3 billion in explicit subsidies and a massive $754 billion in implicit subsidies, which are costs like negative health impacts and environmental degradation that are borne by society as a whole rather than producers. Direct government subsidies alone account for $10 to $52 billion per year. These subsidies distort energy markets, hinder renewable energy growth, and cost taxpayers billions.
The fossil fuel industry claims to thrive on free-market principles, yet it receives billions in government subsidies. These tax breaks, royalty relief programs, and indirect benefits distort energy markets, making fossil fuels appear cheaper while taxpayers foot the bill. For example, when fossil fuel extraction occurs on federal land, artificially low lease prices and royalty rates help subsidize costs. In addition, states also subsidize fossil fuels through measures like sales tax exemptions.
There have been attempts to reduce or reform fossil fuel subsidies. For instance, the End Oil and Gas Tax Subsidies Act of 2023 (R.1483) proposed repealing fossil fuel tax breaks. If governments removed explicit subsidies and imposed corrective taxes, fuel prices would increase, leading firms and households to consider environmental costs in their decisions. This would result in cleaner air, improved health outcomes, and significant reductions in global carbon emissions.
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Environmental costs
Fossil fuels have been the dominant energy source in the US for over a century, but this dominance has come at a significant environmental cost. In 2023, fossil fuels accounted for about 84% of total US primary energy production. This heavy reliance on fossil fuels has resulted in a range of environmental issues, from local air pollution to global warming.
The combustion of fossil fuels is the leading contributor to global warming, with greenhouse gas emissions causing a rise in global temperatures. In 2019, fossil fuels accounted for 74% of US greenhouse gas emissions. This has led to oceanic and atmospheric warming, resulting in global sea level rise. Sea levels have risen by about 9 inches since the late 1800s, causing more frequent flooding, destructive storm surges, and saltwater intrusion. With 40% of the US population living along the coasts, adapting to sea level rise could cost $400 billion over the next 20 years.
In addition to sea level rise, global warming has also impacted agriculture. A 2007 study found that global production of major crops experienced significant losses due to global warming between 1981 and 2002. For example, global wheat growers lost $2.6 billion, and global corn growers lost $1.2 billion in 2002.
Fossil fuels also contribute to local air pollution, emitting hazardous pollutants such as sulfur dioxide, nitrogen oxides, particulate matter, carbon monoxide, and mercury. These pollutants have harmful effects on both the environment and human health, causing issues such as acid rain, eutrophication, damage to crops and forests, and respiratory problems. In the US, transportation is the largest source of heat-trapping emissions, with passenger cars and trucks contributing significantly to the country's total transportation emissions.
The environmental costs of fossil fuels also include the risk of oil spills during extraction, transportation, and refining. Oil spills can have devastating consequences for communities, wildlife, and habitats. The 2010 BP Deepwater Horizon spill, the largest in history, released 134 million gallons of oil into the Gulf of Mexico, resulting in 11 deaths and widespread environmental damage.
The annual cost of the health impacts of fossil fuel-generated electricity in the US is estimated to be up to $886.5 billion. Fossil fuel pollution is responsible for one in five deaths globally, with 350,000 premature deaths in the US in 2018 attributed to fossil fuel-related pollution.
To address these environmental costs, the US needs to transition away from fossil fuels towards cleaner energy sources. Investing in renewable energy can not only help reduce environmental and health impacts but also provide economic savings.
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US government projections
According to the US government's projections, the country will spend an estimated $23 trillion on fossil fuels between 2010 and 2030. This is based on the assumption that energy consumption and fossil fuel prices will follow the projected trends. By 2030, the United States can expect to spend approximately $360 billion more per year on fossil fuels than it did in 2006. This is due to the expected rise in oil prices, which is a major driver of higher expenditures. If oil prices reach $200 per barrel by 2030, the United States will spend $1.3 trillion out of $1.6 trillion in total fossil fuel costs on oil alone.
The US government's projections also indicate that fossil fuel expenditures will decline in the coming years due to the lingering effects of the economic recession. However, annual expenditures of more than $1 trillion per year will become the "new normal" by the middle of the next decade. If fossil fuel prices increase faster than expected, the United States could spend more than $30 trillion on fossil fuels between 2010 and 2030.
The US government has taken some steps towards a clean energy future, with policymakers adopting policies to encourage energy efficiency and the use of renewable sources such as solar and wind power. However, the federal government has also provided funding for efforts to make coal more economical and environmentally friendly, such as Carbon Capture and Storage (CCS) technologies. The American Recovery and Reinvestment Act of 2009, for example, allocated $3.4 billion towards fossil fuel research and development, primarily for CCS technologies.
Additionally, the Department of Energy's Loan Programs Office (DOE LPO) has designated $8 billion for loans to advanced fossil fuel projects that aim to reduce greenhouse gas emissions. While the primary focus of the DOE LPO is on financing renewable and efficiency technologies, the inclusion of fossil fuel projects has drawn criticism as these projects can result in increased greenhouse gas emissions and contribute to global warming.
While the US government has made some efforts towards reducing fossil fuel consumption and transitioning to cleaner energy sources, the projections indicate that spending on fossil fuels will remain significant in the coming years. The phasing out of explicit and implicit fossil fuel subsidies, estimated at $7 trillion globally, could be a crucial step in accelerating the transition to a sustainable energy future. Removing these subsidies would encourage the consideration of environmental costs in consumption and investment decisions, leading to reduced emissions, improved air quality, and significant health benefits.
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Oil prices
If oil prices reach $200 per barrel by 2030, which is likely due to increasing strain on global oil supplies, the United States will spend $1.3 trillion on oil alone, out of a total of $1.6 trillion in fossil fuel costs. This will result in a significant increase in spending compared to previous years. For instance, in 2006, American consumers and businesses spent $921 billion on fossil fuels, and in 2008, expenditures likely surpassed $1 trillion for the first time.
The United States is heavily reliant on fossil fuels, which have dominated the country's energy mix for over a century. Petroleum consumption, in particular, peaked in the 1970s, and while it has decreased in recent years due to the COVID-19 pandemic, it is expected to rise again as economic activity returns to pre-pandemic levels. In 2023, the United States consumed approximately 20.25 million barrels of petroleum per day, or 7.39 billion barrels for the entire year.
The continued reliance on fossil fuels has imposed massive environmental and economic costs. The production and transport of fossil fuels routinely cause pollution and occasionally lead to catastrophic accidents, such as oil spills, resulting in significant removal costs and compensation for damages. Additionally, the combustion of fossil fuels is the leading contributor to global warming, which poses environmental and economic threats, including the potential for costly storm damage in key cities.
To address these challenges, there have been recent efforts to transition towards a clean energy future. Policymakers have adopted measures to encourage energy efficiency and increase the utilization of solar and wind power. Removing explicit and implicit fossil fuel subsidies, while challenging, could also play a crucial role in reducing fossil fuel consumption and emissions.
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US fossil fuel revenues
Fossil fuel expenditures in the US are extremely high and are projected to increase. In 2007, America spent more than $360 billion on importing fossil fuels, with the majority of that money spent on crude oil. Between 2010 and 2030, the US is expected to spend an estimated $23 trillion on fossil fuels, which could increase to over $30 trillion if fossil fuel prices increase. By 2030, the US is expected to spend approximately $360 billion more per year on fossil fuels than it did in 2006. This increase in spending is due to rising oil prices and the country's dependence on fossil fuels.
The US fossil fuel industry makes significant revenues, with the total revenue of the US oil and gas industry reaching $244.4 billion in 2023, a decrease from $330.8 billion in 2022. Despite lower oil prices and a sharp decline in gas demand, the industry continues to make massive profits. In 2023, the combined profits of ExxonMobil, Chevron, Shell, and BP totaled over $100 billion.
The high expenditures on fossil fuels have severe economic, social, and environmental costs. Fossil fuel combustion is the leading contributor to global warming, causing environmental damage and imposing significant health costs. The environmental costs of fossil fuel consumption are often not reflected in prices, with consumers not paying for over $5 trillion of environmental costs in 2022. Removing fossil fuel subsidies and imposing corrective taxes could significantly reduce global carbon dioxide emissions and improve public health.
The US government has taken steps toward a clean energy future by encouraging energy efficiency and the use of renewable energy sources such as solar and wind power. However, fossil fuel interest groups continue to urge the expansion of fossil fuel projects and drilling on public lands and waters, endangering wild places and contributing to climate change. The fossil fuel industry has also been criticized for its deceptive practices, lobbying for its interests, and disregarding the harmful impacts of its activities.
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Frequently asked questions
American consumers and businesses spend roughly $700 billion to $1 trillion per year on fossil fuels.
America spends over $20 billion per year on fossil fuel subsidies.
Fossil fuels generate roughly $138 billion per year for US localities, states, tribes, and the federal government.
