Renewable energy advocates try and justify wind and solar subsidies by arguing that the fossil fuel industry has received trillions; therefore, it is only fair that wind and solar continually benefit from the generous tax credits allotted through legislation like the Inflation Reduction Act (IRA). What they fail to recognize is the skewed calculations employed to compute so-called trillions in taxpayer subsidies.
The exact number of fossil fuel subsidies differs depending on the source, but the global figure commonly referenced approaches $7 trillion. However, not all energy subsidy math is created equal, and this estimate calculated by the International Monetary Fund penalizes oil, coal, and natural gas for activities that should not be included in the grand total.
Roughly two-thirds of that figure consists of fossil fuel “side effects” such as air pollution, climate change, road damage, congestion, and accidents. Including by-products such as pollution in subsidy amounts is akin to including the litter resulting from food assistance programs; incorporating road wear and car accidents is like saying the agriculture industry is responsible for the obesity epidemic. It lacks logic.
Electric vehicles use roads and have just as much likelihood of sustaining damage, traffic, and accidents. Yet, the subsidies are not subject to the same stipulations.
There is an implied assumption that fossil fuel equivalents exist, but they don’t. Also implied is that if something did exist to the extent of fossil fuels, there would be no side effects, which is also erroneous. If renewable energy were to replace oil and natural gas on a comparable scale, the side effects would be considerable. Producing, constructing, and retiring wind and solar—which require substantially more land and critical minerals—comes with its own set of environmental issues. By the same logic, shouldn’t those costs be included in wind and solar subsidy figures?
Ironically, not factored into such estimates are the life-enhancing benefits fossil fuels provide. The industry has done more to lift people out of poverty than any other source has or can hope to accomplish. That should work in its favor.
The fuzzy math goes beyond so-called negative impacts by not addressing cost disparities between units of electricity generation. Solar and wind receive $65.71 and $18.58, respectively, per unit of electricity; oil and natural gas receive $0.39. Wind is procuring 48 times more in subsidization per unit than oil, and solar a colossal 168 times. Taxpayers are largely funding renewable energy.
While prior to 2010 the U.S. fossil fuel industry received higher dollar amounts than renewable energy, the reverse is currently true. Between 2010 and 2023 cumulative energy subsidies for solar, wind, oil and gas, and coal were $76 billion, $65 billion, $33 billion, and $20 billion, respectively. But as previously discussed, the rate of return for the more heavily subsidized solar and wind is completely lopsided and financially flawed.
If all or part of the IRA is not repealed, specifically the tax credits, wind and solar stand to secure trillions in additional subsidies. The renewable energy industry relies on these subsidies, and without them, would not survive. Their future rests on the Big Beautiful Bill’s fate, which if passed, will strip most green energy tax credits.
Fossil fuel subsidies focus on research, exploration, and development whereas wind and solar address the installation of assets, making them far more dependent on government support for their existence.
Most troubling behind all the renewable subsidization is the staggering costs to consumers through skyrocketing electricity rates and inferior energy resources that jeopardize the grid. States incorporating substantial renewable energy into their portfolio experience soaring utility costs and grid failures, leaving customers in the dark and out of money. The North American Electric Reliability Corporation consistently warns that sharply increasing renewables, coupled with a rapid scale back of fossil fuels, leads to blackouts.
Oil and natural gas have proved to be vital and an essential component of everyday life, serving a multitude of purposes. Petroleum is responsible for over 6,000 products consumers use on a regular basis. Wind and solar perform one function: electricity.
Regardless of an energy source’s variety of uses or lack thereof, oil and natural gas can survive without the modest subsidies they receive. Wind and solar would be nonexistent. Their intermittency issues and distortion of electricity markets makes them not cost competitive.
Renewable energy receives far more subsidies than fossil fuels yet yields far fewer benefits.
Kristen Walker is a policy analyst for the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit www.theamericanconsumer.org or follow us on Twitter @ConsumerPal.