At $50 a barrel, billions in tax breaks keep many oil projects profitable

Enlarge / MIDLAND, TX - JANUARY 20: A pumpjack sits on the outskirts of town at dawn in the Permian Basin oil field on January 21, 2016 in the oil town of Midland, Texas. (Photo by Spencer Platt/Getty Images) (credit: Getty Images)

At $50 a barrel, the low price of crude oil has slowed some of the oil production in the US, especially in regions that are costly to develop, like the Arctic. But US oil producers aren't bearing the whole brunt of low prices, because federal and state governments provide tax breaks that stimulate oil production despite low prices.

The tax situation isn't unique to the US-China, the EU, and India also offer a variety of flavors of tax breaks to fossil fuel producers, despite their recognition of the need to address climate change. Although the US has signaled its intent to withdraw from the Paris Agreement, tax breaks that fund more fossil fuel production don't help the rest of the globe to limit warming to 2 degrees Celsius.

The latest research offers some hard numbers on just how much tax policy is supporting extra CO₂ emissions. "Federal tax subsidies to the oil and gas industry alone cost US taxpayers at least US$2 billion each year," write researchers from the Stockholm Environment Institute and Earth Track in a recent Nature Energy article. That $2 billion in uncollected taxes is helping some oil fields go from "unprofitable" to "profitable," increasing the amount of oil that's available for consumption. (The researchers broadly used the term "subsidies" to indicate different types of tax-based support that "confer a financial benefit from government to oil producer.")

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