The nation directly subsidizes the deadly oil, gas, and coal industries with billions of dollars—estimates range anywhere from $10 billion to $52 billion annually—in tax breaks, bailouts, and other financial privileges. According to one evaluation, the U.S. currently spends 10 times as much on fossil fuel subsidies as it spends on education. On Thursday, Sen. Bernie Sanders and Rep. Ilhan Omar unveiled legislation that would change that.
The bill, dubbed the End Polluter Welfare Act, would eliminate $150 billion over the next decade in tax loopholes and federal subsidies for fossil fuel companies. It would do away with income tax credits for drilling and coal plant construction, tax breaks for energy firms, allowances for fossil fuel firms to pay below-market royalty rates for oil and gas production, and more. Some loopholes it would close are over a century old. The bill also proposes a ban on taxpayer-funded research and development programs for the fossil fuel industry.
“Climate leadership means confronting the oil, gas, and coal industries head-on, and the End Polluter Welfare Act is a key piece of the puzzle,” said Collin Rees, a campaigner with Oil Change U.S. “Ending deadly public giveaways to the richest industry in the history of the earth is long overdue, and this bill would be a tremendous step toward a just and equitable phase-out of fossil fuels.”
Officials introduced the 2021 bill as Sanders chaired a Senate Budget Committee hearing on the cost of climate inaction, to which he invited CEOs of three major oil corporations. None chose to attend, which, lol. The 2021 measure has racked up six Democratic co-sponsors so far. It’s also won backing from 85 environmental, climate justice, and human rights advocacy groups—including Oil Change U.S.—who sent a letter to Congress on Thursday morning.
If this bill sounds familiar, it might be because representatives have been trying to get versions of it passed for a decade. But maybe this is its time to shine. After all, its introduction comes two weeks after President Biden released his infrastructure plan, which also proposed cutting subsidies to fossil fuel firms, albeit at a smaller scale. As Treasury Secretary Janet Yellen clarified last week, the administration’s plan would reduce subsidies $35 billion, which is a fraction of the Sanders-Omar proposal. But if Biden is serious about taking on the climate crisis, why stop at $35 billion?
“The End Polluter Welfare Act is key because it names and removes the broadest possible set of direct subsidies to fossil fuel production, making it clear that even $1 of public money supporting the Big Oil and Gas is too much,” said Rees. “Other plans to remove subsidies are less comprehensive and would let the fossil fuel industry retain its power to lie, delay action, and block solutions for too long.”
The new legislation should be a no-brainer. Research shows that removing financial incentives for continued fossil fuel production would decrease extraction and have huge benefits for the climate. Doing so would also because it would free up billions of dollars for the transition to a green economy, but Rees said that’s not the primary reason the legislation is crucial.
“[Fossil fuel] subsidies are nefarious primarily because of the political signal they send. It’s about government reconfirming every year that it still has the industry’s back,” he said. “The actual money involved is certainly germane and does matter, but the political impact of removing public support for the industry is massive and a key part of this fight.”
The legislation alone wouldn’t completely fix the problem of government handouts to fossil fuel companies. A study released last month showed that, in addition to pouring tens of billions of dollars directly into the fossil fuel industry each year, the U.S. also provides oil, gas, and coal companies with massive indirect subsidies by allowing them to avoid paying the true cost of the pollution, health risks, and other dangers with which they plague the planet.
But ending the direct giveaways is a crucial component of the overall fight to phase out of fossil fuels. The fossil fuel market crash during the covid-19 pandemic made it clearer that fossil fuels aren’t even a safe investment, and climate scientists have spent decades sounding the alarm about how extraction needs to end to avert climate catastrophe. The longer we continue subsidizing the deadly industry, the longer it will exist, and the worse our climate consequences will get.Dharna NoorPostsTwitter
Staff writer, Earther
REBECCA LEBER, Mother Jones
Mother Jones illustration
Emails obtained from last April between JPMorgan Chase and top Treasury Department officials through a Freedom of Information Request and subsequent lawsuit. The batch of emails show JPMorgan requesting changes to government lending programs meant to help smaller and medium-sized businesses weather the economic fallout of the pandemic. They also capture an unusual snapshot of Wall Street’s interdependence on the future of fossil fuels.
In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, providing $454 billion to the Federal Reserve to support businesses. The move also gave then-Treasury Secretary Steven Mnuchin broad powers to adjust the terms of the lending as he saw fit. Three weeks after the law passed, a top executive at JPMorgan forwarded on an email to then-Treasury deputy secretary Justin Muzinich that outlined two items under the subject line, “MSL industry review and Oil and Gas Banking Commentary.” Part of the email referenced the Main Street Lending Program, called by the shorthand MSLP, targeting small- and medium-sized businesses that were left out of other COVID relief packages. https://www.documentcloud.org/documents/20580536/annotations/2026832
The same email includes a frank discussion of the ways the government could directly support bailouts for the oil and gas sector, and protect banks exposed to heavy losses when oil prices were in free fall. One JPMorgan employee, Travis Machen, the head of Financial Institutions Corporate Client Banking, wrote, “Numerous banks, largely scattered across the South, have meaningful direct exposure to oil and gas (generally ranging from ~3-11% of total loans)” with fewer than 50 banks having “measurable direct exposure to the oil and gas sector.”https://www.documentcloud.org/documents/20580536/annotations/2026746
Machen lists a menu of ideas for the federal government to intervene on the banks’ behalf, including “additional direct government support to the energy sector (similar to programs for the airline industry).” He suggests tailoring programs like the Main Street Lending Program, as well as a government bailout. The email includes some suggestions that were ultimately not taken up by the administration. For example, the executives proposed a program modeled after the troubled-asset TARP program to give the banking sector an injection of government-backed equity when it was facing steep losses. https://www.documentcloud.org/documents/20580536/annotations/2026748“
This email exchange is a surprisingly candid picture of the risk Big Oil poses to the stability of our financial system.”
Friends of the Earth program manager Lukas Ross says the exchange gives a “glimpse at the depths the industry was willing to go to protect fossil fuel investments when the entire future of the economy” is at stake. “This email exchange is a surprisingly candid picture of the risk Big Oil poses to the stability of our financial system.”
JPMorgan characterized the emails differently. “We engaged with the government to provide feedback on the Main Street Lending Program broadly and across all industries,” a spokesperson at JPMorgan Chase said in a statement. She said that the part of the email that Mother Jones reviewed was actually sent to the Treasury deputy secretary in error. The section that was intended for the deputy secretary, she said, was an attachment that Mother Jones couldn’t review because it was redacted to protect business confidentiality. In that attachment, “at no point did we advocate for any specific industry,” the spokesperson said.
It’s unclear, based on the documents, how the Trump administration took up the specific items in the email. But there is plenty of evidence that both Wall Street and the fossil fuel sector did ultimately shape the terms of government lending to businesses. A March report from Public Citizen found the fossil fuel sector “in part responsible for the program’s failure to meet its goals,” weakening language on employer retention, loosening requirements around financial needs, and increasing the loan size even to businesses employing fewer than 10 workers. The result was 46 fossil fuel companies receiving $828 million in MSLP loans by the end of November. Twelve of those companies each received loans of $35 million or more:
After the first version of the MSLP term sheet was released, the fossil fuel industry and its political allies lobbied to weaken constraints on borrowers, hoping to make MSLP loans available to gas and oil companies. This lobbying included letters sent by The Independent Petroleum Association of America (IPAA) and Sen. Ted Cruz (R-Texas), in which they argued that loosening the criteria for eligible borrowers and weakening restrictions on loan use would be critical to supporting the struggling energy sector. 9 Following these lobbying efforts, the Fed implemented several changes to the MSLP term sheet, many of which mirrored the IPAA’s and Cruz’s requests.
Banks are not a direct arm of the fossil fuel industry, according to the financial accountability group Little Sis, but they are indispensable in providing loans and financial services to prop up the industry so it can continue to exist and expand. That relationship can seriously backfire in the volatile market of oil prices. JPMorgan’s emails to Treasury cites precedent for government intervention for the financial sector and other industries when the economy is in crisis, but precedent from the 2008 recession also shows how Wall Street has relied on taxpayer bailouts when its bets falter. Last year’s pandemic was an early lesson in the consequences of a carbon bubble, where banks like JPMorgan showed just how vulnerable the entire financial system is to a crash amid overvalued oil prices in a world dealing with climate crises.
JPMorgan has taken a few small steps to restore its reputation around climate change: The bank has promised to phase out funding of Arctic oil exploration. Its financing of the fossil fuel industry did drop significantly in 2020, though whether that’s a reflection of the pandemic or sustainability commitments is unclear. Last December, after a year of steady pressure to oust the 33-year JPMorgan board member Lee Raymond, the former Exxon chief resigned. No specific reason was given for his resignation.
Banks, including JPMorgan, have voluntarily jumped ahead of expected government scrutiny of the sector’s investment in fossil fuels: Treasury Secretary Janet Yellen has repeatedly tied climate impacts to economic instability, and President Joe Biden is expected soon to direct Securities and Exchange Commission and Federal Reserve to step up requirements that companies disclose the impacts global warming has on investments to shareholders. But banks and their regulators have much more work to do. Eventually, Ross predicts, “the price of oil is headed for zero again, and it’s going to stay there forever. The question is whether or not we’re going to have a reasonable and safe phasing down of this industry, or if it’s going to be a rough landing. This is a preview of what could happen when the carbon bubble finally bursts.”
In October, top executives at JPMorgan Chase wrote in an op-ed for Fortune that the “clock is ticking” on the climate crisis and that JPMorgan planned to be part of the solution. The bank, they said, would align its immense financing portfolio to meet the Paris climate goals in the oil and gas, electric power, and automotive sectors. “We’re optimistic that industry and governments will harness the momentum and rise to the challenge,” they wrote. “Our bank intends to, and our shared future depends on it.”
Environmental watchdogs have had their doubts about JPMorgan’s commitment—not least because the bank at the time had on its board of directors the former ExxonMobil CEO Lee Raymond, a longtime climate skeptic who led the corporation when it aggressively fought government action to address climate change. Recently, in a report on fossil fuel financing by the climate group Rainforest Action Network, JPMorgan Chase earned the distinction as the “worst banker of fossil fuels” between 2016 to 2020, financing nearly $317 billion for the fossil fuel industry in that period, including oil and gas drilling in the Arctic and tar-sands extraction in Canada. For example, the executives proposed a program modeled after the student loan TARP program to give the banking sector an injection of government-backed equity when it was facing steep losses.
The bank undercuts its climate promises in important ways that are less visible to the public. The environmental group Friends of the Earth
“Competitiveness is about more than how U.S.-headquartered companies fare against other companies in global merger and acquisition bids. It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods.” That was Janet Yellen calling for a minimum global corporate income tax. The Biden administration wants to raise corporate taxes. But it wants other countries to do the same to keep corporations from moving to cheaper pastures.