If fossil fuel companies in the United States were paid to pay for the real environmental and health costs of their products, a new model suggests that it would return them at around $ 62 billion dollars annually.
Today, that huge amount of money is subsidized by taxpayers.
“Fossil fuel companies are reaping huge benefits in a way that prices do not currently reflect the environmental and social costs of producing and consuming fossil fuels,” says economist Matthew Kotchen from Yale University.
“Change would have a major impact on their baselines, and this study estimates the extent.”
Kotchen’s assessment covers the natural gas, coal, diesel and gasoline industries. Using data from 2010 to 2018, his model seeks to quantify the financial benefits of conventional subsidies, while estimating the true costs of fossil fuels in terms of environmental damage, health damage, and inefficient transport practices.
Ultimately, these hidden costs are covered by taxpayers in a number of ways, including medical costs associated with climate change and local pollution, infrastructure repairs on roads and bridges. , and smog-increasing traffic congestion.
At the same time, the companies themselves have largely washed their hands of the issue.
If natural gas and oil producers had to pay instead of taxpayers, the costs would be up 18 percent of their net income for the 2017-2018 financial year.
Coal producers, on the other hand, did not even make enough money that year to pay for all the damage. In fact, Kotchen’s model has found that the benefits of understandable subsidies outweigh the net revenues of half of U.S. coal companies, “in many cases with a wide margin.”
“These numbers clarify why many in the fossil fuel industry are opposed to more efficient regulatory reform,” Kotchen wrote, “they may also be shaping how policymakers see plans for additional subsidies going forward. “
Petroleum producers seem to be the luckiest of the lottery. Despite the fact that burning gasoline and diesel causes major air pollution and contributes significantly to global warming, most petrol companies have been unable to take responsibility for these consequences. to avoid.
In 2018, results from the model reveal both gasoline and diesel companies that combined $ 45 billion in understandable subsidies. That same year, the coal industry received $ 9 billion more than its net income, while the natural gas industry generated $ 17 billion in benefits.
Today, there are only a handful of large fossil fuel companies in the U.S., and these industries tend to be at their fingertips in a number of industries, which means that their understandable subsidies are huge benefits for them across the board.
In 2018, for example, ExxonMobil’s all-inclusive subsidies for natural gas, gasoline, and diesel saved $ 1.4 billion and saved Chevron $ 908 million. Coal company Peabody Energy Corp, on the other hand, received a large slice of $ 1.56 billion of the subsidy package.
This excludes the $ 33 billion benefits to other oil producers and downstream fossil fuel suppliers in U.S. retail markets.
Of course, this model only takes into account gasoline and diesel consumption and not the additional subsidies associated with other petroleum products, such as heating oil and jet fuel.
“Therefore, the specific benefits to a producer should be interpreted as non-conclusive,” Kotchen writes.
Compared to obvious subsidies in the U.S., which amount to about $ 20 billion a year, near-understandable subsidies are not to be talked about, although scientists and economists are trying to change this.
A recent estimate found that understandable subsidies in 2011 were around $ 800 billion worldwide. This is clearly a market failure, where real and substantial costs are ignored. Kotchen’s model is the first to discover the financial benefits back to specific producers.
“We hope these results will contribute to ongoing debates on climate and energy policy,” Kotchen said, “and may also shape how policymakers see the prospects for subsidies. more going on. “
Before announcing his results, Kotchen reached out to all the companies surveyed. None of them had anything to do with it.
The study was published in the Proceedings of the National Academy of Sciences.