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United States

Shocking contrast with oil

The US government provided total subsidies to the American oil industry of between $5.2 billion and $11.9 billion in 1995 alone, according to a new report by environmental group Greenpeace. The report, released on June 9, includes details of tax breaks to oil companies as well as government support for oil exports and foreign production.

Entitled "Fuelling Global Warming," the report finds that oil companies paid on average 23% below the usual rate of corporate taxation in America. Greenpeace's new lobbying effort comes as some of the country's largest companies are starting to ramp up opposition to the greenhouse gas reduction treaty hammered out in Kyoto. It also comes in the midst of the US Congress' annual budgetary process in which renewables are struggling to maintain their R&D budgets while oil continues to enjoy wide government support.

"Not only do these subsidies divert needed public support for emerging clean energy technologies, but they often make it more difficult for cleaner fuels to compete in the marketplace," says Kalee Kreider, director of Greenpeace's US climate campaign. "Greenpeace is calling on Congress to strip all subsidies to the oil industry," adds Greenpeace's Gary Cook. "Instead, we must make renewable energy sources like solar and wind an integral part of US efforts to curb global warming."

Accepting that there is general recognition that oil prices do not reflect the environmental costs of petroleum consumption, the report goes a step further and details how much petrol prices do not reflect the actual costs of petroleum production. At the end of the last decade, federal subsidies to oil were more than four times higher than those to all renewable energy and energy efficiency sources combined, says Kreider. The subsidies to all fossil fuels were ten times higher, she adds.

"Subsidies to oil are simply too large to be ignored as the world tries to shape a global climate change strategy and address the many competing needs for scarce government funds," says the study, written by Douglas Koplow and Aaron Martin of Industrial Economics Inc, an economics consulting group in Cambridge, Massachusetts.

Indeed, the multi-billion dollar US oil subsidy for 1995, highlighted by Greenpeace when it released the report, does not even include the military costs of defending the Persian Gulf. The report says that would be an additional $10.5-$23.3 billion for the same year, bringing America's total oil subsidy in 1995 to $15.7 to $35.2 billion. Among costs that were assessed, however, were an estimated $5.4 billion to maintain the Strategic Petroleum Reserve, $2.3 billion in tax breaks for domestic exploration and production, and $1.6 billion for oil-related exports and foreign production.

Oil companies overall continue to pay taxes at a rate more than one-fifth below the going or "statutory" level, says the report. In addition, tax credits through the US Export Import Bank and the Overseas Private Investment Corporation provide $0.8-$1.6 billion a year in subsidies for exports and foreign production, according to the report.

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