Dirty Subsidies

In July, President Donald Trump signed an Executive Order terminating subsidies for wind and solar energy. The stated rationales were to end “the massive cost of taxpayer handouts” and counter U.S. dependence on “supply chains controlled by foreign adversaries.”

Estimates of the money devoted to energy subsidies vary depending on how “subsidy” is defined. In the case of renewables, the figure most often cited by conservative think tanks was $15.6 billion per year. (Unsurprisingly, the same sources adopt measurement approaches that lowball dirty energy subsidies.)

Meanwhile, the Trump administration increased subsidies for fossil fuels to the tune of $18 billion, as well as doling out a $6 billion cut in what corporations pay the government to extract oil and gas from public lands. To put these numbers in perspective, in fiscal year 2025 the entire annual budget of the U.S. Environmental Protection Agency was $9 billion, slashed by the Trump administration to $4 billion for the new fiscal year that began October 1.  

These handouts to fossil fuel producers come on top of already existing subsidies and tax breaks that totaled $17.8 billion in 2023, according to the OECD’s Fossil Fuel Subsidy Tracker. The Biden administration attempted to trim $35 billion from tax breaks to oil and gas corporations over the next decade, but failed, prompting New York Times reporter Lisa Friedman to call these the “zombies of the tax code: impossible to kill.”

An example is the oil depletion allowance, dating from 1926, that allows firms to deduct 27.5% off the top from their taxable income. Texas Senator Tom Connally, the policy’s original sponsor, explained its logic: “We could have taken a 5% or 10% figure, but we grabbed 27.5% because we were not only hogs but the odd figure made it appear as though it was scientifically arrived at.”  

These billions in cash giveaways do not include the staggering environmental costs of fossil fuels in hazardous air and water pollution and global climate destabilization. These costs, too, are passed onto the public. Counting these as “implicit subsidies,” the International Monetary Fund pegs total U.S. subsidies to fossil fuel companies at more than $750 billion per year.

The Trump administration is not only tilting the playing field by scrapping subsidies for clean energy while juicing them for dirty energy. It is also gutting regulations on the fossil fuel industry while creating new regulatory roadblocks to wind and solar. Among its initiatives is a “concierge, white glove service” for the oil and gas industry. Brittany Kelm, senior policy adviser to Trump’s National Energy Dominance Council, describes this as connecting companies to political appointees at the agencies that control permits: “They can walk out of our office, and they have all the contacts they need.” In October, the administration opened Alaska’s pristine Arctic National Wildlife Refuge to oil and gas drilling. At the same time, it is revoking permits for wind projects that were already approved and underway.

Apart from bogus savings for taxpayers, the ostensible rationale for the redirection of energy subsidies is to lessen the nation’s dependence on “foreign adversaries” in the energy sector. Unlike oil or gas—where the fuel itself can be monopolized, as OPEC dramatically showed in the 1970s— sunlight and the wind are free; all that is needed is the equipment to harvest the energy.

The biggest suppliers of solar panels to the United States are Vietnam, Thailand, Malaysia, and Cambodia—none of them now considered U.S. adversaries. China dominates the world market in solar panels, having strategically invested in the energy of the future, the opposite of the Trump strategy of doubling down on the energy of the past. Chinese dominance is a plausible reason to subsidize domestic solar panel production, but not to spurn solar energy—any more than worries about dependence on foreign suppliers for pharmaceuticals is a reason to quit taking medicine. In wind energy, Denmark and Spain are among the leading producers of equipment; again, they are not U.S. adversaries, though Trump may manage to turn Denmark into one with threats to annex Greenland. And again, the sensible response to supply-chain concerns is to invest in domestic manufacturing, not to forego wind power. 

The clumsy economic pretexts of saving taxpayer money and reducing supply-chain vulnerability barely conceal a cold political logic of rewarding friends and punishing enemies. During the 2024 presidential campaign, when Trump hosted top oil and gas executives at an exclusive dinner at Mar-a-Lago, he reportedly asked them to contribute $1 billion to his campaign, saying it would be a “deal” in return for the payoff they would get when he was elected.

In the end the companies ponied up only $75 million, according to a New York Times analysis. But they are getting an enormous return on their investment—at the expense of American taxpayers and future generations worldwide.

James K. Boyce is a senior fellow at the Political Economy Research Institute at the University of Massachusetts Amherst. He is the author of Economics for People and the Planet.