Analysis Reveals Substantial Increase in US Federal Fossil Fuel Subsidies under Trump Administration

A report released on Tuesday has uncovered that the Trump administration, in 2025, has augmented federal subsidies for oil, gas, and coal by nearly $40 billion. This will result in an additional annual expenditure of $4 billion on fossil fuels over the next decade. The new subsidy amount, authorized through the passage of the One Big Beautiful Bill Act this summer, is in addition to the pre - existing annual subsidies of $30.8 billion for the fossil fuel industry. As per the report, the United States will now spend at least $34.8 billion annually on domestic fossil fuels.

Significance of the Increase

Collin Rees, the US program manager for Oil Change International (an anti - fossil fuels advocacy organization and the report's author), stated that this increase represents “the largest single - year increase in subsidies we’ve seen in many years—at least since 2017.”

Century - long History of Fossil Fuel Subsidies in the US

The United States has been subsidizing fossil fuel production for over a century. Many of the tax subsidies detailed in the report, such as the tax break implemented in 1913 that enables companies to write off significant expenses related to drilling new oil wells, have been in existence for decades.

Difficulty in Reversing Fossil Fuel Subsidies

Even with an administration determined to end such subsidies, the task has proven extremely challenging. President Joe Biden, during his campaign, vowed to end tax breaks for Big Oil. His 2021 budget pledged to raise $35 billion over 19 years by eliminating certain fossil fuel subsidies, and one of his first executive orders tasked agencies with eliminating these subsidies. However, during climate legislation negotiations with then - Senator Joe Manchin of West Virginia (a key swing vote in the Senate at the time, with long - standing ties to the coal industry and a recipient of fossil fuel money), the phase - outs of these subsidies were scrapped.

The Inflation Reduction Act, the compromise between Manchin and Democratic leadership passed in August 2022, actually provided additional support to the fossil fuel industry. It offered subsidies for oil - and - gas - friendly technologies, such as carbon capture and storage and certain types of hydrogen made with natural gas.

Matthew Kotchen, a professor of economics at Yale University not involved in the new analysis, explained, “What happens is you have these policies in place, and then you have a constituency that strongly advocates and lobbies for them, it becomes harder and harder to unwind them, which I think is the situation that we’re in today.”

Continuation of the Cycle under the New Administration

Fossil fuel companies invested millions of dollars in getting Trump elected last year. A report from the advocacy group Climate Power estimated the total at $445 million. These companies are now reaping the benefits as the administration pursues an aggressive deregulatory agenda, hinders renewable energy projects, and downplays the significance of climate change. The Wall Street Journal reported on Sunday that the president has been calling oil CEOs after their TV appearances.

Rees remarked, “It’s no secret that Trump and the Republicans are on the side of the fossil fuel industry and very much vice versa. The fossil fuel industry spent hundreds of millions of dollars getting Republicans and Trump elected. They then presented their wish lists. Nearly everything on those wish lists was fulfilled, and in fact, they got a bunch of additional goodies that weren’t even in those wish lists.”

Methodology and Context of the New Research

The new research builds on previous work by Oil Change International, which last calculated national fossil fuel subsidies in 2017, finding an annual outflow of $20 billion to the industry. To compile the new report, Rees and his colleagues scoured various federal government sources on the annual funding to the oil, gas, and coal industries.

The definition of what constitutes a federal subsidy is a matter of debate. Environmental groups typically take a broader view when tallying public money spent on fossil fuels, including federal funds not directly distributed to oil companies. Conservative groups, on the other hand, adopt a much more narrow approach. Oil Change International used the subsidy definitions set by the World Trade Organization in calculating domestic funding to fossil fuels for its report.

Rees also noted that due to a lack of transparency across the federal government, the calculations in this report are “likely to be an undercount. There’s probably some things that we missed—some corners of the budget that are funding fossil fuels in different ways.”

Composition of the New Subsidies

The $4 billion in new yearly subsidies mainly come from allocations in the One Big Beautiful Bill Act passed this summer. One of the most significant new subsidies, an expansion of the tax credit for carbon capture and storage, is ironically related to provisions from the Inflation Reduction Act, which Trump campaigned on reversing. (The One Big Beautiful Bill Act did, however, severely curtail tax credits for wind and solar, fulfilling part of Trump’s campaign promise.)

Carbon capture and storage involves capturing CO2 emissions and injecting them deep underground. The oil and gas industry has been injecting CO2 underground for decades to recover difficult - to - reach reserves not easily accessible through traditional drilling methods. Environmentalists have long criticized the idea of using an oil and gas technique as a climate solution, especially since a company could receive a climate tax credit for injecting CO2 that will be used to produce more fossil fuels.

In the original Inflation Reduction Act, which significantly expanded the existing carbon capture tax credit, there was a price differential in the tax credits. Producers received more money per ton of CO2 sequestered underground without any oil production involved and less for CO2 used specifically to produce more oil and gas. However, the One Big Beautiful Bill Act eliminated this differential, allowing producers to claim the full credit even if they use CO2 to produce more fossil fuels. The analysis found that the total expansion of tax credits for carbon capture in the One Big Beautiful Bill Act could result in over $1.4 billion of public money flowing to oil and gas companies each year.

Other Forms of Support for Fossil Fuel Industries

The federal subsidies addressed in this report are just one aspect of the government's support for dirty industries. The analysis does not account for state and local tax breaks for fossil fuel companies, nor does it include international financing from publicly - funded US entities to overseas fossil fuel companies and projects. (Just before leaving office, President Biden backed a limit on funding for dirty investments by the US Export - Import Bank. President Trump promptly encouraged the Bank in April to resume funding for coal projects abroad.)

The fossil fuel industry also benefits financially from not having to address the negative externalities of their products. For example, coal companies do not bear the health costs associated with people breathing polluted air, and oil and gas companies do not consider damages from extreme weather exacerbated by climate change caused by their products. Kotchen calculated in a 2021 paper published in the Proceedings of the National Academy of Sciences that a small number of US oil, gas, coal, and diesel giants receive $62 billion in what he terms “implicit subsidies” per year by not paying for the damage they cause.

When asked if, given the major environmental rollbacks under the Trump administration, he expected this figure to increase if he redid his analysis in 2025, Kotchen responded, “The environmental externalities are higher, and production has gone up. I think [the number] would be a lot higher.”