Friendly policies keep US oil and coal afloat far more than we thought

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Roberts' review of various estimates of US subsidies to fossil fuels included a section, excerpted below, on the analysis jointly done by SEI and Earth Track that was published in Nature Energy in 2017:

..."The effects of consumption subsidies are fairly well-understood, as it is fairly easy to aggregate consumer decisions and find patterns. But the effects of production subsidies are trickier to pin down; it is difficult to tie particular background subsidies to particular investment decisions by producers.

In an analysis published in Nature in October 2017, researchers from the Stockholm Environment Institute (SEI) attempt to clear this up, quantifying, to the extent possible, just how much a difference production subsidies make. They do this by focusing in on a specific economic decision on the part of producers: whether or not to develop a new oil field they’ve discovered.

After tallying up their own long list of production subsidies and attempting to calculate how those subsidies shift the economic returns of new production, they came to some pretty startling conclusions, emphasis mine:

We find that, at recent US oil prices of US$50 per barrel, tax preferences and other subsidies push nearly half of new, yet-to-be-developed oil into profitability. This potentially increases US oil production by almost 17 billion barrels over the next few decades, equivalent to 6 billion tonnes (Gt) of CO2.

Almost half of the new oil fields getting drilled would have been left alone if not for subsidies. That is no small effect!

The researchers acknowledge that the impact of subsidies on these decisions is extremely sensitive to oil prices. If oil prices rise back up to, say, $75bbl, as some forecasters project, the impact of subsidies will appear far smaller.

But at current low oil prices, subsidies are making a huge, huge difference..."