Why Subsidies Persist

The US has tried to repeal fossil fuel tax preferences at least a dozen times since 2009. Every attempt has failed. The subsidies are not popular. They are durable. The difference matters.

Energy subsidies persist not because they are good policy but because they create concentrated beneficiaries who fight harder to keep them than diffuse losers fight to remove them. This is Mancur Olson's collective action logic applied to energy: the oil and gas industry's benefit from the percentage depletion allowance is concentrated (a few thousand companies receive billions), while the cost is spread across millions of taxpayers at pennies per person. The beneficiaries organize; the losers do not.

The same dynamic protects renewable subsidies. Solar and wind tax credits create concentrated beneficiaries (developers, installers, financing firms) who lobby fiercely for extensions, even as the technologies become cost-competitive without them. The Investment Tax Credit has been "temporarily" extended nine times since its creation.

Tracing the lobbying asymmetry. The oil and gas industry spent roughly $125 million on federal lobbying in 2022. The clean energy industry spent roughly $90 million. Both amounts dwarf what consumer groups spend opposing either set of subsidies.

If both industries lobby to protect their subsidies, who represents the taxpayer interest in removing both?

Almost nobody with equivalent resources. Taxpayer advocacy groups are diffuse and underfunded relative to industry. This is why subsidy reform almost always happens through budget reconciliation arithmetic (when Congress needs revenue) rather than through principled policy review.

Understanding why subsidies persist is a prerequisite for designing policies that can actually be repealed when they are no longer needed.

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