How Elon Musk could end fossil fuel subsidies

President-elect Donald Trump has repeatedly promised to upend the federal government, and he has enlisted firebrands Elon Musk and Vivek Ramaswamy to help him do it. The two men are set to lead the Department of Government Efficiency and aim to trim $2 trillion from the U.S. budget.

That’s about one-third of all federal spending, and the pair also believe they can cut the government workforce by 75 percent. In announcing the office, known as DOGE, Trump said that “these wonderful Americans” will “dismantle” bureaucracy, “slash” regulations, cut “wasteful” expenditures, and “restructure” agencies. Ramaswamy took to X to promise, “We will not go gently.”

Overall, that’s likely going to be bad news for U.S. environmental policy and the Biden administration’s landmark climate bill, the Inflation Reduction Act. But there’s a chance that, if DOGE wields its cleaver widely enough, the department may actually please environmentalists by eliminating a few things they have long-loathed, including fossil fuel subsidies. 

“It’s a truth test to all of their messaging,” said Matthew Tejada, a former Environmental Protection Agency official who’s now a senior vice president at the Natural Resources Defense Council. “These handouts to the oil and gas industry, which allows these multinational corporations to earn billions of dollars a year, fly in the face of everything else they talk about.”

The extent of these federal subsidies depends on how they are counted. The Fossil Fuel Subsidy Tracker pegged them at nearly $18 billion in 2023. The International Monetary Fund estimate is $757 billion, including what it calls ‘implicit’ subsidies, such as undervaluing environmental harm. While the exact number is debated, it is clear that ending these industry benefits could reap billions in revenue. 

“The enormous handouts that we continue to make to an industry that extracts tens of billions of dollars out of our country already should certainly be somewhere within their line of sight,” Tejada said. “There are dozens and dozens of different subsidies.” 

One major tax break allows companies to deduct most of the cost of drilling new oil and gas wells. The Joint Committee on Taxation, a nonpartisan panel of Congress, estimates that repealing this “intangible drilling costs” provision could bring an additional $6 billion in revenue by 2032. Another — the percentage depletion tax break — allows independent producers to recover development costs of declining oil, gas, and coal reserves and has been on the books since 1926. Eliminating it could generate an additional $7.3 billion. 

“I don’t know how much they will be able to cut the tax code subsidies,” said Mark Jacobson, a Stanford University professor of civil and environmental engineering. In all likelihood, he said, oil and gas companies will lobby successfully to preserve their interests. And, he argued, the largest benefit they receive from the government is the ability to pollute, which is outside DOGE’s mandate. 

“They don’t touch on hidden subsidies,” said Jacobson. “The biggest subsidy is allowing these companies to freeload off our health.” 

Neither the Trump transition team or the American Petroleum Institute responded to multiple requests for comment. 

Both Tejada and Jacobson said their wishlist for DOGE would go beyond fossil fuel subsidies. One deadline Tejada is watching arrives this spring, when the tax cuts of the first Trump administration expire. Letting them lapse could be one way the government could work toward a balanced budget. Jacobson said another often overlooked topic is Washington’s support for corn ethanol fuels. The government has spent billions propping up a fuel that studies show has greater climate and environmental impacts than gasoline and now accounts for 45 percent of all the corn grown in the U.S. 

But, they say, for now these hopes for DOGE tackling environmental concerns remain just that. “They probably will end up cutting a lot less than they want to cut,” Jacobson said.

This story was originally published by Grist with the headline How Elon Musk could end fossil fuel subsidies on Jan 3, 2025.