New York State Must End Tax Breaks for Fossil Fuels

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Over the past several months, millions of people all across this country—from the heartland to the sea—have experienced the destruction of the climate crisis firsthand. People have lost their homes, businesses, and tragically, even loved ones. In the midst of a respiratory pandemic, they are struggling to breathe as smoke engulfs their communities. They are watching the floodwaters rise. They’re anxiously checking the weather and hoping they are out of the path of the next big storm.

This is climate change. The impacts are here, and they’re only going to get worse if we don’t take swift, bold action.

The fossil fuel industry is the primary source of harmful greenhouse gas emissions. So one place to start, to protect our planet, is to stop building or expanding fossil fuel infrastructure.

Another place is to stop subsidizing this reckless industry.

Every year, New York State spends $1.6 billion of taxpayer money on benefits for the oil and gas industry—the very industry that fuels the climate crisis. Yes, 1.6 billion with a “B.”

This money is distributed in the form of outright tax breaks, credits, subsidies, and refunds that support all facets of the oil and gas industry, from fuel production to transportation to storage.

The tax advantages that New York State doles out to the industry are impossible to justify, especially today, given the depleted state resources during the current economic downturn and the increasing ferocity of the climate crisis. These tax breaks are expensive. They’re unnecessary, and counterintuitively, only serve to prop up the very industry driving us into climate catastrophe—an industry that New York State is actively fighting against through the most aggressive climate law in the nation.  

Here are a few of the fossil fuel tax breaks New York taxpayers are paying for:

  • $182 million for research and development. Current policy allows tax exemptions for the costs of fuel, gas, electricity, refrigeration, and steam used for research and development within the fossil fuel industry
  • $120 million for electric and gas delivery. Right now, the sales and use tax rate on transportation, transmission, and distribution of gas or electricity is zero percent when it is sold by someone other than the vendor of gas or electricity
  • $118 million in tax breaks for airline fuel

New York State Senator Liz Krueger, a real leader on climate issues, has introduced a bill that directly tackles the problem of New York’s continued subsidizing of the fossil fuel industry. The bill (S.2649C) requires the Governor, in consultation with the State Energy Planning Board—which oversees New York’s plan to build a clean energy system—to review all fossil fuel-related tax expenditures in New York State. It also requires the Governor and this Energy Planning Board to evaluate whether those tax breaks align with New York’s nation-leading climate goals.

Senator Krueger’s bill mandates an annual reporting of these fiscal policies as a formal component of the Tax Expenditure Report that is given to the New York State legislature. It also requires that the report be made available to the public, ensuring a level of transparency about the economic incentives our state offers the oil and gas industry. Importantly, this report will make formal recommendations on current tax policy—including the modification or outright repeal of specific tax programs that benefit oil and gas companies.

The bill takes it a step further, setting a five-year sunset period for all current and future fossil fuel-related tax expenditures. That means that within five years of the bill passing, all existing and future tax breaks to the fossil fuel industry will expire.

New York State, at both the executive and legislative levels, has been a national model in battling climate change. But incentivizing the fossil fuel industry does not align with New York State’s climate leadership, and it must end. As the state scales-up this historic transition away from a fossil fuel-based economy and toward a healthier, more sustainable one, it must stop subsidizing the industry that’s responsible for the climate crisis in the first place.

About the Authors

Rich Schrader

New York Political Director, NY Regional, Healthy People & Thriving Communities Program

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