Subsidies, tax incentives, and the grey area in between

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The Biden presidency has awoken and energised calls for ending tax subsidies for fossil fuel companies. Some argue oil and gas is not subsidised and instead is heavily taxed. Distinguishing what is and is not a subsidy is challenging. Should specialised depreciation schedules be considered a subsidy? What if the government sets oil tax rates below that of other countries, could that be a subsidy? Is lack of carbon taxes a subsidy to oil and gas? In this insight, we look globally for examples of oil subsidies, tax incentives, and explore the grey area in between.

Table of contents

  • Executive summary
  • Defining subsidy
  • A direct transfer of funds: the traditional ‘subsidy’
  • Direct transfer of funds is not always a subsidy
  • Late-life considerations
  • Liability transfer: lack of emission taxes a subsidy?
  • Forgone government revenue: when is it forgone?
  • Forgone revenue: taxation opportunity costs
  • Clarifying the use of ‘subsidy’ frames our discussion

Tables and charts

This report includes 7 images and tables including:

  • Canada project life taxes
  • Canada project late-life taxes
  • Intangible drilling costs shift tax cash flows (example project)
  • Largest US energy and depreciation-related tax preferences
  • Selected sovereign 10-year bond yields
  • Minimum state share and recent commercial offshore discoveries
  • Progressivity of government share under different fiscal structures

What's included

This report contains:

  • Document

    Subsidies, tax incentives, and the grey area in between

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