The Economic Fallout
As governments around the world struggled to deal with the fallout of the coronavirus pandemic, some economic markets ended up receiving more state-funded assistance than others. Research has shown that Russia, the United States, and many other countries involved in the G20 international forum of governments dedicated significantly more bailout funding for fossil fuel companies than renewable energy companies. Companies involved in the extraction and production of oil, coal, and natural gas received tremendous financial support to overcome the economic impacts of the coronavirus pandemic. On the other hand, renewable energy companies were not presented with the same opportunities for financial relief. Fossil fuel companies have been reaping the benefits of a variety of tax rebates, stimulus packages, and other incentives provided by the international community. As the global economy was placed on a lockdown over pandemic concerns, a remarkable decline in industrial activity, air travel, and driving decreased the need for fossil fuels in countries all over the world. The historic drop in the demand for oil, coal, and natural gas compelled policy makers to aid the struggling industry.
The drop in global economic activity, the decline in travel, and the disruption of many other aspects of normal daily life created the biggest drop in energy demand that the world has ever experienced (Rathi, 2020). This decline in the need for energy has disproportionately impacted the fossil fuel industry when compared to other sectors of the global energy market. Research showed that the renewable energy industry grew during the coronavirus pandemic. While countries around the world began to use less oil, coal, and natural gas, the renewable energy industry made tremendous gains during the height of the economic slowdown. Fossil fuel advocates worry that 2020 may have provided the opportunity for alternative sources of energy to finally overtake the once-thriving oil, coal, and natural gas industries.
A Difficult Year for Energy
The start of 2020 turned out to be one of the most catastrophic years on record for fossil fuels. Oil prices plummeted to negative levels, natural gas supplies vastly exceeded demand, and coal suffered the largest decline in demand since World War II. The International Energy Agency says that the worldwide demand for coal will fall by eight percent by the end of 2020. A similar projection has been shared for oil, with researchers expecting a decline of nine million barrels of oil consumed per day, which is indicative of a nine percent drop in demand (Rathi, 2020). While the global natural gas market may not experience as dramatic of a fall, the industry is still feeling the impacts of declining demand from natural gas power plants. Even though fossil fuels have largely dominated the global energy market since the beginning of the Industrial Revolution, some economists and energy analysts believe that 2020 may finally be the year when the energy market experiences a sustained transition towards alternatives.
The notion of a sustained global energy transition has terrified fossil fuel executives in recent years. The historic decline in energy consumption has added more fuel to the industry’s concerns. In an attempt to prevent a sustained transition from fossil fuels to renewable sources of energy, the fossil fuel industry has stepped up their lobbying efforts to get policy makers to intervene. A recently published study conducted by a consortium of institutions has shown that that the efforts to entice policy makers to bailout the fossil fuel industry has been working. According to a report from the International Institute for Sustainable Development, the Stockholm Environment Institute, and the Institute for Global Environmental Strategies, many of the world’s largest countries have extended financial support to the fossil fuel industry during the global economic slump.
The Institute for Climate Economics and Columbia University in the City of New York have conveyed that only India, China, and four other countries making up the G20 ended up dedicating more funding to renewable sources of energy than the fossil fuel industry. As oil prices continued to claw their way back up above $30 per barrel, a number of oil and gas producers were able to focus efforts on policy outcomes. Therefore, fossil fuel producers turned the economic uncertainty into an opportunity to secure relief funding. In the U.S. for example, fossil fuel companies sought assistance from the U.S. Department of the Interior for oil and gas royalty payment relief. Data from the Department of the Interior conveyed that of the 76 oil and gas companies that requested a reduction in tax payments, 100 percent were able to reduce their tax liability for the oil and gas that they produced (Axelrod, 2020).
In addition to relief from tax payments, fossil fuel companies have been granted funding through the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act. Upwards of $1.9 billion in CARES Act funding has been claimed by 37 oil companies (Dlouhy, 2020). Federal regulators have indicated that there is no limit on how the relief funding could be used. Even firms that were on the verge of bankruptcy prior to the coronavirus pandemic have been able to secure federal funding. Some policy makers and international environmental organizations have vehemently criticized Trump administration officials for awarding relief funding without restrictions on their use. For example, Diamond Offshore Drilling Inc. was one struggling oil company that has received intense scrutiny for its use of CARES Act funding. After Diamond Offshore Drilling received $9.7 million in federal relief funding, filings from the U.S. Securities and Exchange Commission (SEC) showed that nine company executives received bonuses totaling $9.7 million (Dlouhy, 2020).
The Diamond Offshore Drilling bailout is just one example of the criticism that Trump administration officials have been receiving. Another area of scrutiny has been around the use of funding for the Small Business Association’s Paycheck Protection Program. Multimillion-dollar corporations tied to the fossil fuel industry have been receiving millions of dollars’ worth of federally backed loans that were originally destined for small American businesses. Research has shown that 16 fossil fuel extraction companies, along with oil technology firms and fuel transporters have received $72 million in small business funding (Walters, 2020). When this information first surfaced, Treasury Secretary Steven Mnuchin issued a warning that large companies who had inappropriately sought this funding could be held criminally liable for misstating their economic situation.
Small Business Loans
While the exact definition of a small business may be subject to some level of interpretation, the majority of the 16 oil and gas firms that applied for funding through the Small Business Association’s Paycheck Protection Program are valued at over $10 million each on the stock market (Walters, 2020). As the Trump administration has pushed forward with its fossil fuel agenda, the policy makers from the United Nations Framework Convention on Climate Change (UNFCCC) have continued to express their frustration that the U.S. continues to counteract global efforts to safeguard the health of the planet.
In response to fossil fuel companies applying for the Small Business Association’s Paycheck Protection Program, Democratic Representative Nanette Barragán of California delivered some scathing statements aimed at the Trump administration. “The PPP is about helping small businesses — mom-and-pop type Main Street stores — struggling to make it through the COVID-19 public health crisis. It was never intended to make it easier for giant fossil fuel corporations to drive us closer to climate catastrophe” (Walters, 2020). Moreover, quarterly financial filings have revealed that other substantial taxpayer-funded economic relief has come in the form of income tax credits. For example, a major crude oil and natural gas exploration firm known as QEP Resources was granted $165.4 million in income tax credits alone (Axelrod, 2020).
Furthermore, another publicly traded hydrocarbon exploration firm known as EOG Resources has taken on a substantial amount of scrutiny for receiving taxpayer-funded resources while simultaneously maintaining shareholder dividends for stock investors. EOG Resources is headquartered in Houston, Texas and recorded revenues in excess of $17.38 billion in 2019. With 2,900 employees, EOG Resources is among the biggest privately owned upstream oil and gas companies in the country. Even though the oil market as a whole has been slammed by the coronavirus pandemic, EOG Resources still managed to achieve record net income this year, which makes some American policy makers even more weary about the notion that they received taxpayer funding while other companies struggled to stay afloat.
Fossil Fuels vs Renewables
As the Trump administration has sought to prop up the fossil fuel industry with taxpayer funding, the administration has also been attempting to weaken the solar and wind industry. Officials from the Natural Resources Defense Council say that the Trump administration is going out of its way to hinder solar and wind companies by seeking retroactive payments for rent related to operations on federal land. At a time when the energy industry as a whole has been struggling, some energy analysts and environmental advocates have found it to be incomprehensible that the Trump administration has sought to adversely impact the renewable energy industry. As the U.S. government has continued to send out federal loans, tax breaks, fee waivers, and other benefits in the form of relaxed regulatory enforcement, solar and wind producers are being hit with new pressure aimed at slowing their growth.
After being granted federal waivers that allowed them to operate for two-years without reimbursing the government for the use of federal land, the Trump administration has revoked a two-year rent holiday. Instead of simply starting to charge solar and wind producers for the use of federal land, the Trump administration has retroactively sent out rent payment requests for the past two years during the height of the coronavirus pandemic. The dichotomy of fossil fuel producers receiving massive tax benefits as solar and wind producers have been slapped with new economic hardships has been a cause for concern, even for some Republicans. Alaska Senator Lisa Murkowski and Wyoming Senator John Barrasso have both publicly criticized the Trump administration’s efforts to slap solar and wind producers with higher rents.
In addition to the break that was given to the fossil fuel industry, the nuclear energy industry has also received some assistance from the federal government. In a recent press release that was issued by the Nuclear Regulatory Commission, officials revealed that nuclear power plant owners will be granted a 90-day fee deferral as a result of the economic impacts that were caused by the coronavirus pandemic (Groom, 2020). Wind and solar companies such as NextEra Energy Inc, Clearway Energy Inc, Southern Company, and NRG Energy Inc have all cited the incentives being given to other sectors of the energy market as prime reasons why they should not be targeted with new fees and taxes.
While the global energy market continues to struggle to get past the economic downturn, some policy makers see this as an opportunity to reshape the future of energy. The sustainable energy supplies director at the International Institute for Sustainable Development says that, “this is a once-in-a-generation opportunity to use government funding, government subsidies, and loans to reshape our future” (Doyle and Darby, 2020). However, rather than reshaping the global energy market, it appears that many developed countries are seeking to prevent the renewable energy industry from making up ground against fossil fuel producers.
Axelrod, J. (2020). “The Oil and Gas Bailout Is a Gusher.” Natural Resources Defense Council.
Dlouhy, J. (2020). “Stealth Bailout Shovels Millions of Dollars to Oil Companies.” Bloomberg.
Doyle, A., and Darby, M. (2020). “Big nations aid fossil fuels more than clean energies amid pandemic, researchers find.” Climate Justice Resilience Fund.
Groom, N. (2020). “Trump admin slaps solar, wind operators with retroactive rent bills.” Reuters.
Hodges, J., and Martin, R. (2020). “Coal Demand Set for Biggest Annual Drop Since World War II.” Bloomberg.
Rathi, A. (2020). “Renewables Are the Only Winners in Historic Decline in Energy Demand.” Bloomberg.
Walters, G. (2020). “Coronavirus Bailout Loans Went to Big Oil and Gas Companies.” Vice.