Time to End New York’s Fossil Fuel–Related Tax Breaks

With our state facing the enormous financial challenges brought on by the COVID-19 pandemic—while the world experiences an intensifying climate crisis—there has never been a better time for New York to break its ties with the dirty fossil fuel industry.  

Right now, New York State faces a staggering $15 billion budget deficit. At the same time, our state currently offers $1.6 billion every year in tax benefits for the fossil fuel industry—the very industry that is driving the global climate crisis. And it is everyday New York taxpayers, like you and me, who foot the bill for that annual multi-billion-dollar giveaway.

It simply makes fiscal sense to end our expensive subsidizing of the fossil fuel industry, so that our state can invest in the essential services that will help get New Yorkers back on their feet after a year of unthinkable hardship. The past year has been extraordinarily challenging: the COVID-19 pandemic has devastated communities, while causing an economic downturn that finds millions of New Yorkers out of work and experiencing food insecurity.

At such a strenuous time, we must do all that we can to protect the people of New York and our planet. Eliminating subsidies to the oil and gas industry is a critical way to simultaneously tackle the global climate crisis while saving taxpayer money.

Senator Krueger’s Bill

A new bill in Albany would do just that. Introduced by Senator Liz Krueger, a longtime ally to environmental causes, the bill would repeal many of the tax handouts that currently prop up the fossil fuel industry. Those handouts exist in the form of various tax credits, breaks, subsidies, and refunds—all of which support the oil and gas industry at different stages, from fuel production to transportation to storage.

Specifically, the bill, which builds on legislation proposed last session, would eliminate more than $330 million of the most egregious fossil fuel-related tax expenditures that currently come out of the pockets of New York taxpayers.

Savings would include: 

• $118 million saved by repealing the tax exemption currently given to airline fuels.  
• $89 million saved by ending the tax exemption offered for fuel and gas used in research and development within the fossil fuel industry.
• $57.7 million saved by removing the tax exemptions offered for liquid petroleum gases, such as butane, ethane, and propane.
• $11.3 million saved by eliminating the tax exemption offered for so-called “bunker” fuels, which are used in container ships and commercial shipping vessels. Bunker fuel is one of the lowest-grade, highest-polluting fuels used in the transportation sector.
• $4.8 million saved by repealing the tax exemption offered for diesel and other fuels used in manufacturing.
• $4 million saved by canceling the tax exemption for oil and gas used to operate fracked gas infrastructure, like gas pipelines, distribution lines, and compressor stations.

Although not the largest, the fracked gas tax break is one of the most appalling. Given the destruction to public health, environmental quality, and the climate wrought by fracking—and the fact that New York State banned new drilling in 2015—this handout is unacceptable.

Importantly, Senator Krueger has made sure to consider the needs of everyday New Yorkers in her bill; the bill also preserves some narrow tax advantages that serve the public interest. These include a home heating credit that primarily benefits low- to moderate-income households, and an agricultural exemption that helps small- to mid-size farmers upstate.

New York State: A Climate Leader

Over the past few years, New York State has forged a legacy as a leader on climate issues. Among many environmental victories, New York has cemented a historic ban on fracking across the state; blocked both the Williams and Constitution fracked gas pipelines; prohibited offshore drilling for oil and gas; and divested the $225 billion Common Retirement Fund from fossil fuels.

What’s more, in 2019, New York enacted the Climate Leadership and Community Protection Act (CLCPA), a nation-leading climate law, and in fact, one of the strongest climate laws in the world. The CLCPA sets ambitious goals for New York, aiming for 100% zero-emission electricity by 2040 and an 85% reduction in greenhouse emissions by 2050. It also includes several environmental justice components, including a requirement to direct at least 35-40% of the program’s benefits to historically disadvantaged communities.

Right now, our state is facing mounting financial challenges. At the same time, people across the country are experiencing firsthand the destructive impacts of climate change, while our government works to build back after years of Trump administration attacks on the environment, which have included the gutting of the EPA and the opening of public lands to fossil fuel drilling and exploration. There has never been a more important time to take a stand to protect public health and our environment.

Ending subsidies to the fossil fuel industry is a natural continuation of New York’s strong climate leadership—and it is essential to reaching the goals outlined in the CLCPA. Passing the Krueger bill is a critical step forward for our state; it would save the state more than $330 million, while simultaneously aligning our tax policies with our ambitious climate goals.

NRDC thanks its partner environmental organizations, who have been critical leaders in the ongoing fight against fossil fuel subsidies: New York Youth Climate Leaders, New York Public Interest Research Group, 350.org, and others.