China and the United States announced in December 2013 that they would undertake a reciprocal peer review of their fossil-fuel subsidies under the auspices of the G20. In the case of the United States, those invited participants were (in addition to China): Germany, Mexico, and the OECD. This report, after summarising key aspects of the United States’ energy landscape, addresses each stage of the supply chain for fossil fuels, discussing in detail the subsidies and other measures that the United States and the review team have identified in the course of the review process.
The report notes that, throughout the last decade, two trends have characterised the evolving energy landscape in the United States. First, the U.S. has entered a new era of energy abundance. Innovations in extraction technologies (notably horizontal drilling and fracking) have allowed U.S. shale drillers to push domestic crude oil production to near-record levels while attaining record levels of domestically produced natural gas. Second, the U.S. is taking steps to foster the transition towards a cleaner, more energy efficient economy. To reduce the country’s greenhouse gas emissions, the federal government put in place carbon pollution standards for new and modified power plants and the Clean Power Plan to address greenhouse gas emissions from existing power plants.
The report also suggests that domestic emissions of CO2, NOX, and SOX have followed a mostly downward trend since 2005. This is largely because coal has become an increasingly unprofitable alternative to natural gas for generating electricity, in large part due to the expansion of shale gas production that has made natural gas cheaper throughout the country.
Bearing in mind the above developments, the report summarises 16 inefficient fossil fuel subsidies benefitting upstream activities (exploration, development, and extraction of fossil fuels), which were identified by the United States in its self-assessment. In the report, those subsidies are grouped according to the branch of government responsible for their reform. U.S. officials have indicated their intention to reform all 16 measures, though, in most cases, reform can only take place with action by the U.S. Congress. The review team generally agrees with the Government that these upstream measures are likely inefficient and recommends the pursuit of ongoing reform efforts.