Despite repeated calls from President Obama to end tax subsidies for oil and gas companies, tax benefits for renewable energy and energy efficiency make up three-quarters of energy-related tax subsidies the U.S. is estimated to hand out in 2013.
In 2013, it’s estimated that $7.3 billion — 45 percent — in energy tax subsidies, will go towards renewable energy, according to Congressional testimony by Congressional Budget Office senior advisor Terry Dinan. Another $4.8 billion — 29 percent — in energy tax subsidies will be for energy efficiency.
In total, the federal energy tax subsidies will cost more than $16 billion in 2013, up from only $5 billion in 2005. Tax subsidies for fossil fuels make up 20 percent of the total and tax subsidies for nuclear power make up another seven percent.
Energy tax subsidies began to expand rapidly in 2006, growing to more than $20 billion per year from 2009 to 2011. Increasingly, more and more tax dollars were aimed at promoting renewables and energy efficiency.
“Government should work to ensure that Americans have access to abundant, affordable, reliable energy, and target taxpayer resources to fundamental research that could one day enable these technologies to compete without expensive subsidies or mandates,” said Wyoming Republican Rep. Cynthia Lummis in her opening remarks in a Wednesday Congressional hearing on energy subsidies. “Doing so would not only help bring energy independence and grow our economy, but it would bring revenue to the Treasury.”
The federal government gives tax subsidies for using fossil fuels, nuclear power, renewable energy, and energy efficiency which reduce the amount of taxes producers and consumers pay to use certain types of energy. However, the CBO notes that the $16 billion figure does not include all tax energy-related benefits and excludes tax breaks that benefit the energy industry in general.
Energy industry tax breaks have become a hot button issue during President Obama second term as he has asked Congress to end $4 billion in tax subsidies for oil and gas companies.
“You can either stand up for the oil companies, or you can stand up for the American people,” Obama said. “You can keep subsidizing a fossil fuel that’s been getting taxpayer dollars for a century, or you can place your bets on a clean-energy future.”
However, the oil and gas industry pushed back and argued that they did not in fact get any subsidies, but got “cost-recovery benefits.”
“The oil and gas industry gets no subsidies, zero, nothing,” said Jack Gerard, president and CEO of the American Petroleum Institute. “We get cost-recovery benefits, much like other industries. You can go down the road of allowing economic activity, generating hundreds of billions to the government, or you can take the alternative route by trying to extract new revenue from industry by increasing their cost to do business.”
Energy subsidies in general have become a target for some Republicans and conservative groups as a way to remove some corporate welfare from the tax code.
“Companies should have customers, not political patrons,” said Kansas Republican Rep. Mike Pompeo. “The last thing we can afford during our dire financial straits is giving taxpayer-backed subsidies to companies that don’t need them in markets that can’t sustain them.”
Earlier this year, Pompeo introduced a bill that would eliminate all energy tax credits, but would keep general business tax deductions which are available to many industries.
The fight against subsidies doesn’t stop at tax benefits, as groups highlight the fact that total federal energy subsidies have exploded in recent years as well.
“Renewable energy subsidies have increased by 186 percent, with wind energy receiving a 10-fold increase and solar increasing by a factor of 6,” said Institute for Energy Research distinguished senior fellow Mary Hutzler in her Congressional testimony.
“Biofuel subsidies increased by 66 percent, and conservation subsidies increased from $369 million in 2007 to more than $6.5 billion in 2010,” she added. “Fossil fuels, also, have seen increased federal support — with coal subsidies increasing to $1.3 billion and oil and natural gas subsidies increasing to $2.8 billion. Nuclear energy subsidies increased 46 percent from $1.7 billion to $2.5 billion.”
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