ANALYSIS: Baucus energy tax plan comes with dubious benefits

Montana Democratic Sen. Max Baucus has proposed an energy plan that would simplify much of the complex labyrinth of subsidies buried in the tax code costing $150 billion over ten years.

But it is unclear what the costs and benefits are of the Baucus plan or if any real environmental goals will be accomplished.

Baucus’s energy tax proposal released this week would eliminate various energy tax credits and consolidate others into two broad tax credits for renewable energy production and green transportation fuels. The intention is to have fewer, more targeted tax incentives that push the production of renewable energy and clean fuels to lower U.S. carbon dioxide emissions and tackle global warming.

But one tax policy expert is asking what are the costs and benefits of doing this?

“We don’t know what the costs and benefits of any of this are going to be,” Stephen Entin, senior fellow at the nonpartisan Tax Foundation, told The Daily Caller News Foundation. “We don’t know how much damage global warming is doing.”

Baucus’s draft proposal says that the web of tax subsidies to energy production would cost $150 billion over ten years, but does not address what the benefits or the costs would be to restructuring energy tax incentives in such a way.

“If they can’t find either one, why are we doing this?” Entin added.

The energy plan refocuses a complex web of tax benefits into two broad categories for “clean” energy production and transportation fuels. The credit for energy production would be for facilities that are 25 percent cleaner than the average power plant — however, this would phase out after four years once power plant emissions are reduced by 25 percent from 2013 levels.

For clean fuels, the Baucus plan would reward those that are 25 percent cleaner than conventional gasoline. This would be phased out over year once emissions from fuels are reduced 25 percent from 2013 levels.

The ultimate goal of incentivizing renewable energy production is to curb U.S. carbon dioxide emissions, which some scientists say causes global warming. However, reducing emissions in the U.S. alone will do little to stem global temperatures from rising.

Global warming is just that, a global phenomenon. The U.S. is already on a downward emissions trend due to the increased use of natural gas to generate electricity, but atmospheric carbon dioxide levels keep rising because of economic growth in developing countries.

“Anything we offset here is a drop in the bucket,” Entin added. “So anything we reduce here isn’t going to affect climate.”

However, Baucus argues that his tax plan is needed to eliminate waste in the tax code and make it more efficient.

“It is time to bring our energy tax policy into the 21st century,” Baucus said. “Our current set of energy tax incentives is overly complex and picks winners and losers with no clear policy rationale. We need a system of energy incentives that is more predictable, rational, and technology-neutral to increase our energy security and ensure a clean and healthy environment for future generations.”

However, with U.S. emissions falling due to low-priced natural gas increasingly replacing coal as a power generating fuel, Entin questions the wisdom of subsidizing “clean” power plants — a system that would effectively exclude coal-fired power plants.

“Coal is going to have a heck of hurdle to jump here,” Entin said. “The market is taking care of a number of problems, so I’m not sure if we need a bill.”

Baucus, who was already retiring from the Senate after the 2014 elections, has been nominated to become ambassador to China.

The senator’s office did not respond to The Daily Caller News Foundation’s requests for additional information about his plan.

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