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Obama Can Cut Fossil Fuel Subsidies and Save $39 Billion, But Will Congress Go Along?

The cuts were included in the last two budgets submitted to Congress, but were never implemented. Will GOP budget hawks now get on board?

By Elizabeth McGowan

Jan 14, 2011

But the prescription shouldn’t end there, he said, ticking off a list of stimulus grants and other expensive federal investments that support projects such as coal gasification projects, carbon sequestration and the country’s first liquid coal facility.

“This country is continuing to finance coal projects,” he said. “Obama isn’t calling them subsidies but they clearly are. Coal is not going to be clean no matter what you do.”

Hope Amidst the Frustration

“The American people need to make it clear to Congress they are concerned about our fiscal situation,” Schreiber said. “They need to tell them that we can’t give billons of dollars to corporations until we get rid of this debt.”

Kretzmann is rooting for leaders in Congress to make cutting subsidies to fossil fuels a priority soon.

“Unlike greenhouse gas emissions, this one plays well in the polls,” he said. “People don’t like the idea of their money going toward the most profitable industry in the country. This one is a winner for whomever wants to take it up. The job is open right now.”

Goldwyn, the energy specialist with the State Department, called for calm as the debate proceeds. He emphasized that it is destructive when opponents and proponents of particular energy decisions malign one another.

“As we try to strike this balance between energy and the environment, I would ask to approach this with humility,” he said. “Transformation of our energy use to low carbon is going to take a long time. If we don’t begin that transformation now, we’re never going to get there.”

Goldwyn is well aware that back-and-forths over “cleaner” and “cleanest” energy sources can turn ugly.

His advice to all involved?

“Keep an open mind, a patient ear and a civil tongue.”

(White House Photo by Pete Souza; Infographic by Tommy McCall, courtesy Environmental Law Institute)

This should not be an either-or-debate

Shrinking consumption subsidies in the developing world would do nothing but provoke backlash and ensure gridlock.

Not true, or at least not as a universal generalization. Shrinking consumption subsidies in the developing world will not always be easy, but an increasing number of developing countries know that such a change is necessary and inevitable -- especially the countries like Indonesia, which have gone from being net oil exporters to being net oil importers and are seeing precious government revenues being spent on consumption of something that is dirtying their atmosphere and not helping to develop their economy.

Even Iran has come to realize that it cannot afford to continue the current policies, so has embarked on a radical reform of its fuel-pricing policies, while instituting a cash-transfer program to help those poor most adversely affected.

In many countries that subsidize (suppress) prices of petroleum fuels or natural gas, it is not the poor who are the major beneficiaries, but the non-poor. And in countries like Saudi Arabia, the government is keeping prices of naptha and natural gas low in order to encourage the build-up of a petro-chemicals industry.

Politically, the developed countries need to do their own bit in eliminating subsidies to fossil fuels if they expect at the same time that developing countries should eliminate theirs. But let's concentrate on that without needlessly glossing over the real environmental and economic problems being caused by the practice of subsidizing fossil-fuel consumption in developing and emerging economies.

Small correction

Just one small correction to this otherwise excellent article - I didn't and woudn't say that removing subsidies will necessarily lead to an increase in gas prices - my point in linking it to record profits is that a removal of subsidies doesn't have to lead to an increase in gas price - it can instead simply lead to a reduction in the record level of profits that the industry enjoys.  Industry will always raise the spectre of higher gas prices as a way of stopping any effort aimed at subsidy removal - but the truth is that they're more interested in protecting their record profits than the price of gas.

End All Subsidies

Renewables are at a major disadvantage. Fossil fuels including gas, oil, and coal, get a total of $80 billion in tax breaks and direct spending subsidies every year. Renewables now get $29 billion, with $6 billion of it going to ethanol. So that means renewables are at a $51 billion subsidy disadvantage. By repealing all subsidies, it removes that huge disadvantage holding back renewables. Every time renewable subsidies are to be extended, fossil fuel subsidies always get tacked on. So it's actually better to repeal ALL subsidies.

Our government has always

Our government has always subsided oil...why?  Because Big Oil has used the subside to return a part of our tax money to the politicians for election campaigns.  Additionally, this money serves to keep the price of gasoline at the pump lower than it should be by assuring they have a floor of profit. 

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