U.S. Treasury Secretary Janet Yellen on April 7 released details of a tax hike proposal that would replace subsidies for fossil fuel companies with incentives for production of clean energy in President Joe Biden’s infrastructure plan.
Linked to the $2.3 trillion infrastructure package, it is part of wider plan that includes boosting the corporate income tax rate from 21% to 28%.
A Treasury Department office estimated that eliminating subsidies for fossil fuel companies would boost government tax receipts by more than $35 billion in the coming decade.
The “Made In America” tax plan did not specify which tax breaks for fossil fuel companies would be targeted. It said the subsidies undermine long-term energy independence and the fight against climate change and harm air and water quality in U.S. communities, especially communities of color.
RELATED:
US Oil Lobby API Responds to Biden’s $2 Trillion Infrastructure Plan
One of the top fossil fuel breaks is called intangible drilling costs, which allows producers to deduct most costs from drilling new wells. The Joint Committee on Taxation, a nonpartisan congressional panel, has estimated that ditching it could generate $13 billion over 10 years.
The Biden tax plan would advance clean electricity production by providing a 10-year extension of the production tax credit and investment tax credit for clean energy generation, such as wind and solar power, and energy storage such as advanced batteries. It also creates a tax incentive for long-distance transmission lines to ease movement of electricity from clean energy generators.
The plan would restore a tax on polluters to pay for EPA costs associated with Superfund toxic waste sites, addressing harm caused by fossil fuel production.
Unwinding tax breaks on fossil fuel companies could face opposition from Biden's fellow Democrats in the U.S. Congress from energy-producing states.
Greenpeace, an environmental group, said the plan does not go far enough, citing a study calculating that U.S. fossil fuel companies get $62 billion a year in implicit subsidies for not having to pay for damage their products do to the climate and human health.
Fossil Fuel Industry Response
The plan is expected to face resistance from fossil fuel lobbyists. The American Petroleum Institute said last week that getting rid of the breaks would amount to new taxes on oil and gas drillers.
“Targeting specific industries with new taxes would only undermine the nation’s economic recovery and jeopardize good-paying jobs, including union jobs,” the API said last week in response to Biden's infrastructure plan.
The Treasury Department confirmed that the Biden plan includes a blender’s tax credit for sustainable aviation fuel, a top priority of U.S airlines, which Treasury said would enable “the decarbonization of a key portion of the U.S. transportation sector.”
The plan also “proposes incentives to encourage people to switch to electric vehicles and efficient electric appliances.” The Treasury has not specified how it would revise or expand existing credits.
A top airline industry group praised the plan's inclusion of the blender’s credit. Nancy Young, vice president of environmental affairs at Airlines for America, said a credit of up to $2 a gallon would help build the market for sustainable aviation fuel, providing an incentive for companies to integrate more renewable fuel into the supply.
Recommended Reading
EU Expected to Sue Germany Over Gas Tariff, Sources Say
2024-04-17 - The German tariff is a legacy of the European energy crisis that peaked in 2022 after Moscow slashed gas flows to Europe and an undersea explosion shut down the Nord Stream pipeline.
The Jones Act: An Old Law on a Voyage to Nowhere
2024-04-12 - Keeping up with the Jones Act is a burden for the energy industry, but efforts to repeal the 104-year-old law may be dead in the water.
Kinder Morgan Exec: Building Pipelines ‘Challenging, but Manageable’
2024-04-05 - Allen Fore, vice president of public affairs for Kinder Morgan, said building anything, from a new road to an ice cream shop, can be tough but dealing with stakeholders up front can move projects along.
FERC Again Approves TC Energy Pipeline Expansion in Northwest US
2024-04-19 - The Federal Energy Regulatory Commission shot down opposition by environmental groups and states to stay TC Energy’s $75 million project.
The Problem with the Pause: US LNG Trade Gets Political
2024-02-13 - Industry leaders worry that the DOE’s suspension of approvals for LNG projects will persuade global customers to seek other suppliers, wreaking havoc on energy security.