Partisans Joining Forces to Cut Energy Subsidies
Recommendations Given to Super Committee
The political food fighting has paused. An unusual group of partisans are joining hands and asking the joint congressional committee set up to cut $1.5 trillion from the national debt to review its suggestions -- ones that promise to rile the feathers of key interest groups.
What makes the 2011 Green Scissors so interesting is not just its recommended cuts but also its political composition. And more importantly, its roadmap is coming at a time when the partisan differences are so sharp that any civil dialogue seems remote. Environmentalists and conservative tax-cutting interests have illuminated $380 billion in possible savings over five years.
“We can go a long way toward solving our nation’s budget problems by cutting spending that harms the environment, and this report provides the Super Committee with a road map,” says Friends of the Earth climate and energy tax analyst Ben Schreiber. “At a time of great polarization, Super Committee members can and should find common ground by ending wasteful polluter giveaways.”
Friends of the Earth combined with the conservative think tank The Heartland Institute and Taxpayers for Common Sense as well as consumer watchdog Public Citizen. Overall, they set aside their preconceived notions, although the document focused almost exclusively on mature energy endeavors.
The rancorous budget deal reached by Congress -- the one that caused Standard & Poor’s to question the country’s credit worthiness -- allowed a $14 trillion debt ceiling to be lifted by $2.4 trillion. However, that increase must be accompanied by $2.7 trillion in budget cuts over the next decade.
Of that $2.7 trillion, $917 billion will come from discretionary programs. A bipartisan super committee will propose the remaining cuts of $1.5 trillion. Lots of commentary is suggesting that this group will find a way to circumvent its responsibilities. Some of it is saying they will just fail to agree.
With that as a context, the Green Scissors quartet has weighed in: Its biggest targets are the ethanol and oil industries. Beyond those, it examines subsidies or loan guarantees to nuclear, coal and natural gas, saying that this spending is “wasteful and environmentally harmful.”
Feeding at the Trough
The report did not examine subsidies given to wind, solar and other green technologies. While obvious disagreement abounds over such assistance, the participants say those renewable fuels did not fall into the category of being “environmentally harmful” and, with the exception ethanol, were excluded from this analysis.
For the record, the U.S. Energy Information Administration says that in 2010 alone renewable energy subsidies were $14.7 billion, accounting for 55.3 percent of all assistance given to power production while providing just 10.3 percent of the country’s energy production. Bio-fuels like ethanol got $6.6 billion; wind $5 billion; solar $1.13 billion and biomass $1.1 billion.
Ethanol subsidies are the “granddaddy of wasteful alternative fuels,” Green Scissors says. At issue is whether to continue to extend the current 45-cent a gallon tax credit as well as other incentives to boost the use of bio-fuels. Critics of the largess say that current law already requires the use of ethanol in gasoline products and that there is no reason to pay such high subsidies to producers.
At least a dozen U.S. Senators from both parties have asked their respective leaders to reduce the break to 36-cents per gallon. And it appears that they may get their way when the credit is up for review at year-end. Green Scissors also says the Renewable Fuels Standard that requires the purchase of ethanol by fuel blenders should be repealed. At least $50 billion is at stake over 5 years for both provisions.
Meantime, the group says that the oil and gas sector must give up at least some of the 20 different individual tax credits and direct payments it is now receiving as well as forego some royalty-free leases. That would add up to $61 billion in savings in five years.
“The oil and gas industry simply does not need the government handouts coming its way; its bottom line benefits from high prices at the pump,” the report says. It notes that less than a year after the Deep-water Horizon catastrophe, BP saw its second quarter profits rise to $5.3 billion.
The study is also critical of handouts it says are given to natural gas and cleaner coal. It essentially says that many older fossil fuels have fed at the federal trough for nearly a century and that they are now making subtle changes and marketing themselves as green -- to get even bigger subsidies.
Similarly, Green Scissors says that nuclear is a mature industry that despite much government help has not built any new reactors since the 1970s. It is asking Congress to deny President Obama’s request to increase the federal loan guarantees program from $18 billion to $54 billion.
Each interest group is committed to its cause. But reducing the size of the federal debt will require shared sacrifice. The members of Green Scissors have bargained in good faith. It’s time members of Congress do the same.
EnergyBiz Insider has been named Honorable Mention for Best Online Column by Media Industry News, MIN. Ken Silverstein has also been named one of the Top Economics Journalists by Wall Street Economists.
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