Obama Striving to Put an End to Oil Subsidies

President Obama's proposed 2013 budget seeks to end "unfair' oil subsidies. As evidenced by his State of the Union addresses in 2009, 2010,, 2011, and 2012, the President has repeatedly tried to put an end to oil subsidies.

Treasury Secretary Tim Geithner makes the point that unfair allocation of subsidies mean that some industries like oil and gas get a huge tax break while others do not.

"Right now, companies in some industries pay two or three times the effective tax rates as companies in other industries. For example, the effective tax rate on an investment in buildings or other structures by a manufacturing company might be twice as high as the rate that applies to an oil or gas company. These subsidies distort choices about where companies should invest, and they distort the allocation of capital."

The subsidies offered to the oil and gas industries are a fundamentally important issue for renewable sources of energy that are striving for grid parity. As the President said to students at the University of Miami, “It’s time to end taxpayer giveaways to an industry that has never been more profitable, double down on clean-energy industries that have never been more promising.”

For information on the environmental elements of the Obama budget click here.

© 2012, Richard Matthews. All rights reserved.

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The Value of Electric Vehicle Subsidies

Electric Vehicle (EV) subsidies are short term means of accelerating the introduction of low emission vehicles so that they can benefit from economies of scale. Direct subsidies or EV tax credits can be phased out when the technology is a bit more mature and volume production is lowering prices.

According to a poll by Ernst & Young, thirty-four percent of US respondents said they would be willing to subsidize charging stations for hybrid and electric cars.

Governments around the world are subsidizing EV development. In Ireland, the Government wants to see 10% of vehicles running on electric power by 2020. To support the increase in EVs, the Green Party minister for Energy, has announced a scheme to deploy 1,500 electrical recharging stations.

In a bid make Britain "the European capital for electric cars," the then UK Prime Minister Gordon Brown pledged £100 million in government money to support greener cars including electric and hybrid vehicles. In July 2010, the UK also announced it would subsidize buyers up to 25% or £5000 for EVs starting in January 2011.

As of June 2009, consumers in Japan who purchased an electric vehicle can receive subsidies for as much as one third of the car's cost. EVs and hybrids, are also exempt from taxes for three years in Japan.

Critics tend to exaggerate the cost of EV subsidies without considering the advantages. It is absurd that the oil, coal, and gas industries that are responsible for global warming get vastly more public funds than zero emission electric cars.

Although it makes sense to clean up the power grid, even when charged with electricity that partly comes from coal plants, EVs are still cleaner than internal combustion engine cars.

Subsidies for electric vehicles are needed, says auto industry analyst George Magliano, of IHS Global Insight. Acceptance of electric cars "will not occur without some sort of incentives, unless the price of the technology changes," he says. "People who are buying them today are basically people that want to make a statement. And without the push from the government, this is a difficult sell."

"Our own expectation is the costs will come down as we go through what engineers [call] 'generations of learning," Mike Robinson, GM's vice president for environment says. "We'll go through that on the battery technology; the motor technology; it will help drive costs down. And if the customer doesn't see value at the end of this, we won't be successful."

Subsidies will help to reduce the price of EVs so that they can penetrate the market and achieve economies of scales. This will also help fund research and development for technological breakthroughs.


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Reigning in Irresponsible Oil Giants Chevron and Exxon Mobil

Big Oil is increasingly under scrutiny as the world is seeking cleaner sources of energy. The Obama administration is working on several fronts to reduce emissions and provide much needed oversight and regulation. Important financial and chemical reforms are being sought by US lawmakers and the EPA has put forward new mileage guidelines.

Although President Obama has denied any direct link, the SEC's fraud charges against Goldman Sachs are part of a new political climate and this is a reflection of the strength of the President's convictions.

In the context of this environment, social media based efforts are also underway to help reign in a couple of the many injustices of the oil giants.

Chevron is responsible for a catastrophe in Ecuador's rainforest known as the "Amazon's Chernobyl." Over the course of twenty-six years of oil drilling in Ecuador, Chevron deliberately dumped more than 18 billion gallons of toxic wastewater into the rainforest, leaving local people suffering a wave of cancers, miscarriages and birth defects.

Within the next year, the outcome of a court case sixteen years in the making will be determined by a court in Ecuador. Chevron has pledged that even if it is found guilty in court the company will not pay to clean up the site or provide health care, potable water and compensation to affected communities.

To demand that Chevron take responsibility for its actions in Ecuador, Change.org is circulating a petition intended for Chevron CEO John Watson telling him to clean up his toxic legacy in Ecuador.

The well know environment destroyer and denier supporter, ExxonMobil made a profit of $19.28 billion last year and avoided paying federal income tax by exploiting foreign tax shelters and taxpayer-funded giveaways.

Tax breaks and subsidies to the fossil fuel industry make it harder for renewable sources of energy to compete in an open market. Sierra has organized a petition that asks Congress to phase out subsidies and tax breaks to Big Oil.

Our dependence on oil puts us in the dangerous position of being beholden to questionable regimes and powerful oil interests that have a proven track record of environmental degradation and political manipulation.

Through determined political leadership and a broad spectrum of social action we can encourage investment in renewable energy and begin the process of weaning ourselves off oil. Renewable energy can create green jobs, grow a sustainable economy, reduce our reliance on foreign oil and contribute to a cleaner environment.
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