Obama Proposes $10 Per Barrel Oil Tax To Fund Clean Transportation—Here’s How Republicans Responded

CREDIT: AP Photo/Carolyn Kaster

President Barack Obama steps from the new Chevrolet Bolt electric car as Dan Ammann, President, General Motors Company, stands right and Patrick Foley, controls manager for the Bolt EV at GM in Detroit, stands left, during a tour of the 2016 North American International Auto Show in Detroit, Wednesday, Jan. 20, 2016, to highlight the progress made by the American auto industry.

President Obama’s budget request next week will include plans for a $35-billion-per-year clean transportation plan, funded by a $10 per barrel tax on oil, phased in over five years.

In a fact sheet about the president’s “21st Century Clean Transportation System,” the White House detailed how this new fee on the oil industry would boost federal funding for clean transportation by 50 percent, and help create “hundreds of thousands of good-paying, middle-class jobs each year.”

The priority would be to reduce greenhouse gas emissions from the transportation sector, which is responsible for nearly a third of U.S. emissions. Last year, Congress did pass a transportation bill, though the White House called it “merely a first step towards what our economy needs, with only a modest increase in infrastructure funding.”

Theoretically, this is an excellent time to raise fees on oil, with the global glut causing the price of Brent crude to fall below $30 per barrel at the end of last year, and Wall Street not predicting that to change much any time soon. As American economic growth continues to grow while decoupling from energy consumption, proposals like these become more feasible.

The fee would help provide the long-term solvency of the Highway Trust Fund, and provides an incentive to cut oil consumption and boost clean energy investment. The plan would invest in clean vehicle research and deployment, including electric vehicle (EV) charging systems and clean autonomous vehicles.

“This proposal, if enacted, would generate substantial and sustainable new revenue to transform our transportation sector and cut carbon pollution,” said Greg Dotson, vice president for energy policy at the Center for American Progress.

Because Americans waste 7 billion hours in traffic each year, the plan boosts funding for mass transit options like rail and public transit by $20 billion per year. This includes suburbs and rural areas, high-speed rail, and a modern freight rail system.

The plan would also provide bonus funding — to the tune of $10 billion per year — to state and local governments that use existing transportation funding to cut carbon pollution, “for example by encouraging better land use planning, investing in clean vehicle fueling infrastructure or increasing use of public transportation.”

Clean autonomous vehicles and other next-generation transportation systems would get $2 billion per year in research and development, clean vehicle fleet upgrades, and regional fueling infrastructure for low-carbon vehicles.

The fact sheet identified cutting carbon pollution and strengthening the economy as primary goals. “A key step in that effort is making smart and strategic investments to create a cleaner, more sustainable transportation system,” it read.

Environmental groups lauded the move, with Sierra Club executive director Michael Brune pointing out that, following the historic Paris climate agreement, this move shows how “President Obama laid out more of his vision of how we can meet this agreement by challenging Big Oil’s stranglehold on how America powers its transportation sector.”

The plan, part of the administration’s yearly budget proposal, would have to go through a Republican-controlled congress hostile to the president’s energy and environmental initiatives. Sen. John Barrasso (R-WY) said “Congress should and will reject it,” according to Politico transportation reporter Lauren Gardner. Industry figures responded the same way. Oil billionaire T. Boone Pickens said on Twitter that it would purposely bankrupt the oil and gas industry. He also tweeted:

House Majority Whip Steve Scalise (R-LA) called the plan “Dead on Arrival”:

House Speaker Paul Ryan (R-WI) said in a statement that the “president should be proposing policies to grow our economy instead of sacrificing it to appease progressive climate activists,” and said it was an “election-year distraction” that “this lame-duck president knows” is “dead on arrival in Congress.”

The oil industry may be in a downturn due to the fact that it is producing too much, but the biggest companies are still pulling in hundreds of billions of dollars a year in revenues, benefiting from tens of billions in energy subsidies per year in the United States alone.

“For over a century, oil, gas and coal companies got rich by foisting onto us the massive health and environmental costs of burning and extracting fossil fuels,” Elijah Zarlin, director of Climate Campaigns at CREDO Action, said in a statement. “The new oil fee in President Obama’s budget is a welcome step to make oil companies begin to pay a small part of the societal cost of their product — but it is unfortunate that it will likely be blocked by Republicans in Congress that are beholden to those oil companies, not the best interests of the American people.”

The president first moved to address carbon pollution in the transportation sector in 2009 with the American Recovery and Re-investment Act to help pull the country out of recession by using loans at historically low interest rates to pay for research, mass transit, high-speed rail, and road and bridge modernization upgrades in thousands of cities and towns. That same year he pressed forward with much higher auto fuel economy standards.