"The first sustainable budget in U.S. history: Obama invests in clean energy, projects cap-and-trade revenue, seeks repeal of fossil industry subsidies"
One thing is clear from President Obama’s new budget. He is delivering on the promise of his first month and continues his unprecedented effort to reverse decades of unsustainable national policy forced down the throat of the American public by conservatives (see “31 days that made — and may remake — history“).
His $3.5 trillion budget blueprint has a big boost in clean energy, projects the bulk of cap-and-trade revenue will go to cut taxes on the middle class (duh), and eliminates $31.5 billion in “oil and gas company preferences” over a decade. Greenwire lays out the details in a series of articles (subs. req’d, excerpted below):
Specifically, Obama said his plan would invest $15 billion a year for the next decade to develop renewable energy sources such as wind and solar and to build more fuel-efficient vehicles. “It’s an investment that will put people back to work, make our nation more secure, and help us meet our obligation as good stewards of the Earth we all inhabit,” Obama said.
Hand-in-hand with energy spending, Obama said he intends to push for implementation of a market-based cap on greenhouse gas emissions that the administration says will drive investment toward renewable energy and provide funding for the renewable energy initiatives.
Conservatives will not give up their self-destructively unsustainable ways easily, though (see “Anti-science conservatives must be stopped“). House Minority Leader John Boehner (R-Ohio) said: ” ‘Cap-and-trade’ is code for increasing taxes, killing American jobs, and raising energy costs for consumers.”
Here are the details on Obama’s budget-related cap-and-trade plans:
President Obama’s proposed budget laid out his assumptions that a new cap-and-trade program for greenhouse gas emissions would begin to generate billions of dollars in revenue as companies are forced to comply with a market-based program.
Obama’s budget includes several principles on what the administration wants to see out of a cap-and-trade program, including emission targets that cut U.S. greenhouse gas levels 14 percent from 2005 levels by 2020. Obama also wants midcentury cuts of 83 percent from 2005 levels.
Along with the big boost in clean energy funding, it is these principles in particular that make this the first budget in U.S. history that is environmentally sustainable — and hence economically sustainable, since right now the entire U.S. economy is one big Ponzi scheme, as the current generation of Americans are only propping up their wealth by stealing a livable climate from future generations.
The budget also includes revenue from a national cap-and-trade system for greenhouse gas emissions, which would come from auctioning off emissions permits to industries. The climate program would generate nearly $650 billion between 2012 and 2019, according to Obama’s proposal.
About $80 billion of the climate revenues would go toward Obama’s proposed middle-class tax cut each year beginning in 2012, the draft says, and the government would spend $15 billion per year on “clean” energy technologies. In his address to Congress on Tuesday, Obama said those technologies would include wind power, solar power, advanced biofuels, “clean coal” and more efficient cars and trucks.
Obama’s proposed cap-and-trade revenues immediately drew the ire of House Minority Leader John Boehner (R-Ohio).
” ‘Cap-and-trade’ is code for increasing taxes, killing American jobs, and raising energy costs for consumers,” Boehner said in a statement. “Middle-class families are struggling during this recession, and the last thing they need is even higher costs of living and weaker job security, which is exactly what ‘cap-and-trade’ would deliver.”
But White House Office of Management and Budget Director Peter Orszag insisted that Obama’s budget takes into account projected increases in Americans’ energy bills as utilities pass on their compliance costs. The OMB chief said Obama’s cap-and-trade program would provide taxpayers with direct payments to help them cope with higher energy prices.
“Let’s remember what we’re trying to accomplish here,” Orszag said. “We’re trying to reduce our dependence on foreign oil. We’re trying to address global climate change. And we’re trying to do that in a fiscally responsible way.”
The budget also calls for a $19 million increase for U.S. EPA to use on a greenhouse gas emission inventory. The inventory is expected to identify baseline levels of carbon emissions and set the foundations for a national cap-and-trade program.
And here are details on Obama’s propose to “repeal several oil industry tax incentives while imposing new taxes on Gulf of Mexico producers to close ‘loopholes’ that have allowed companies to avoid royalty payments”:
The overall budget eliminates $31.5 billion in “oil and gas company preferences” over a decade, according to a slender summary released by the White House this morning.
Many provisions are certain to prompt resistance from the oil industry and from Republican and Democratic lawmakers from oil-producing states. The plan drew a swift rebuke today from the oil industry’s most powerful trade group, which called the measures a bad idea, especially during a recession.
“New taxes could mean fewer American jobs and less revenue at a time when we desperately need both,” American Petroleum Institute President Jack Gerard said in a statement. “More taxes also could reduce our nation’s energy security by discouraging new investment in domestic oil and natural gas production and refining capacity and pushing those investments — and American jobs — abroad.”
But critics of petroleum tax and royalty policies say the industry has received too much support, even during periods of record-breaking profits, and that repealing tax breaks can help fund alternative energy programs.
The plan includes a “new excise tax on offshore oil and gas production in the Gulf of Mexico to close loopholes that have given oil companies excessive royalty relief.” The new tax would begin in 2011, which the document says is “after the economy has had time to recover,” and the budget assumes it would bring in nearly $5.3 billion over a decade.
The excise tax plan is an effort to ensure payment from deepwater leases issued in the late 1990s that allow royalty waivers — also called “royalty relief” — even when oil prices are high. The leases were drafted without the clauses that end the incentive when oil and gas prices exceed certain limits.
Senate Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.) floated a new gulf excise tax as part of a major 2007 energy bill, but it was not ultimately included in the final bill.
That 2007 plan would have allowed a credit against the tax for royalties paid, and the new proposal is modeled on that earlier effort, an Interior Department spokesman said today. “Producers that pay royalties would receive a credit, so this provision only impacts current royalty-free production,” said spokesman Frank Quimby.
Elsewhere, the budget would repeal oil and gas companies’ ability to claim a deduction on domestic manufacturing income, which would do away with an incentive that last year’s Wall Street bailout bill had already frozen. Ending the incentive would bring in more than $13 billion in federal revenues over a decade, according to the document.
Other tax provisions include the repeal of expensing of intangible drilling costs and of the percentage depletion for oil and natural gas, among other measures, the document states.
‘Use it or lose it’
In addition to the tax provisions, the budget proposal says Interior will ensure companies are “diligently” developing their existing leases or risk losing them, a concept that Democrats call “use it or lose it.”
The plan says one step would be charging new fees on nonproducing Gulf of Mexico leases, which the outline claims would provide an incentive for companies to start producing from these leases or relinquish them.
The new fee on nonproducing leases would raise an estimated $1.2 billion total during the 2010-19 period, the document states.
The Obama administration is also proposing new user fees on oil companies for processing federal lands drilling permits and “increasing the return from oil and gas production on federal lands through administrative actions, such as reforming royalties and adjusting rates.”
The budget also calls for ending federal funding for an ultra-deepwater oil and gas research and development program.
Kudos to team Obama and my old
nemesis friend from the Clinton Administration, Peter Orszag. They get it.
For more analysis, see “Energy Budget Is Sunlight After Eight Years of Darkness” by Daniel J. Weiss is a Senior Fellow and Director of Climate Strategy at the Center for American Progess.