 | What Does an Undulating Plateau Really Mean? | The Oil Drum: Local | Worldchanging Book Tour Comes to New York |  |
First Principle: End Fossil Fuel Subsidies
Posted by Glenn on November 25, 2006 - 2:35pm in The Oil Drum: Local
Topic: Policy/Politics
Tags: new york, oil, peak oil, subsidies [list all tags]
A much better and more expansive list of policy recommendations can also be found at "Energize America" platform put together by the good folks at Daily Kos. But rather than debate all these specific proposals I thought I might start defining the key overarching principles that should guide policy makers in drafting legislation aimed at decreasing oil dependence and carbon emissions.
The first principle is "End All Subsidies of Fossil Fuels".
But this may be more pandering to motorists who simply want lower gas prices and see oil companies as "Evil" or "Price Gouging". But actually fossil fuel subsidies are wrapped up in thousands of pieces of legislation, regulations, tax codes, which if they were eliminated should raise the price of gas at the pump. When my State Senator Liz Krueger calculated all of New York State's oil and gas subsidies, she estimated that New York currently subsidizes them to the tune of $1 Billion a year in direct subsidies. And I'm not talking about externalities like the costs of oil wars, the health impact of pollution or the property damage done by global climate change - I'm just talking about financial incentives to consume oil and other fossil fuels.
On the consumption side, the way this normally works is that an industry, say aluminum producers or fishermen complains that gas, diesel, coal, etc prices are underminig their competitiveness and threaten to leave to state X that allows them to buy that fuel tax free or allows them to write off that cost in some other way. The politician can then say that they protected X number of jobs by providing that industry tax incentives to stay where they are. It's a classic special interest ploy that forces political pandering and a regulatory race to the bottom between the states.
There are other direct consumption subsidies that are aimed at helping lower income folks heat their homes or other need based programs that are probably worth keeping in some form. The issue is whether you should subsidize the fuel or just give them enough money to afford the fuel but leaving in place the incentives to conserve. Perhaps subsidizing the installation of insulation, cleaner burning furnaces and other weatherstripping would have more lasting value than simply paying for the immediate fuel needs.
Then there are the producer incentives - incentives that were put into place many years ago as a way to increase domestic production when prices were low. These incentives are clearly not necessary in a $50+ barrel of oil world (nor, I would argue were they ever a sound policy idea).
Even more hidden are other forms of subsidies that favor the purchase of energy-intensive equipment. While many people understand that SUVs are exempt from the "truck tax", there are many times when a company chooses between capital and labor to produce a good or service. Cheap subsidized energy encouraged the process of automation that substituted labor (which is heavily taxed) with capital which are treated as "investment". By ending these subsidies, we may actually see a net increase in jobs in the economy as businesses choose labor over energy intensive capital. This is why many people including most notably Westexas here have called for replacing all the Social Security and Medicare taxes with and energy tax.
But before we increase taxes on anything or further spend any public money on increasing subsidies for other energy sources (like biofuels) we should conduct a top to bottom review of all subsidies in all shapes and sizes. As much as possible, this should come from the Federal government setting a standard across the entire country banning subsidies of any type on fossil fuels lest the race to the bottom on energy subsidies between the states continue.
Sort of like the hippocratic oath (First, Do No Harm) that doctors must take, any politician that supports energy independence or reducing greenhouse gas emissions should have to pledge to end all subsidies of oil, coal, natural gas extraction or consumption. Otherwise, they really are talking out of both sides of their mouth.
This is a pilot technology, and to get such technologies widely adapted, there is a role for government underwriting the loss of 'first movers'.
We are not going to beat global warming without a clean way of burning coal.
Look around you, and the "enabling" of car-addiction in the US is amazing. I know this is the New York section of TOD, and it may seem strange to you, in a city where a person is a bloody fool to own a car (or merely has more money than brains and a high appetite for punishment) but in most of the US, things are rigged highly in favor of car ownership. There are even charities on the radio asking for people's "extra" cars to donate to the poor, way to go, give them a thing they'll have to work 2 jobs and eat out of Dumpsters to support. I have never once heard a "buy a bicycle for the poor" campaign.
You're thinking of Jane Holtz kay, author of Asphalt Nation.
BP
I also see the Democrats playing at populism and demagoguery with regard to all sorts of reform, from ethics to various energy issues.
Rhetorical attacks on "Big Oil" are especially popular when gas prices are nigh.
One problem is that the Democrats are just as prostituted to "Big Money" as the Republicans are. I cannot imagine any real change coming from the Democratic Party we see today.
Any changes the Democrats propose will be massaged into corporate subsidies which actually extract more wealth from the poor and middle class.
The reforms we might see will pale in comparison to the new loopholes, corporate welfare, and letgislation on behalf of a wealthy political "base" versus "we the people."
PR corporations will be paid mightily to persuade the target group of "likely voters" that things are otherwise. The poor will be used as photo-ops, while they will be discouraged from actually participating.
The Democrats have no use for peace or for "useless eaters" than the Republicans do.
Democrats want more competent war-planning and execution as well as more competent management of the rabble.
Good politicians and effective cultural reformers die young.
I'm not a bit cynical, am I?
As a first step, I think that it would be good to pull together a list of all fossil fuel subsidies. Useful things to include in the list would be things like what the subsidy is, how much the subsidy costs per person and in aggregate, and who the subsidy benefits. It is very difficult to get subsidies eliminated if they are hidden.
Good post.
- FF's for transportation (mostly oil)
- FF's for manufacturing (natural gas)
- FF's for production of electricity (mostly coal)
This is so because the unaccounted-for externalities (a type of subsidy) and actual subsidies differ for each.Of course for transportaion fuels we have the easy government subsidies to list:
My second would be allowing companies to have royalty free leases in Federal waters. At the most we should be allowing them free royalties only until pay-out, then the royalties need to be increased to at least 25%.
My third candidate is the subsidies for roads. We need tolls high enough to subsidise mass transit, and to stop the feds from building new highways. Its throwing good money after bad.
I do think a "Windfall Profits Tax" is absurd. We import 70% of the US oil consumption and the integrated oil compaies sold their US production years ago, we need an import tax big enough to pay for the military and the resource war in Iraq. But we need to encourage domestic production because 100% of the money received is spent domesticly, while lttle of the foreign profits makes it home.
- gasoline tax, not tolls. You want to discourage the least efficient vehicles. If a nickel or dime is not enough to have the effect, then a dollar a gallon...
But we need to encourage domestic production because 100% of the money received is spent domesticly
- proof?
And I think "free markets" are b.s.. Our capitalist system distorts the true costs and subsidises all kind of political goals-from cheap mortgages with no money down that subsidise the suburbs, to the US Treasury bonds that give our tax money to big insurance companies. An import tax rather than a gas tax seems to be more likely to stimulate US production, because domestic oil prices will rise to the same level as the imports. It will also stimulate alternative energy, and remove a huge subsidy for real estate developers. Same way with Toll Roads. And its doable politicially. The right wing controlled media is already starting their tax-and-spend Democrat mantra. How popular are higher federal gas taxes? But punish the Arabs and Hugo Chavez while being fiscaly responsible?-'nuff said
And don't worry, oilmanbob, your job is secure in any case... :-)
But I am concerned about the US dollar collapsing under the huge mountain of debt and the ruinous imported oil bill. So, we need to get money where the money is to be got-and we import about 14 MMBPD. Ten bucks a barrel is $140,00,000 per day. That's real no shit money that could help eliminate the National Debt.
<rant>
When alternative energy kicks in the oil reserves won't be worth as much-less demand means lower prices if we handle the transition properly. I heard that arguement about saving our reserves when Ronald Reagan and King George the First opened the floodgates of cheap foreign imports in the 1980's. If we'd preserved high prices we wouldn't have the crisis in personel and equipment availability that we have now in the oil patch.
For way too long our energy policy has been handled for the profit of the multinational oil companies at the expense of independents and the citizens of the USA. We have the best government that money can buy. Free markets are a myth and a chimera. Revolution Now! Put the jam pot on the bottom shelf where the little guy can get his spoon in! Republican principles are hypocracy and greed!
- Provide for a stable tax base for the state of Alaska
- Reduct our negitive ballance of payments by as much as $60,000,000.00 per DAY
- Provide an employment base for Alaska oil field workers for at least 50 years
- Provide the resource to keep the west coast refineries working
- Insure that the Alaska pipeline is not shut down when north slope (Prudo Bay et al) declines to the 400,000 BOPD rate necessary to operate the pipeline
- Provide the incentive to build the North Slope gas pipeline to maximize the gas potential of the North Slope
I am sure sure that there are additional reasons for more North Slope oil and gas development but these are the first that come to mind.A late comment, to your specific list, which I appreciate. My sincere questions: 1) How long do these positive outcomes last? 2) What happens when ANWAR begins to decline? 3) What to do with this gain - (?)... that is, how to insure the presumed energy gain (total) will be used for off-setting the effects of global peak?
In the Great Depression, entire schools of economics were based on differing levels of caution with regards to taking on national debt. There was a reason for that, even if the current political spectrum is used to the idea. Debt is dangerous, and it takes some very strong elements (being the world's only superpower, capable of unlimited imperialism under the heading of Saving the World from Communism, de facto anchor currency for the world, being the world's best source of cheap oil, having unmatched engineering prowess, the world's best functioning middle class, and in general, being The Shit) to handle it safely. If those elements fall apart, debt spirals out of control and inevitably, the country spirals out of control.
Greenspan spent his career trying to hold the reins, riding the bipolar horse of the market as the country sped up in its path down that spiral. I'm just not sure that we can level out again, without drastically reshaping the political system and the economy.
Conservation is our first step, and quite possibly the most valuable one. Higher prices and stopping subsidies for wasteful behaviour are an important first step. People are empowered when they save money, and saving energy will save money. If we use fewer fossil fuels we will help global warming.And to quote Ben Franklin, "Waste Not, Want Not"
All I'm saying is that an oil import tax meets more of our countries economic needs than a "windfall profits tax". And, I think a cute label for it like an Anti-terrorism initive would quite probably sell the deal, while a gasoline tax is political suicide and won't pass, and probably would get vetoed if the tax did pass. Maybe call an import tarrif an Independence Initative. Stop funding terrorists with your SUV.
This will be an uphill battle. The Automobile industry and the oil companies control the media-look at the advertisements on CNN and Fox news channels. And, New York writers I hope to inspire you, have the actresses om the soaps say that guys drive gas guzzlers to make up for their small penis and stupidity.
Do you have any specifics for "reshaping"?
This is a genuine call for discussion to you and everyone else here. How can such a program actually be enacted in the current political climate? Please enlighten me because I think you are just doing the proverbial "whistling past the graveyard at night" thing here.
Having said that, there may be method to the madness:
Issue useless dollar IOU's to other nations.
Turn the IOU's into massive amounts of superior military kit, superior fire-power, the best standing army since Ceasar.
Then play 'stand and deliver!' :-)
Of course, there is always a risk it can go pear-shaped.
I actually think this is a pretty winning political idea. This is not about artificially raising the price of gas $7. That's a strawman. It would take a gas or carbon tax to achieve that.
I'm just saying that businesses and individuals should not get any special tax breaks or incentives. It's getting rid of exemptions and simply leveling the playing field.
Removing subsidies should be a slam dunk - it's not calling for new spending, higher taxes or added debt. In fact all this is getting rid of are subsidies that aid business practices that are wasteful of two things we value - energy and carbon emissions.
I think it's time to get past our inhibitions on calling out politicians that talk about massive new projects or investments that are unproven or "green washing" their record while keeping the very system of subsidizing fossil fuels intact. So everytime some proposes something new, I say tell them to simply repeal special tax breaks for those that waste energy and carbon.
Peakguy
And I didn't say use this or a tax to raise the price of gas to $7 a gallon. What I said was that this would not be a winning proposal even then for the reasons I just outlined.
Peakguy, if you think the bulk of America (or even most of the rest of the world) would accept those arguments, I fear that you are sadly overestimating the rational aspect of humanity.
***
"If I had a rocket launcher."
As an aside, this sounds like the title and a line from an old Bruce Cockburn song about, I believe, Nicaragua....for years he's written good music about the places he's visited --including Iraq.
***
Back to the topic at hand: it seems like the idea of ending fossil fuel subsidies is agreed upon, but people are also agreed that it cannot or will not be done. Is that fair to say?
My own opinion is that the corporatist (Fascist, OK) political system is too resistant to change to be able to sustain any effort to reform our energy policy.
Money will be thrown at alternatives as a palliative to the liberal geeks, but this same money will mostly line the pockets of huge corporations and drive up food prices along the way.
Meanwhile, the main solutions sought to all problems will be military. why? Because war will help keep the rabble in line and will especially justify the continued erosion of Habeus Corpus rights, the US Constitution, and so forth. Just as importantly, war does not challenge the corporatists to change, but actually adds to the profit-taking of huge corporatists involved directly or indirectly in the Military-industrial complex.
The Democrats already are setting the stage to be the "Smarter Never-Ending War Party" rather than an "Anti-War Party." The Democratic leadership continues to demand more competently planned and executed war. They do not suggest at all that there are workable alternatives to war.
Again, our Energy and Security and Foreign Policies will all depend on growing the military and upon increasingly blurring the line between military action outside of "The Homeland" and police activity inside the US borders.
Politicians who push for real change will find their careers to be short-lived.
Every letter we write, every protest we attend counts. I'm proud of NYC for your protests during the GOP Coronation. I think the Neocons were just too scared to fix the last election.
We need to demand that our Government acts responsily. We need to demand our traditional freedoms-a free press, free speech, freedom of assembly, fair and open elections and the freedom to bear arms so that they are scared of us, the people of the US. And freedom from choking on pollution and freedom from the international energy slavers.
I admire Carter's bravery in presenting that Sweater Speech, but maybe not so much his psychological strategizing.
The politician who proposes the end of 'all oily subsidies' will be the one to catch the blame when the prices go up to where they 'should be', and so of course, he/she will never stick their head in that noose. I don't think you can just devise a policy to push us away from the Fossil Fuels.. the plan has to involve making the alternatives draw us TO them. (Including that pinnacle of alternatives, reduced-consumption/conservation .. call it what you will)
The part about how cheap energy and pricey labor made companies create energy-heavy solutions is really worth looking at, since we need to rediscover a full range of labor thru management jobs that will be able to stay here and really be the underpinning of our economic base. I think it means that we have to reinvent both the basis of the Labor Unions (or they do, anyway) and the Tax Code, so that work is rewarded, but also fits into the system. I don't know if the Detroit LaborUnion model was really sustainable, subsidised as it and all of the Auto industry has been, on both cheap oil AND gov't subsidies for Auto MFRs, Highways, etc. I think labor should be organised, but it has to be functional, where some of the unions I have had the closest contact with have some difficult disfunctions to fix. (IATSE-Nabet film tv unions in NY)
I guess my main thought is that even if it involves killing unhelpful subsidies.. the program must be focused on and sold on what we are moving towards, not just what we are trimming out of our path so we can get there.
'Accentuate the Positive' , or in otherwords, have an energised, forward moving message.. not one of reductions and restrictions. Those will be disciplines necessary to 'put us on the moon'.. but the goal is The Moon!
I think the idea of generating a massive growth in the Alt Energy sector itself would be targeting several birds with the same stone. (Now I have to look at the article linked in today's earlier post about solar industry jobs)
However the intent is not to dramatically or artificially raise gas prices, but reduce the incentives to overconsumption.